The Supreme Court has ruled that goods moved from Domestic Tariff Areas (DTA) to Special Economic Zones (SEZ) are domestic supplies, not exports. The verdict relieves companies like Adani Power from export duty disputes under the Customs Act, 1962.
New Delhi: The Supreme Court of India has given a significant ruling that will have a direct impact on companies operating in Special Economic Zones (SEZs). The Court has said that the transfer of goods from a Domestic Tariff Area (DTA) to a Special Economic Zone (SEZ) cannot be treated as an export outside India.
This means that such transfers will not attract export duty under the Customs Act, 1962.
A two-judge Bench consisting of Justice BV Nagarathna and Justice R Mahadevan dismissed the appeal filed by the Union Government. The Centre had challenged an earlier ruling which had gone in favour of Adani Power Limited and other entities.
The Court made it clear that the movement of goods from a Domestic Tariff Area to a Special Economic Zone is considered as a domestic supply.
Therefore, customs authorities cannot treat it as an export transaction and cannot demand export duty on such movements.
The judges observed,
“the movement of goods to SEZs qualifies as a domestic supply, and therefore no export duty can be levied.”
This ruling has brought major relief to companies operating in SEZs because it removes a long-standing tax burden and resolves uncertainty.
Businesses had been facing demands from customs authorities, who had earlier argued that any transfer of goods to SEZs amounted to an export and should therefore attract export duty. However, the Supreme Court has now clarified that such an interpretation is not correct.
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The appeal by the Union Government was essentially based on the argument that SEZs should be treated as separate from the domestic economy, and hence transfers to SEZs were to be seen as exports.
But the Court has now settled the issue firmly in favour of industry. The judgment is being seen as a positive step that will strengthen the SEZ framework and make operations smoother for businesses.
According to legal experts, this ruling resolves a long-standing dispute between businesses and tax authorities.
It has also reaffirmed the principle that SEZs, while being given special incentives, are still very much a part of the Indian territory when it comes to the treatment of goods transferred from DTA.
The Court’s dismissal of the Union Government’s appeal means that companies will no longer have to pay export duty for such transactions. This is expected to encourage further manufacturing and trade activities within SEZs, boosting industrial growth.
For the corporate sector, particularly for companies like Adani Power Limited which were directly involved in the case, this decision marks a clear legal victory. It also provides certainty for future transactions between DTAs and SEZs, avoiding unnecessary litigation.
Industry specialists believe that the judgment will reassure investors and companies about the stability of India’s SEZ regime.
As one commentary pointed out,
“the judgment brings relief to companies operating in SEZs, as it clarifies that duty will not be applicable on goods transferred from DTA units.”
The Supreme Court’s ruling has therefore put an end to a long-standing conflict on the interpretation of exports and has given clarity on how the Customs Act, 1962 will be applied in such situations.
By holding that such transactions are domestic in nature, the Court has provided clarity that will benefit the business community at large.Adani Power in Focus: SC Dismisses Centre’s Appeal, Says No Export Duty on DTA to SEZ Transfers
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