The Gujarat High Court, while dismissing the petition held that the Goods and Services Tax (GST) department can conduct search and seizure against a SEZ unit within its jurisdiction.
The Petitioner RHC Global Exports Private Limited company was in specific area within SURSEZ which was located for Gem and Jewellery activity.
The Unit of the petitioner was to be treated as foreign territory for its business operations and as such they were ‘Tax Neutral’ or ‘Revenue Neutral’ entity with respect to levy and collection of custom duties, GST and other indirect taxes. The petitioner was granted the approval to operate the SEZ unit in SURSEZ by Development Commissioner, SEZ, Surat.
In respect of the business, the petitioner had obtained the Registration cum Membership Certificate from Export Promotion Council for EOUS & SEZ Unit as well as Registration cum-Membership Certificate from Gem & Jewellery Export Council, Surat in the context of Clause (xvi) of LOP. Further, in compliance with Clause (xvii) of LOP, petitioner also obtained GSTIN certificate and as such petitioner is a tax neutral in terms of GST registration.
According to the petitioner, even the GST registration of the company was indicating the tax entity as ‘SEZ Unit’ and was covered under first proviso to Rule 8 of the Central Goods and Services Tax Rules, 2017 which indicates as “PROVIDED’’ that a person having a unit(s) in a Special Economic Zone or being a Special Economic Zone Developer shall make a separate application for registration as a business vertical distinct from his other units located outside the Special Economic Zone”.
It is the case of petitioner that in both instances, incidence of IGST was not borne by the petitioner. So far as the petitioner’s unit is concerned, the same is ‘Zero Rated Supply’ and as such a tax neutral / revenue neutral and petitioner was filing nil IGST returns and only declares value of imports and Exports from its SEZ unit at SURSEZ.
The Petitioner also additionally obtained a Legal Entity Identifier (LEI) India Limited Certificate, which provides security for international transactions, shortcuts KYC processes and boosts transparency throughout the global financial system.
The Petitioner contended that the LEI was a sort of a legal identity to transact globally and same was granted only to credible and fully KYC and PMLA compliant entities.
A search and seizure was conducted in the applicant’s premise and business place and sealed the premise by the GST Department. The petitioner raised an issue upon the authority to do so.
Senior advocate Mr. Saurabh Soparkar appeared for the petitioner had submitted that since petitioner’s Unit was within the area earmarked and was SURSEZ unit which was a distinct foreign territory and as such, are tax neutral/ revenue neutral area and hence outside the ambit of provision of CGST Act, 2017 or SGST Act, 2017.
He further argued that the state authorities were not empowered to initiate any action since every SEZ unit was a tax neutral zone and the supplies to the petitioners SURSEZ Unit were considered as Zero Rated Supply under the provisions of IGST Act, 2017 and as such they were not subjected to provisions relating to levy, collection, evasion or otherwise of GST in the unit.
The Government Pleader Manisha Shah invited attention of the Court to circular issued by Assistant Commissioner of Sales Tax Unit-62, Surat dated 3.3.2023 and has referred to Section 72 of the IGST Act, 2017 and had indicated that this petitioner’s unit was under jurisdiction of Development Commissioner and hence requested to cooperate in the proceedings under Section 67(2) of the aforesaid petitioner’s dealers/ suppliers.
He further drew attention to Article 246A of the Constitution of India, which was prescribing special provision with respect to goods and services tax and then had contended that enforcement agencies were notified for exercising power conferred under sub-section (1) of Section 21 of SEZ Act, 2005
He also submitted that if interpretation as canvassed by petitioners to the effect that Special Economic Zone should be deemed to be a territory outside the custom territory of India and to be considered an area outside India, such interpretation would lead to a situation where specific economic zone would not be subjected to any laws whatsoever and object of SEZ Act 2005
The two Bench consisting of Ashutosh Shastri and J. C. Doshi observed that this was an attempt on the part of petitioners by filing these kind of petitions to thwart and belay the legal proceedings which are initiated by respondent authorities and as such this move of petitioners appears to be an abuse of process of law looking to the manner in which the irregularities alleged to have been committed. Such an attempt on the part of petitioners deserved to be dealt firmly so that the litigants may not take disadvantage of the situation by bringing such kind of litigation. Records indicated that after issuance of notice, the petitioners did not cooperate and indicated to wait for the orders from the Court.
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