Levy of export duty on goods supplied from Domestic Tariff Area to Special Economic Zones is not justified.
Supreme Court Dismisses Union of India's Appeals, Confirms No Levy of Export Duty on Goods Supplied from Domestic Tariff Area to Special Economic Zones
In a landmark judgment, the Supreme Court of India has dismissed the appeals filed by the Union of India against M/s Adani Power Ltd, affirming that the levy of export duty on goods supplied from the Domestic Tariff Area (DTA) to Special Economic Zones (SEZs) is unjustified. The decision was delivered by a bench comprising Justices B.V. Nagarathna and R. Mahadevan on August 28, 2025.
The court's judgment underscores the interpretation of the Customs Act, 1962 and the Special Economic Zones Act, 2005, particularly focusing on the provisions that define and regulate the imposition of export duties. The appeals, which were clubbed together due to common questions of law, sought clarity on whether export duty could be imposed on DTA supplies to SEZs under the Customs Act, 1962, or the SEZ Act, 2005.
The court addressed three pivotal questions: the imposition of export duty under the Customs Act, the levy under the SEZ Act, and whether the Customs Act could incorporate the definition of 'Export' from the SEZ Act. After thorough deliberations, the court concluded that none of these frameworks justified the levy of export duty on such transactions. This interpretation was supported by previous judgments from the Madras High Court and the Andhra Pradesh High Court, which had similarly ruled against the imposition of export duties on DTA to SEZ supplies.
The Supreme Court's judgment reinforces the SEZ Act's definition of 'export,' which includes supplying goods from the DTA to SEZ units as a form of export. However, the court noted that the SEZ Act, 2005, takes precedence over any conflicting laws due to its overriding provisions, specifically Section 51, which ensures its provisions have effect regardless of inconsistencies with other laws.
This judgment is significant for businesses operating within SEZs, as it provides clarity and assurance that goods supplied from DTA to SEZs will not attract export duties, thereby facilitating smoother and more cost-effective operations. The decision is expected to have far-reaching implications, boosting the appeal and functionality of SEZs across India.
Legal experts have hailed the decision as a progressive step towards encouraging economic activities within SEZs, aligning with the government's broader objectives of fostering growth and exports. With this judgment, the Supreme Court has once again emphasized the importance of interpreting statutory provisions in a manner that aligns with legislative intent and economic policy.
The dismissal of the appeals by the Supreme Court marks a definitive conclusion to the legal disputes surrounding the interpretation of export duties in the context of SEZs, thereby setting a precedent for future cases involving similar issues.
Bottom Line:
Levy of export duty on goods supplied from Domestic Tariff Area to Special Economic Zones is not justified.
Statutory provision(s): Customs Act, 1962 Section 12, Special Economic Zones Act, 2005 Sections 2(i), 2(m), 2(za), 51
Union of India v. M/s Adani Power Ltd, (SC) : Law Finder Doc id # 2782682
