Can Export Duty Under Customs Act Imposed on Items Sold By Domestic Tariff To SEZ?
The SEZ Act has come in the year 2005 and the SEZ Act identified certain places in the country to be called as Special Economic Zones and when a person wants to set up an industry or do trading, he has to necessarily obtain permission from the SEZ Commissioner of the particular area. After obtaining permission from the SEZ Commissioner the units setup if sells the products within the country or to other countries the products sold by the SEZ units is exempted from the respectful State acts, now being the zero rate sales under the IGST Act and under the Customs Act 1962.
When VAT was levied there is to be a separate provisions under the VAT Act r/w SEZ Act and the State Act i.e., VAT Act also used to exempt the sales made by the SEZ unit as also the dealers or the other units who have made sales to the SEZ units.
In other words, the SEZ Act is a Central Act and it plays a vital role as a non obstante clause is provided in the act by virtue of which the other Central Acts will not be in a position to tax a commodity which falls under the a SEZ Act.
The position has changed when the GST Act was introduced. The IGST Act clarifies by way of abundant caution and more particularly introduces section 16 which is a zero-rated sales and the section in IGST categorically sates that GST Act prevails over the SEZ Act. Though initially they tired to levy tax on sales to SEZ units later on they have converted such sales under zero rated sales.
This is not the position with regard to customs act and the customs act does not prevail over the SEZ Act and section 12 of the SEZ Act and Section 2(m) of the SEZ Act when compared with each other the SEZ Act prevails over the customs act and it may be noted that Section 2(m) of the SEZ Act deems moment of goods from Domestic Tariff Area (DTA) to Special Economic Zone(SEZ) as exports. Section 12 of the Customs Act when proposes to levy tax, such tax cannot be levied on the goods transferred from or sold from Domestic Tariff Area to Special Economic Zone as such tax is deemed export.
A conjoint reading of the aforesaid provisions though section 12 of the Customs Act is a charging section, section 26 of the SEZ Act reserves the grant of an exemption or a concession under the provision of Customs Act 1962, a duty is leviable as far as the customs act and such duty is not leviable on transfer of goods or the sale of goods from Domestic Tariff Area to SEZ.
Though several judgments on this aspect were dealt, the Gujarat High Court in the case of Adani Power Limited and others Vs. Union of India and others reported in 2015 Gujarat High Court 20008 DB in Civil Application No. 3142 of 2010 dated 15-07-2015 has held that levy of export duty on goods supplied from Domestic Tariff Area to Special Economic Zone units or developers is not justified and the Petitioners are therefore not be called upon to the export duty on the moment of goods from the Domestic Tariff Area to Special Economic Zone units or developers.
When a matter was carried by the Department in an appeal to the Hon’ble Supreme Court the Supreme Court has dismissed the appeal and said that no export duty on transfer from Domestic Tariff Area to Special Economic Zone .
It is very clear that the Central Act i.e., SEZ 2005 prevails over all the Central Acts including the Customs Act expect the GST Act and when the SEZ Act as clearly laid down non obstante class that exempts the duty either on to the customs or Central Excise or Service Tax(Finance Act 1994) or Central Sales Tax Act as the levy is unwarranted.
By virtue of recent Judgment of Gujarat High Court which was upheld by the Hon’ble Supreme Court on 23 September, 2025, it is once again made clear that SEZ act will prevail over the other Central Acts expect the GST Act ( which is zero rated) and any transfer of goods or sale of goods from or services from the Domestic Tariff Area to Special Economic Zone is exempt from tax.
I hope that this article has thrown light on the topic and suggestion if any may be addressed to me so as to improve myself.
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