New Delhi CESTAT: Duty Payable on SEZ Imports Sold in Domestic Tariff Area

The New Delhi Bench of the Customs, Excise, and Service Tax Appellate Tribunal (CESTAT) has ruled that goods imported into a Special Economic Zone (SEZ) must be used for authorized operations; if such goods are instead sold in the Domestic Tariff Area (DTA), applicable duties must be paid.

According to Section 51 of the Special Economic Zones (SEZ) Act, 2005, the SEZ Act’s provisions will supersede any other conflicting legislation. This means that in the event of a dispute between the SEZ Act and another law, the SEZ Act will reign supreme.

The Bench of Dilip Gupta (President) and P. V. Subba Rao (Technical) has noted that, “if goods imported into an SEZ are not used for the authorised operations but are sold in Domestic Tariff Area, duty has to be paid. If duty is not paid or short paid and as a result a demand has to be raised, it must be done as per the Customs Act by the jurisdictional Customs Officers.”

In this case, the assessee, Prestige, an authorized unit in the Special Economic Zone (SEZ) in Indore, imported Malaysian-origin LED display panels through eight Bills of Entry without paying any duty. These panels were brought into its SEZ unit and subsequently cleared under six Bills of Entry to buyers in the Domestic Tariff Area (DTA).

The department felt that the assessee had not paid BCD and SAD on the six Bills of Entry by wrongly claiming the benefit of the Notifications.

A show cause notice was issued by the Commissioner of CGST & Central Excise, Indore. The Commissioner had confirmed the demand under section 28(4) of the Customs Act.

Aggrieved by the Commissioner of CGST & Central Excise, Indore, the assessee has filed an Appeal before the Tribunal.

The assessee contended that during the conflict between the SEZ Act and the Customs Act, the SEZ Act would prevail by section 51 of the SEZ Act. Also, the SCN was not issued by the specified officer nor was the adjudication done under the SEZ Act.

Whereas the department contended that the SCN and the impugned order do not relate to the authorised operations within the SEZ and therefore, the provisions of section 51 of the SEZ Act would not apply.

The Tribunal observed that the goods in this case have been brought into the DTA falling under the jurisdiction of the Commissioner of Customs, Indore. If any duty is short-paid, he has both the authority and duty to recover it.

Merely because the goods were removed from the SEZ unit as provided under section 30 of the SEZ Act and not directly imported from outside India would make no difference.

The bench stated that not only were the Bills of Entry filed by the assessee but even the duty was assessed and paid by it and not by the buyer. So, the assessee was not only the exporter but was also the importer.

Read Also: CESTAT New Delhi: Multiple Bills of Entry or Shipping Bills Cannot Be Consolidated for Assessment

“Prestige/Assessee had not only filed the DTA Bills of Entry but had also paid the duties of Customs and cleared the goods and after clearing sold them to its buyers at destination. Prestige continued to be the owner of the goods until they were sold. Therefore, as the owner of the goods, Prestige was also the importer in addition to being the exporter in respect of the goods cleared through DTA Bills of Entry, added the bench.”