29 January 2016

Customs duty on electrical energy produced in SEZ and supplied in DTA

The Supreme Court has dismissed the petition filed by the Revenue Department against the judgement of Gujarat High Court in the case Adani Power Limited v. UOI. The High Court had quashed Notification No. 25/2010-Cus., and Notification No. 21/2002-Cus. as amended by Clause 60 of the Finance Bill, 2010 (Second Schedule thereto) as being ultra vires Entry 83 of List I of Seventh Schedule of the Constitution of India, Section 12 of Customs Act, 1962 and Section 30 of SEZ Act, 2005 as well as Articles 14 and 265 of the Constitution.

The notifications exempted Customs duty in excess of 16% ad valorem on electrical energy produced in SEZ and supplied in DTA. The High Court however observed that Section 12 of the Customs Act read with Entry 83 provides for levy of Customs duty on goods ‘imported’ into India. Considering the definitions of ‘import’ in the Customs Act and SEZ Act read with Entry 83, it was held that the goods cleared from SEZ to DTA cannot be considered to be ‘imported’ into India. It was held that since there was no levy under Section 12 of the Customs Act, the question of exempting duty beyond 16% by a subordinate legislation issued under Section 25 of the Customs Act does not arise and therefore the impugned notifications were ultra vires Section 12 and Entry 83. The notifications were also found to be beyond Section 30 of the SEZ Act and in violation of Article 14 of the Constitution as they continued to exempt Customs duty on electricity imported into India but made such Electricity chargeable to duty when cleared from SEZ to DTA.


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