Relief to Adani Power, Export Duty Not applicable on Transfer from Domestic Tariff Area to SEZ: Supreme Court [Read Order]

In a ruling in favour of Adani Power Ltd, the Supreme Court of India ruled that movement of goods from a Domestic Tariff Area (DTA) to a Special Economic Zone (SEZ) is a domestic supply and not an export outside India. The Export duty under the Customs Act, 1962 is not applicable for the same.

A two judge bench of Justice BV Nagarathna and Justice R Mahadevan dismissed the appeal filed by Union of India and upheld the ruling of Gujarat High Court. The High Court had held that it was a domestic supply and not an export outside India, therefore exempted from the payment of the export duty.

The Union government had levied export duty on goods supplied from the DTA to SEZs, arguing that the transaction fell under the Customs Act's definition of "export," which simply means "taking out of India to a place outside India." It was contended that since SEZs are considered foreign territory for trade operations, any supply to them was an "export."

The companies challenged this, relying on the specific and expansive definition of "export" within the SEZ Act, 2005, which explicitly includes three types of transactions, including "supplying goods... from the Domestic Tariff Area to a Unit or Developer."

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Section 12 of the Customs Act, 1962, is the charging provision which levies export duty only on goods physically exported out of India. While Section 2(m) of the SEZ Act deems movement of goods from the Domestic Tariff Area (DTA) to a Special Economic Zone (SEZ) as “exports.

The Court clarified that this operates only to extend benefits under the SEZ scheme, not to impose export duty. Since the power to levy duty flows exclusively from Section 12 of the Customs Act, DTA-to-SEZ transfers cannot be taxed as exports.

The bench found that the High Court had rightly arrived at the conclusions in the aforesaid paragraphs on a correct interpretation of the provisions of the aforesaid two Acts. On a conjoint reading of the aforesaid provisions, Section 12 of the Customs Act, 1962 is the charging Section. However, under Section 26 of the SEZ Act, power is reserved to grant an exemption or a concession if under the provisions of the Customs Act, 1962, a duty is leviable as per the charging Sections.

In the circumstances, all appeals arising got dismissed.

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