The High Court of Madras, while quashing the show cause notice of the Development Commissioner held that Development Commissioner appointed under section 11 of the SEZ Act, 2005 is neither a “proper officer” within the meaning of Section 2(34) the Customs Act, 1962 nor a Central Excise Officer for the purpose of Section 11A of the Central Excise Act, 1944, to demand excise duty through a show-cause notice.
The petitioner, M/s. DLF Utilities Ltd. is a Co-Developer of Information Technology/Information Technology Enabled Services located in a Special Economic Zone (SEZ) in Pour, Chennai. The petitioner had procured HSD Oil from Indian Oil Corporation Ltd. (IOCL) from a local refinery in terms of Section 26(1)(c) of the Special Economic Zones Act, 2005 read with Rule 27 of the SEZ Rules, 2006 for carrying on authorized operation in the “Processing Area” without payment of excise duty between April 1, 2015, and October 10, 2015, the respondent authority, the Development Commissioners issued the impugned SCN to the petitioner and has called upon the petitioner to pay a sum of Rs.11,13,78,979/- in terms of Rule 27(3) of Special Economic Zone Rules, 2006 read with Section 26 of the Special Economic Zones Act, 2005.
The petitioner contended that even if excise duty has to be collected, it has to be collected from the manufacturer /refinery concerned which supplied HSD Oil to the petitioner, and therefore the proposed demand was contrary to the well-known canons of law and contrary to the provisions of the Act.
It was further contended by the petitioner that the impugned 2015 Guidelines dated April 6, 2015, were later replaced with a new Guidelines dated September 16, 2016, as a result of which the status quo-ante that was prevailing immediately prior to the impugned 2015 Guideline has been partly restored. Consequently, all procurement after September 16, 2016, is without payment of tax and the benefit of Guidelines should be allowed retrospectively.
The single-judge bench of Justice C. Sarvanan, while quashing the show cause notice of the Development Commissioner held that Development Commissioner appointed under section 11 of the Special Economic Zones Act, 2005 is neither a “proper officer” within the meaning of Section 2(34) the Customs Act, 1962 nor a Central Excise Officer for the purpose of Section 11A of the Central Excise Act, 1944, to demand excise duty through a show-cause notice.
“Even otherwise in view of the consistent policy of Government to allow procurement of goods from 2012 vide 2012 Guidelines dated 21.3.2012 and thereafter 2016 Guidelines dated 16.09.2016, denial of the benefit of procurement of goods without payment of duty is unsustainable under the impugned 2015 Guidelines dated 6.4.2015,” the court said.
“There is no rationale in recognizing exemption vide 2012 Guidelines and withdrawing the same the year 2015 vide impugned 2015 Guideline and thereafter reintroducing the same in the year 2016 with slight modification,” the order said.
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