*THE HON’BLE SRI JUSTICE B. PRAKASH RAO AND * THE HON’BLE SRI JUSTICE RAMESH RANGANATHAN + W.P.Nos.16932, 16902, 15778, 11219, 21059, 21224 OF 2008 & 1315, 6025 AND 18618 OF 2009 W.P.No.16932 of 2008 % Dated -07-2010 # M/s Tirupati Udyog Ltd. …. Petitioner Vs. $ Union of India and 5 others …. Respondents ! Counsel for the Petitioner: Sri Raghavan Ramabhadran on behalf of M/s. Lakshmi Kumaran and Sridharan, ^ Counsel for the Respondents 1,2, 5 & 6: Sri A. Rajasekhar Reddy Counsel for the Respondents 3 & 4 : Sri E. Manohar <GIST: > HEAD NOTE: ? Cases referred 1. 2010 (249) ELT 3 (Guj.) 2. AIR 1952 Nagpur 139 3. 1997(9) Supreme 24 4. (1964) 4 SCR 869 5. (1970) 3 SCC 710 6. AIR 1958 SC 468 7. (1964) 7 SCR 539 8. (1989) 1 SCC 44 9. (1855) 11 “Exch 452 10. (1892) AC 150 11. (1951) 2 All ER 473 12. (1990) 2 SCC 71 13. 1992 Supp (1) SCC 50 14. (1976) 4 SCC 643 15. (1963) 48 ITR (SC) 1 16. 1957 SCR 837 17. (1967) 3 SCR 876 18. (1936) 19 Tax Cases 490 19. AIR 1940 PC 183 20. AIR 1969 SC 812 21. (1970) 1 SCC 462 22. (1979) 1 SCC 193 23. (1966) 3 SCR 379 24. (1921) KB 64 25. (1875) 19 Eq 457 26. (1948) 1 All ER 616 27. (1961) 2 SCR 189 28. AIR 1965 SC 1216 29. AIR 1976 SC 1935 30. (1989) 4 SCC 378 31. AIR 1971 SC 378 32. (1963) AC 1, 24 33. (1992)1 SCC 418 34. AIR 1963 SC 1760 35. (1970) 1 SCC 509 36. AIR 1962 Punjab 256 37. AIR 1981 SC 951 38. AIR 1995 Bombay 19 39. AIR 1980 Andhra Pradesh 191 40. AIR 1929 Privy Council 181 41. (1985) 1 SCC 51 42. AIR 1968 Punjab & Haryana 478 43. AIR 1951 SC 128 44. AIR 1974 SC 396 45. AIR 1996 SC 2181 46. (1996) 6 SCC 185 47. AIR 1966 SC 719 48. AIR 1966 SC 870 49. 2004(5) Supreme 29 50. AIR 1950 Nagpur 223 51. 1953 SCR 1 52. 1984 Supp SCC 196 53. AIR 1957 ALLAHABAD 282 54. (1970) 3 SCC 710 THE HON'BLE SRI JUSTICE B. PRAKASH RAO AND THE HON'BLE SRI JUSTICE RAMESH RANGANATHAN WRIT PETITION Nos.16932, 16902, 15778, 11219, 21059, 21224 OF 2008 & 1315, 6025 AND 18618 OF 2009 COMMON ORDER: (Per Hon’ble Sri Justice Ramesh Ranganathan) These batch of writ petitions are filed by Units established in the Special Economic Zone (for short “SEZ”), and units in the Domestic Tariff Area (for short “DTA”). The petitioners, in W.P. Nos.11219 of 2008, 21059 of 2008, 21224 of 2008, 1315 of 2009 and 18618 of 2009, question the proceedings of the Development Commissioner dated 17.04.2008, and the consequential proceedings of the Assistant Commissioner of Customs, Visakhapatnam SEZ dated 08.05.2008, as illegal and void. By his letter dated 17.04.2008, the Deputy Development Commissioner informed the Assistant Commissioner (Customs), Visakhapatnam SEZ that, pending decision on the issue by the Ministry of Commerce/Central Board of Excise and Customs, the export consignments of SEZ units should be cleared after obtaining a bank guarantee from them covering the value of export duty on export of chrome ore; and a similar procedure should be adopted with regards export of chrome ore by other units in the Visakhapatnam SEZ. The Assistant Commissioner of Customs, Visakhapatnam SEZ, vide letter dated 08.05.2008, informed the petitioner that, henceforth, neither was export duty payable by units of the Visakhapatam SEZ procuring chrome ore & concentrates from DTA suppliers, nor were they required to furnish a bank guarantee in respect of such procurement. The petitioner was informed that the existing stock of chrome ore & concentrates available with SEZ units, which were procured from DTA suppliers without payment of duty, could be exported by them on furnishing bank guarantee equivalent to export duty; DTA suppliers would, however, be required to pay export duty, as per the export tariff, at Rs.3,000/- per metric tonne with immediate effect on the chrome ore & concentrates exported to units of the Visakhapatnam SEZ; a bill of export should be filed by the DTA supplier, or by his authorized representative, for assessment; and, thereafter, the export duty liability had to be discharged by the DTA supplier. The petitioners, in W.P.Nos.15778/08, 16932/08, 16902/08 and 6025 of 2009, question the proceedings dated 30.6.2008 of the Director, SEZ Section, Ministry of Commerce and Industry, Department of Commerce, Government of India, the Circular dated 9.7.2008 issued by the Development Commissioner, Visakhapatnam SEZ, and the proceedings dated 11.7.2008 issued by the Superintendent of Central Excise, Kottur – I Division, Hyderabad, as illegal and void. The Director, Ministry of Commerce and Industry, Government of India, vide proceedings dated 30.6.2008, informed all Development Commissioners that, in accordance with the suggestion of the Department of Revenue, supply of steel products, on which export duty is still applicable as per the relevant Customs Notification, should be permitted only after payment of the prescribed amount of duty. In the Circular dated 9.7.2008 the Development Commissioner informed all the SEZ Developers and Units that steel products procured by them would be permitted only after payment of the prescribed amount of duty as applicable. The specified and authorized officers of the SEZ were advised to permit steel products into the SEZ only after payment of the prescribed amount of duty as applicable. The Superintendent of Central Excise, Kottur Division, Hyderabad, vide letter dated 11.7.2008, informed that export liability should be discharged on iron and steel products cleared to the SEZ from 10.5.2008 onwards. Sri E. Manohar, Learned Senior Counsel appearing on behalf of the SEZ units, would submit that, even if the DTA supplier is liable to pay export duty, it should be recovered from them and not from an SEZ unit; as Section 26(1)(a) & (b) of the SEZ Act exempts every Developer and entrepreneur from customs duty on goods imported into a Special Economic Zone to carry on authorized operations by the Developer or entrepreneur, and exempts duty of customs on goods exported from a Special Economic Zone to any place outside India, the SEZ unit is not liable to pay either import duty or export duty; and the proceedings of the Assistant Commissioner, requiring SEZ Units to furnish bank guarantee towards export duty on chrome ore, was without jurisdiction. Learned Senior Counsel would rely on the judgment of the Division bench of the Gujarat High Court, in Essar Steel Limited v. Union of India[1], in this regard. Sri R. Raghunandan and Sri C.V.R. Rudraprasad, Learned Counsel for the petitioners, while adopting the submissions of the Learned Senior Counsel, would submit that, as the SEZ Act does not authorize levy and collection of customs duty, no such duty could be levied or collected from SEZ Units; in the absence of a specific provision, enabling such duty to be levied and collected, customs duty could not be levied by implication; and, as customs duty can be levied only for imports and exports to a place outside India, the SEZ Units, all of which are located within the territorial limits of India, are not liable to pay customs duty for goods procured from a DTA unit. Sri Raghavan Ramabhadran, Learned Counsel appearing on behalf of M/s. Lakshmi Kumaran and Sridharan, would submit that the SEZ Act merely provides for certain exemptions to SEZ Units; the said Act does not authorize levy and collection of customs duty, from a DTA supplier, for goods supplied by it to a SEZ unit located within India’s territorial limits; Section 12(1) of the Customs Act, 1962 does not authorize levy of customs duty on supplies made by a DTA Unit to an SEZ unit, both of which are located within India; and the action of the respondents in calling upon DTA units to pay export duty is illegal and without jurisdiction. On the other hand, Sri A. Rajasekhar Reddy, Learned Senior Standing Counsel for Central Excise and Customs, would submit that the Customs Act is not one of the Acts specified in the First Schedule to the SEZ Act; while Section 26(c) & (d) of the SEZ Act exempt goods brought from a Domestic Tariff Area to a Special Economic Zone from payment of excise duty, and makes available to a SEZ unit the drawbacks admissible on goods brought from a Domestic Tariff Area to a Special Economic Zone, it does not exempt either the SEZ unit or the DTA unit from payment of export or import duty under the Customs Act; as Section 2(m)(ii) of the SEZ Act defines “export” to mean supply of goods from a Domestic Tariff Area to a SEZ unit, the DTA unit is liable to pay export duty; full effect should be given to the legal fiction in Section 53 as Section 51 gives overriding effect to the SEZ Act over other laws; giving effect to the legal fiction under Section 53 would require goods supplied to an SEZ unit to be deemed as goods sold outside India which would attract levy of customs duty under Section 12(1) of the Customs Act; Rule 2(c) of the Customs, Central Excise duties and Service Tax Drawback Rules, 1995, (hereinafter called the Drawback Rules), defines “export” to mean taking out from a place in a Domestic Tariff Area to a Special Economic Zone; as such the DTA supplier is liable to pay export duty on goods supplied by them to an SEZ unit; both the SEZ Act and the Customs Act must be read harmoniously in conjunction with each other; and, in the light of Special Economic Zone Rules, 2006 (for short the SEZ Rules), while a SEZ unit may not be liable to pay customs duty, the DTA Unit, which supplies goods to an SEZ unit, is required to pay customs duty as it is deemed to have exported goods. The question which necessitates examination is whether the DTA unit is liable to pay export duty on goods supplied to a unit within the Special Economic Zone either under the SEZ Act, 2005 or the Customs Act, 1962? Article 265 of the Constitution of India prohibits levy or collection of tax except by authority of law. Not only the levy but also the collection of tax must be sanctioned by law. (Chhotabhai Jethabhai Patel & Co v. Union of India[2]). The rule of construction of a charging section is that, before taxing any person, it must be shown that he falls within the ambit of the charging section by clear words used therein. No one can be taxed by implication. A charging section has to be construed strictly. If a person has not been brought within the ambit of the charging section by clear words he cannot be taxed at all. (Commissioner of Wealth Tax, Gujarat III, Ahmedabad v. Ellis Bridge Gymkhana[3]). Taxes cannot be imposed in vacuum. There should be some machinery for ascertaining the rate of taxation, and the persons or the class of persons liable to pay the same. (Gopal Narain v. State of U.P.,[4]; State of Mysore v. D. Cawasji and Co.,[5]; M.P.V. Sundararamier and Co. v. State of Andhra Pradesh[6]). A taxing statute must be couched in express and unambiguous language. (Banarsi Debi v. ITO[7]). The Act must be strictly construed in order to find out whether a liability is fastened on a particular subject. The subject is not to be taxed without clear words for that purpose; and every Act of Parliament must be read according to its natural construction of words. (A.P. Board for Water Pollution Control v. A.P. Rayons Ltd.,[8]; Re Nicklethwait[9]; Tennant v. Smith[10]; St. Aubyn v. A.G.[11]). Words must say what they mean, nothing should be presumed or implied, they must say so. The true test must always be the language used. (Goodyear India Ltd. v. State of Haryana[12]). You read nothing in, you imply nothing, but you look fairly at what is said and at what is said clearly and that is the tax. (Sutlej Cotton Mills Ltd. v. CIT[13]; CED v. Kantilal Trikamlal[14]). If a case is not covered within the four corners of the provisions of a taxing statute, no tax can be imposed by inference or by analogy or by trying to probe into the intention of the legislature. (Gursahai Saigal v. CIT[15]; A.V. Fernandez v. State of Kerala[16]). If the subject cannot be brought within the letter of the law the subject is free, however apparently within the spirit of the law the case might otherwise appear to be. (CIT v. Motors and General Stores (P) Ltd.,[17]). In a taxing statute the strict legal position as disclosed by the form and not the substance of the transaction is determinative of its taxability: (Duke of West Minster v . Inland Revenue Commissioners[18]; Bank of Chettinad Ltd. v. CIT[19]; Motors & General Stores (P) Ltd.17; and CIT v. B.M. Kharwar[20]; Jt. CTO v. Young Men's India Assn.,[21]; Gujarat State Financial Corpn. v. Natson Mfg. Co. (P) Ltd.,[22]). The meaning and intention of a statute must be collected from the plain and unambiguous expression used therein rather than from any notions which may be entertained by the Court as to what is just or expedient. The expressed intention must guide the court. (CIT v. Shahzada Nand & Sons,[23]). The Court must look squarely at the words of the Statute and interpret them. It must interpret a taxing statute in the light of what is clearly expressed. It cannot imply anything which is not expressed; it cannot import provisions in the Statute so as to supply any assumed deficiency. The object of this rule is to prevent a taxing statute being construed “according to its intent, though not according to its words”. It has even been said that “if the provision is so wanting in clarity that no meaning is reasonably clear, the courts will be unable to regard it as of any effect”. (Gursahai Saigal15, Cape Branday Syndicate v. Inland Revenue Commissioners[24]; In re: Bethlehem Hospital[25]; A.V. Fernandez16; Re: Bladnoch Distillery Co. Ltd[26]; CST v. Modi Sugar Mills Ltd.,[27]; CIT v. V.M.R.P. Firm, Muar[28]; Controller of Estate Duty v. Kantilal Trikamlal[29]; Aphali Pharmaceuticals Ltd. v. State of Maharashtra[30]; Baidyanath Ayurved Bhawan Pvt Ltd v. The Excise Commissioner, U.P.[31]) The question as to what is covered must be found out from the language according to its natural meaning fairly and squarely read. (IRC v. Duke of Westminster[32], A.V. Fernandez16; Saraswati Sugar Mills v. Haryana State Board[33]). The SEZ Act is an Act to provide for the establishment, development and management of Special Economic Zones for the promotion of exports and for matters connected therewith or incidental thereto. Section 2(c) of the SEZ Act defines ‘authorised operations’ to mean operations which may be authorized under Section 4(2) or 15(9) of the said Act. Section 2(g) defines ‘developer’ to mean a person who has been granted, by the Central Government, a letter of approval under Section 3(10). Section 2(i) defines ‘domestic tariff area’ to mean the whole of India including the territorial waters and continental shelf but not to include the areas of the Special Economic Zones. Section 2(j) defines ‘entrepreneur’ to mean a person who has been granted a letter of approval by the Development Commissioner under Section 15(9). Section 2(zc) defines ‘unit’ to mean a unit set up by an entrepreneur in a Special Economic Zone. Section 3 of the SEZ Act prescribes the procedure for making a proposal to establish Special Economic Zones and, under sub-section (10) thereof, the Central Government shall, on receipt of communication under sub-section (9) (a) or (b), grant a letter of approval, on such terms and conditions and obligations and entitlements as may be approved by the Board, to the Developer. Section 4 relates to establishment of a Special Economic Zone and, under sub-section (2) thereof, the Board may authorize the developer to undertake in a Special Economic Zone such operations which the Central Government may authorize. Section 15 relates to setting up of a unit and, under sub-section (9) thereof, the Development Commissioner may, after approval of the proposal, grant a letter of approval to the person concerned to set up a unit and undertake such operations which the Development Commissioner may authorize, and every such operation so authorized shall be mentioned in the letter of approval. While the SEZ Act provides for exemptions, drawbacks and concessions, it does not contain any provision for levy and collection of export duty for goods supplied by a DTA unit to a Unit in a Special Economic Zone for its authorised operations. The Customs Act, 1962 is an Act to consolidate and amend the law relating to customs. Chapter V of the Customs Act relates to levy of, and exemption from, customs duty. Under Section 12(1), except as otherwise provided in the Act or any other law for the time being in force, duties of customs shall be levied, at such rates as may be specified under the Customs Tariff Act, 1975 or any other law for the time being in force, on goods imported into, or exported from, India. Section 2(18) of the Customs Act defines "export", with its grammatical variations and cognate expressions, to mean taking out of India to a place outside India. Section 2(23) defines "import", with its grammatical variations and cognate expressions, to mean bringing into India from a place outside India. Section 2(27) defines "India" to include the territorial waters o f India. Export Duty is a duty of customs leviable under the Customs Act, 1962 on goods exported from India, under Section 12 of the said Act and Section 2 read with the Second Schedule of the Customs Tariff Act, 1975. Payment of such a duty is a condition precedent to sending goods out of the country to other lands. Export Duty is an impost with reference to the movement of property by way of export, particularly with a view to regulating trade and commerce with a foreign country in so far as such matters are within the competence of the Parliament. (In re, Sea Customs Act, 1878, Special Reference No.1 of 1962[34]; Essar Steel Limited1). A conjoint reading of Section 12(1) with Sections 2(18), 2(23) and 2(27) of the Customs Act, 1962 makes it clear that customs duty can be levied only on goods imported into or exported beyond the territorial waters of India. Since both the SEZ unit and the DTA unit are located within the territorial waters of India, Section 12(1) of the Customs Act 1962 (which is the charging section for levy of customs duty) is not attracted for supplies made by a DTA unit to a unit located within the Special Economic Zone. Section 7 of the SEZ Act relates to exemption from taxes, duties or cess and, thereunder, any goods exported out of, or imported into, or procured from the domestic tariff area by (i) a unit in a Special Economic Zone; and (ii) a developer; shall, subject to such terms, conditions and limitations as may be prescribed, be exempt from payment of taxes, duties or cess under all the enactments specified in the first schedule to the SEZ Act. The first schedule to the SEZ Act gives a list of associated enactments. The Acts mentioned therein do not include the Central Excise Act, the Central Excise Tariff Act or the Customs Act. Section 26 of the SEZ Act reads thus: 26 Exemptions, drawbacks and concessions to every Developer and entrepreneur (1) Subject to the provisions of sub-sec. (2), every Developer and the entrepreneur shall be entitled to the following exemptions, drawbacks and concessions, namely: (a) exemption from any duty of customs, under the Customs Act, 1962 (52, of 1962) or the Customs Tariff Act, 1975 (51 of 1975) or any other law for the time being in force, on goods imported into, or services provided in, a Special Economic Zone or a Unit, to carry on the authorised operations by the Developer or entrepreneur; (b) exemption from any duty of customs, under the Customs Act, 1962 (52 of 1962) or the Customs Tariff Act, 1975 (51 of 1975) or any other law for the time being in force, on goods exported from, or services provided, from a Special Economic Zone or from a Unit, to any place outside India; (c) exemption from any duty of excise, under the Central Excise Act, 1944 (1 of 1944) or the Central Excise Tariff Act, 1985 (5 of 1986) or any other law for the time being in force, on goods brought from a Domestic Tariff Area to a Special Economic Zone or Unit, to carry on the authorised operations by the Developer or entrepreneur; (d) drawback or such other benefits as may be admissible from time to time on goods brought or services provided from the Domestic Tariff Area into a Special Economic Zone or Unit or services provided in a Special Economic Zone or Unit by the service providers located outside India to carry on the authorised operations by the Developer or entrepreneur; (e) exemption from service tax under Chapter V of the Finance Act, 1994 (32 of 1994) on taxable services provided to a Developer or Unit to carry on the authorised operations in a Special Economic Zone; (f) exemption from the securities transaction tax leviable under Sec. 98 of the Finance (No. 2) Act, 2004 (23 of 2004) in case the taxable securities transactions are entered into by a non-resident through the International Financial Services Centre; (g) exemption from the levy of taxes on the sale or purchase of goods other than newspapers under the Central Sales Tax Act, 1956 (74 of 1956) if such goods are meant to carry on the authorised operations by the Developer or entrepreneur. (2) The Central Government may prescribe the manner in which, and the terms and conditions subject to which, the exemptions, concessions, drawback or other benefits shall be granted to the Developer or entrepreneur under sub-sec. (1). The mere fact that the Customs Act, 1962 is not one of the Acts specified in the First Schedule to the SEZ Act does not necessitate the conclusion that export duty is payable by a DTA supplier on the goods supplied by it to a unit located within the Special Economic Zone. In the absence of a charging provision in the SEZ Act providing for the levy of customs duty on such goods, export duty cannot be levied on the DTA supplier by implication. The exemptions in clauses (a) to (g) of Section 26(1) are provided for, as the goods in question would otherwise have been subjected to levy of taxes and duties under the enactments mentioned therein. For instance, but for the exemption under Section 26(1) (b) of the SEZ Act, goods exported by a unit in an SEZ to any place outside India would have been subjected to levy of customs duty under Section 12(1) of the Customs Act. Likewise, but for the exemption under Section 26(1)(c) of the SEZ Act, central excise duty would have been payable on goods procured by an SEZ Unit, from a DTA supplier, to carry on its authorised operations. It was wholly unnecessary to exempt goods, supplied by a DTA unit to an SEZ unit, from the levy of export duty as the Customs Act does not provide for levy of customs duty on the supply of such goods. The levy of export duty is neither expressly nor impliedly contemplated under the SEZ Act, and cannot be read in by purported intendment which, in any case, is clearly to the contrary. (Essar Steel Limited1). It is no doubt true that Section 2(m)(ii) of the SEZ Act defines ‘export’ to mean supplying goods from the domestic area to a unit or developer. The SEZ Act, however, does not contain any provision for the levy of customs duty on goods supplied by a DTA unit to a unit located within a Special Economic Zone. The