5th Proviso of Rule 27(1) Imposing Export Duty on DTA–SEZ Supplies is Ultra Vires to SEZ Act: Andhra Pradesh HC strikes down Proviso [Read Order]
Section 76F(a) of the Customs Act, 1962, had explicitly imposed export duty on DTA–SEZ supplies, but the provision was consciously omitted after enactment of the SEZ Act, reflecting legislative intent not to levy such duty, said the court
![5th Proviso of Rule 27(1) Imposing Export Duty on DTA–SEZ Supplies is Ultra Vires to SEZ Act: Andhra Pradesh HC strikes down Proviso [Read Order]](https://images.taxscan.in/h-upload/2025/09/22/2089652-andhra-pradesh-high-court-5th-proviso-of-rule-domestic-tariff-area-taxscan.webp "5th Proviso of Rule 27(1) Imposing Export Duty on DTA–SEZ Supplies is Ultra Vires to SEZ Act: Andhra Pradesh HC strikes down Proviso [Read Order]")
The Andhra Pradesh High Court has struck down the 5th proviso to Rule 27(1) of the SEZ Rules, 2006, which had sought to impose export duty on supplies made from Domestic Tariff Area (DTA) to Special Economic Zones (SEZs). The Division Bench comprising Chief Justice Dhiraj Singh Thakur and Justice R. Raghunandan Rao held that the proviso lacked statutory authority and was ultra vires...
The Andhra Pradesh High Court has struck down the 5th proviso to Rule 27(1) of the SEZ Rules, 2006, which had sought to impose export duty on supplies made from Domestic Tariff Area (DTA) to Special Economic Zones (SEZs).
The Division Bench comprising Chief Justice Dhiraj Singh Thakur and Justice R. Raghunandan Rao held that the proviso lacked statutory authority and was ultra vires the Special Economic Zones Act, 2005.
The petitioner, TUF Metallurgical Private Limited, a SEZ-based ferrochrome manufacturer, challenged a rejection order denying exemption from export duty on DTA procurement of chrome concentrate. The denial was based on the impugned proviso to Rule 27(1).
The Court examined the SEZ Act, 2005, which defines “exports” to include supplies from DTA to SEZ but provides exemptions under Section 26 and a levy only under Section 30, which makes goods removed from SEZs to DTA chargeable to customs duties.
The Court stated that there is no charging provision in the Act authorizing export duty on DTA–SEZ supplies.
The bench of Chief Justice Dhiraj Singh Thakur and Justice R. Raghunandan Rao, referring to constitutional principles under Article 265, said that no tax or duty can be levied except by authority of law. It noted that earlier, Section76F(a) of the Customs Act, 1962, had explicitly imposed export duty on DTA–SEZ supplies, but the provision was consciously omitted after enactment of the SEZ Act, reflecting legislative intent not to levy such duty.
The Court rejected the department’s argument that SEZs, being deemed outside the customs territory under Section 53, justified imposition of duty, clarifying that the legal fiction under Section 53 was limited to authorized operations and not for extending levy of duties.
Accordingly, the Bench declared the 5th proviso to Rule 27(1) ultra vires and struck it down, while quashing the rejection order dated 26 April 2024. Thus, it is clarified that supplies from DTA to SEZs are not subject to export duty.
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