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Published : November 13, 2010 | Author : mohanbrao
Category : Company Law | Total Views : 15130 | Rating :

  
mohanbrao
Dr.Mohan Rao Bolla Principal,Manair College of Law, Khammam Researcher submitted Thesis on Special Economic zones and the Rights of the PAFs with Special Reference to Kakinada Special Economic Zone Private Limited, East Godavari District, Andhra Pradesh
 

The Special Economic Zones Act, 2005 -A Perspective

“SEZ policy is definitely sustainable for India. There is a limit to development that agriculture can achieve. For a jump in growth, industrialisation is necessary. You have to make a choice between agriculture and industrialisation.” - The Nobel Laureate Prof Mohd.Yunus[1]

Special Economic Zones
Special Economic Zones (SEZs.) are specifically delineated enclaves. They are treated as foreign territory[2] for the purpose of industrial service and trade operations. The SEZs. are given several relaxations of customs and other duties including anti dumping duty[3]. These are more liberal regimes in respect of other levies, foreign investments and other transactions. Domestic restrictions and infrastructure inadequacies would be removed in the SEZs. to create an internationally benchmarked environment for business transactions and operations. Government of India guidelines suggest that SEZs. can be developed in the public-private or joint sector domains, or by State Governments.[4] An SEZ is conceived of as an engine to economic growth of the country with a view to attracting investment into the country and generation of foreign exchange through export of goods and services.[5]
Historical Background of the SEZs. Act

The Government of India had announced a Special Economic Zone Scheme in April, 2000 with a view to provide an internationally competitive environment for exports[6]despite the fact that lack of anti dumping regulation may harm the environment[7]. However, it seems the Government of India has taken care to monitor the SEZ establishments at the higher level. A group of Ministers are empowered for that purpose. Interestingly, the Empowered Group has removed the initial limit of 150 on the number of SEZs on 23 August 2006. It has taken a decision to review the situation after 75 SEZs become operational. There were 28 operational SEZs by August 2006, while 150 SEZs have already received formal approval attracting investment of nearly Six billion US dollars – out of which eight Export Processing Zones (EPZs) have been converted to SEZs. Despite this, there have been open arguments in the media between the Ministry of Commerce and Industry and the Finance Ministry on the limit for the number of SEZs. The Commerce Ministry is in favour of having no limitation to the numbers to increase exports and achieve export targets whereas the Finance Minister is in favour of limiting the number to avoid revenue losses Over 200 proposals are still pending approval[8] in India.

A policy was introduced on 1.4.2000 by the NDA government for setting up of Special Economic Zones in the country with a view to provide an internationally competitive and hassle free environment for exports. Units may be set up in SEZ for manufacture of goods and rendering of services. All the import/export operations of the SEZ units will be on self-certification basis.

The units in the Zone have to be a net foreign exchange earner but they shall not be subjected to any pre-determined value addition or minimum export performance requirements. Sales in the Domestic Tariff Area by SEZ units shall be subject to payment of full Custom Duty and import policy in force.

Further Offshore banking units may be set up in the SEZs.
The policy provided for setting up of SEZ's in the public, private, joint sector or by State Governments. It was also envisaged that some of the existing Export Processing Zones would be converted into Special Economic Zones. Accordingly, the Government has converted Export Processing Zones located at Kandla and Surat (Gujarat), Cochin (Kerala), Santa Cruz (Mumbai-Maharashtra), Falta (West Bengal), Madras (Tamil Nadu), Visakhapatnam (Andhra Pradesh) and Noida (Uttar Pradesh) into a Special Economic Zones. In addition, 3 new Special Economic Zones approved for establishment at Indore (Madhya Pradesh), Manikanchan – Salt Lake (Kolkata) and Jaipur have since commended operations. The SEZ Act,2005 was In addition, approval has been given for setting up of 42 Special Economic Zones in various parts of the country in the private/joint sectors or by the State Government[9]
The Objectives of SEZs

The objectives of Special Economic Zones include making available goods and services free of taxes and duties supported by integrated infrastructure for export production, expeditious and single window approval mechanism and a package of incentives to attract foreign and domestic investments for promoting export-led growth.

There are at present eleven functioning Special Economic Zones. While seven Zones have been set up by the Central Government, four by the private/joint/State sector. In addition, approvals have been given for setting up of thirty-five new Special Economic Zones in the private/joint/State sector[10].

The High Court of Andhra Pradesh speaking through Justice Nooti Rama Mohan Rao traced the evolution of the Spicial Economic Zones Act has observed: “ ….. While the policy relating to the Special Economic Zones is contained in the Foreign Trade Policy, incentives and other facilities offered to the Special Economic Zone developer and units are implemented through various notifications and circulars issued by the concerned Ministers/Departments. The present system, therefore, does not lend enough confidence for investors to commit substantial funds for development of infrastructure and for setting up of the units in the zones for export of goods and services. In order to give a long term and stable policy framework with minimum regulatory regime and to provide expeditious and single window clearance mechanism, a Central Act for Special Economic Zones has been found to be necessary in line with international practice. To achieve this purpose, a "Special Economic Zones Bill, 2005" is proposed.

The Salient Features of the SEZs Bill, 2005
The following are the salient features of the Bill;
i) Mtters relating to establishment of Special Economic Zone and for setting up of units therein, including requirements, obligations and entitlements;

ii) Mtters relating to requirements for setting up of off-shore banking units and units in International Financial Service Center in Special Economic Zone, including fiscal regime governing the operation of such units;

iii) Te fiscal regime for developers of Special Economic Zones and units set up therein;

iv) Sigle window clearance mechanism at the zone level

v) Etablishment of an Authority for each Special Economic Zone set up by the Central Government to impart greater administrative autonomy; and

vi) Designation of special courts and single enforcement agency to ensure speedy trial and investigation of notified offences committed in Special Economic Zones…..”[11]

The Act received the assent of the President on 23rd June, 2005 and has come into force with the Special Economic Zones Rules, 2006 on 10th February, 2006.

The Objective
The Special Economic Zones Act, 2005, provides the legal framework for establishment of Special Economic Zones and also for units operating in such zones. The Special Economic Zones Act, 2005 has been enacted with the major objective of generation of additional economic activity, promotion of export of goods and services, investment from domestic and foreign sources and creation of employment opportunities. This Act is unique as it helps in ‘backward and forward’ linkages of the economy.

The Preamble
The preamble of the Special Economic Zones Act reads, “ An Act to provide for the establishment, development and management of the Special Economic Zones for the promotion of exports and for matters connected therewith or incidental thereto.”

The main objective as per the preamble is to promote exports. It provides for the establishment development and management of the Special Economic Zones. The purpose oft the Act extends to the matters connected therewith and even incidental thereto the export promotion. The export promotion relates to the manufactured products and services.[12] The objective of the SEZs is to make available goods and services free of taxes and duties supported by integrated infrastructure for export production, expeditious and single window approval mechanism and a package of incentives to attract foreign and domestic investments with a view to promoting exported growth[13] In other words, ‘…The Act 28 of 2005 is essentially intended to bring in an industrial environment with export promotion orientation. Apart from seeking to garner substantial funds for development of infrastructure, it primarily seeks to secure units which will achieve greater export production. In short, this is a method conceived not only to inspire confidence both in the domestic as well as international or foreign funding agencies to invest in developing sector specific infrastructure but the eye is kept on exports, which help in securing equally valuable foreign exchange….’[14]

The SEZ Act in a Nutshell
The Special Economic Zones Act consists of 58 sections divided into VIII chapters and Three Schedules. The first chapter enlists the definitions of the several terms used in the Act including the term special economic zone. In a nutshell The SEZ Act, 2005 has three defining features. Firstly it outlines the process of setting of SEZ in Chapter II and III ; Secondly it deals with the functioning of SEZ and Thirdly it outlines the benefits enjoyed by the developers and functioning units of SEZs.Chapter II deals with setting up of special economic zone. Chapter III deals with the Constitution of board of approval. Chapter IV explains the functions of Development Commissioner Chapter V deals with special benefits to the developers like Single Window Clearance. Special Fiscal Provisions for Special Economic Zones are laid down in Chapter VI and chapter VII deals with Special Economic Zone Authority and the concluding chapter VIII is titled Miscellaneous.

Preliminary
Chapter I deals with the preliminary aspects of short title, extent and commencement and definitions. Section 1 (1) provides the short title of Act. The Act may be called the Spcial Economic Zones Act, 2005. Section 1 (2) of the Special Economic Zones Act, clearly states that the Act extends to the whole of India[15]. Section 1 (3) of the Act[16] is an enabling provision empowering the central government to bring the Act into force on such date it may notify. The Act was brought into force from 10th Feb 2006 along with the SEZ Rules 2006.

Definitions
Section 2 of the SEZ Act provides definitions. The precept in the definition clause provides ‘unless the context otherwise requires’ meaning that the words need to be understood as denoted in the section unless the context requires otherwise. Some important definitions are as hereunder.[17]
Special Economic Zone: “Special Economic Zone” [18] means each Special Economic Zone notified under the proviso to sub-section (4) of section 3 and sub-section (l) of section 4 (including Free Trade and Warehousing Zone) and includes an existing Special Economic Zone. An SEZ is conceived of as an engine to economic growth of the country with a view to attracting investment into the country and generation of foreign exchange through export of goods and services.[19]

Existing Special Economic Zone:
Existing Special Economic Zone[20] means every Special Economic Zone which is in existence on or before the commencement of this Act; and which shall be deemed to have been notified and established in accordance with the provisions of this Act and the provisions of this Act shall, as far as may be, apply to such Zone accordingly.

Free Trade and Warehousing Zone: Free Trade & Warehousing Zone means a Special Economic Zone wherein mainly trading and warehousing and other activities related thereto are carried on[21].

Person: The Act provides an inclusive definition for Person[22]. Person includes an individual, whether resident in India or out side India, a Hindu undivided family, co-operative society, a company, whether incorporated in India or outside India, a firm, proprietary concern, or an association of persons or body of individuals, whether incorporated or not, local authority and any agency, office or branch owned or controlled by such individual. The Act keeps the gates open for any person natural and legal and individual including foreign national to start an SEZ. Local authorities and agencies owned and controlled by individuals can start an SEZ. Person of whatsoever category including foreign nationals are no exception to establish SEZ.

In other words, an SEZ can be set up jointly or individually the Central Government, a state government or any other body, including a foreign company, for the purpose of (1) manufacturing goods, (2) rendering services, (3) for both of these reasons or (4) as a Free Trade and Warehousing Zone (FTWZ)[23].

Developer: Developer means a person who, or a State Government which, has been granted by the Central Government a letter of approval under sub-section (10) of section 3 and includes an Authority and a Co-Developer.[24]

Co-Developer: Co-Developer means a person who, or a State Government which, has been granted by the Central Government a letter of approval. Any person who, or a State Government which, intends to provide any infrastructure facilities in the identified area referred to in sub-section (2) to (4), or undertake any authorised operation may, after entering into an agreement with the Developer referred to in sub-section (10), make a proposal for the same to the Board for its approval and the provisions of sub-section (5) and sub-sections (7) to (10) shall, as far as may be, apply to the said proposal made by such person or State Government. Every person or a State Government referred to in sub-section (11), whose proposal has been approved by the Board and who, or which, has been granted letter of approval by the Central Government, shall be considered as a Co-Developer of the Special Economic Zone.[25]

Unit: Unit means a Unit set up by an entrepreneur in a Special Economic Zone and includes an existing Unit, an Offshore Banking Unit and a Unit in an International Financial Services Centre, whether established before or established after commencement of this Act;[26]

Export: export means i) taking goods, or providing services out of India, from a Special Economic Zone by land sea or air or by any other mode whether physical or otherwise orii) supplying goods, or providing services from the Domestic Tariff Area to a Unit or developer or iii) supplying goods or providing services, from one unit to another or developer in the same or different special Economic Zone[27]
The Report of Central Board of Excise and Customs (CBEC) suggested redefining the term "exports" by deleting the provision that allows exports to include supplying goods from one unit to another in the same or different SEZ. Investigations have found that the provision enables exporters to claim concession by transferring goods to another SEZ without physically exporting anything. [28]
Board: Section 2(e) defines the 'Board' to mean the Board of Approval constituted under sub-section (1) of Section 8.[29]
Development Commissioner: Development Commissioner means the Development Commissioner appointed for one or more Special Economic Zones under sub-section (1) of Section 11[30].

Appointment of the Director STPI in Andhra Pradesh as Development Commissioner was challenged as ultravires the Act. The Andhra Pradesh High Court negatived the appointment. Sub-section (1) of Section 11 of the SEZ Act requires the Central Government to appoint only its officers, not below the rank of Deputy Secretary to the Government of India, as Development Commissioners. The court held that the Director STPI could not be equated to an officer not below the rank of Deputy Secretary.[31]

Domestic Tariff Area: Domestic Tariff Area[32] means the whole of India (including the territorial waters and continental shelf) but does not include the areas of the Special Economic Zones.

Manufacture: Manufacture means to make, produce, fabricate, assemble, process or bring into existence, by hand or by machine, a new product having a distinctive name, character or use and shall include processes such as refrigeration, cutting, polishing, blending[33], repair, remaking, re-engineering and includes agriculture, aquaculture, animal husbandry, floriculture, horticulture, pisciculture, poultry, sericulture, viticulture and mining.[34]

Services: Services means such tradable services which –(i) are covered under the General Agreement on Trade in Services annexed as IB to the Agreement establishing the World Trade Organization concluded at Marrakes on the 15th April, 1994;(ii) may be prescribed by the Central Government for the purposes of this Act;(iii) earn foreign exchange[35]
Establishment of Special Economic Zones

Chapter – II Contains the most important aspects of establishment of Special Economic Zones[36] such as procedure for making proposal to establish Special Economic zone[37], establishment of Special Economic Zone and approval and authorization to operate it to, Developer[38], guide lines for notifying Special Economic Zone, Processing and non processing areas[39] and exemption for taxes, duties or Cess.

Section 3 which consists of 13 subsections lays down the procedure for making proposal to establish SEZ. Section 3 (1) of the Act of 2005 provides that Special Economic Zone may be established under the Act, either jointly or severally by the Central Government, State Government, or any person for manufacture of goods or rendering services or for free trade and warehousing zone. Sub-section (2) of Section 3 provides that any person, who intends to set up an SEZ, may, after identifying the area, make a proposal to the State Government concerned for that purpose. Sub-section (3) of Section 3 provides that notwithstanding anything contained in Sub-section (2), any person, who intends to set up SEZ, may, after identifying the area, at his option, make a proposal directly to the Board of Approval for the purpose of setting up the SEZ, provided that where such proposal has been received directly from a person under this sub-section, the Board may grant approval and after receipt of such approval, the person concerned shall obtain the concurrence of the State Government within the prescribed period.[40]

The private developer submits his proposal for establishment of an SEZ to the state government concerned as per section 3 para 2 of the SEZ Act[41]. In Agasthya Bio –Pharm India Ltd Vs Union of India W.P.(C).No. 2144 of 2009(E) the High court of Kerala observed, ‘the Special Economic Zones Rules, 2006 framed by the Central Government under the provisions of the Special Economic Zones Act, 2005. It is seen from Chapter 2 of the said Rules, laying down the procedure for establishment of Special Economic Zone, the recommendation of the 4th respondent (Principal Secretary to Govt. of Kerala) is a necessary requirement.’ Therefore, the secretary was ordered to consider the proposal submitted by the Petitioner for the establishment of the Biotechnology Park [SEZ] and pass orders thereon in the manner as laid down in special Economic Zones Rules 2006.

Pertinently, it is interesting to note that the private developer may also approach the BoA directly[42] and thereafter get the concurrence of the state government concerned. The state government has to get its proposal screened directly by the BoA.[43] After consulting the respective state government, however, the Central Government may set up and notify the SEZ suo motu[44]. The state government has to forward the private developer’s proposal to the BoA within 45 days of the date of receipt along with its recommendation[45].

Requirements for Establishment of SEZ
The central government is empowered to prescribe the requirements for establishment of a SEZ.[46]
a) the minimum area of land and other terms and conditions subject to which the Board shall approve, modify or reject any proposal received by it under sub section (2) to (4) and

b) the terms and conditions subject to which the Developer shall undertake the authorized operations and his obligations and entitlements.

The section contains a proviso. It provides that different minimum area of land and other terms and conditions referred to clause (a) may be prescribed by the Central Government for a class or classes of SEZ[47].

The Duties of the Board

A Board to be called the ‘Board of Approval’ has been constituted to exercise the powers conferred on, and to perform the functions assigned to it, under this Act. The Board of Approval shall have the duty to promote and ensure orderly development of the Special Economic Zones. The Board, keeping in view of the requirements prescribed by the central government under Section 3 (8), may approve modify or reject a proposal as empowered under Section 3 (7).

If the Board approves the proposal without any modifications, it shall communicate to the central government.[48] If the Board approves the proposal with modifications it shall communicate such modifications to the person or the state government concerned and if such modifications have been accepted by such person or State government the Board shall communicate the approval to the Central Government.[49]

If the Board rejects the proposal received, it shall record the reasons and communicate the rejection to the Central Government which shall intimate it to the state government or the person concerned.[50] Sub Section (10) requires to grant a letter of approval on such terms and conditions and obligations and entitlements as may be approved by the Board to the Developer being the person or the State government concerned.[51] The sub section contains a proviso. If the central government approves more than one Developer in an SEZ where one developer does not have the minimum area of contiguous land in his possession, each developer shall be considered as a Developer in respect of the land in his possession.

[ This provision may invite troubles between the Developers when a Developer who does not have the minimum required contiguous land in his possession.]‘…..It is thus manifestly clear that before a parcel of land is declared as a Special Economic Zone, weighty considerations are required to be bestowed by the State and only upon its being satisfied that it is essentially a fit case, the same is to be declared as a # Special Economic Zone. ……. the power available under sub-section (1) of Section 4 has been used after careful consideration of all relevant factors….’[52]
# The proposal for SEZ shall be in the made in such form, manner as prescribed.[53] The duty of the state government is to forward the proposal with its recommendations.[54]
# The Board is vested with the discretionary power of approval modification and rejection. After receipt of the proposal the Board may approve the proposal subject to such terms and conditions as it may deem fit to impose, or modify or reject the proposal[55].

Establishment, Approval and Authorization of SEZ to Operate
Establishment of SEZ
# A Special Economic Zone may be established under this Act, either jointly or severally by the Central Government, State Government, or any person for manufacture of goods or rendering services or for both or as a Free Trade and Warehousing Zone.[56]
# Any person, who intends to set up a Special Economic Zone, may, after identifying the area, make a proposal to the State Government concerned for the purpose of setting up the Special Economic Zone.[57] The State Government may, on receipt of the proposal forward the same together with its recommendations to the Board within such period as may be prescribed. The Board will further communicate its decision about approval/modifications/rejection to the Central Government. The Central Government shall grant a ‘Letter of Approval’ if proposal is approved. The Central Government may approve more than one Developer in a Special Economic Zone in cases where one Developer does not have in his possession the minimum area of contiguous land as may be prescribed, for setting up a Special Economic Zone and in such cases, each Developer shall be considered as a Developer in respect of the land in his possession. (The minimum area requirements for the multi-product SEZs would be 1000 hectares or more; for the service specific zone, the area requirement is 100 hectares. However, SEZs for specific industries like gems and jewellery, bio-technology, it can be set up on 10 hectares or more.)

Any person who, or a State Government which, intends to provide any infrastructure facilities in the identified area or undertake any authorised operation may, after entering into an agreement with the Developer, make a proposal for the same to the Board for its approval. Such person or State Government (who has been granted the Letter of Approval) shall be considered as a Co-Developer of the Special Economic Zone.

The Developer shall then submit the exact particulars of the identified area to the Central Government and thereupon that Government after satisfying that the requirements are fulfilled, shall notify the specifically identified area in the State as a ‘Special Economic Zone’.

The Developer shall, after the grant of letter of approval under sub-section (10) of Section 3, submit the exact particulars of the identified area referred to in sub-sections (2) to (4) of that section, to the Central Government and thereupon that Government may, after satisfying that the requirements, under sub-section (8) of section 3 and other requirements, as may be prescribed, are fulfilled, notify the specifically identified area in the State as a Special Economic Zone[58]:

Provided that an existing Special Economic Zone shall be deemed to have been notified and established in accordance with the provisions of this Act and the provisions of this Act shall, as far as may be, apply to such Zone accordingly[59]:

Provided further that the Central Government may, after notifying the Special Economic Zone, if it considers appropriate, notify subsequently any additional area to be included as a part of that Special Economic Zone[60].
# Guidelines for Notifying SEZ
# The central government is guided by the Act for notifying an area as a Special Economic Zone.
# While (i)notifying an area as SEZ or (ii)an additional area to be included in the SEZ and (iii) discharging its functions under this Act, the central government shall be guided by the following –

a) generation of additional economic activity
b) promotion of exports of goods and services
c) promotion of investment from domestic and foreign sources
d) creation of employment opportunities
e) development of infrastructure facilities and
f) maintenance of sovereignty and integrity of India, the security of State and friendly relations with the foreign states.[61]

Processing and Non Processing Areas

The central government or any authority specified by it may demarcate the Special Economic Zone into Processing and non Processing area. The processing area for setting up Units for activities namely manufacture of goods or rendering services[62] or exclusively for trading or warehousing purposes[63]. The non processing area for activities other than those specified under clause (a ) or (b)[64]
Exemptions from Taxes Duties or Cess

Any goods or services exported out of or imported into or procured from the Domestic Tariff Area[65] by a Unit in a SEZ or a Developer shall be exempt from the payment of taxes, duties or Cess[66] under all enactments[67] specified in the First Schedule[68]. The provision is subject to such terms, conditions and limitations as may be prescribed.

Thus exemptions are provided from payment of taxes, duties or Cess under almost of all the products of agriculture, coffee, Tea, Rubber, Mica, coal, marine, jute products, tobacco, Oil, Textiles, Medicinal/toilet preparations even the research and development for the units of Special Economic Zones and the Developers.

Constitution of the Board of Approval
Chapter III provides for the Constitution of the Board of Approval[69], Duties powers and functions of the Board[70], Suspension of letter of approval and transfer of Special Economic Zone in certain cases[71].

S. 8 (1) The Central Government shall, within fifteen days of the commencement of this Act, by notification, constitute, for the purposes of this Act, a Board to be called the Board of Approval. (2) The Board shall consist of:-

a) an officer not below the rank of an Additional Secretary to the Government of India in the Ministry or Department of the Central Government dealing with commerce-Chairperson, ex officio;

b) two officers, not below the rank of a Joint Secretary to the Government of India, to be nominated by the Central Government to represent the Ministry or Department of the Central Government dealing with revenue-Members, ex officio;

c) one officer not below the rank of a Joint Secretary to the Government of India to be nominated by the Central Government to represent the Ministry or Department of the Central Government dealing with economic affairs (financial services) Member, ex officio:

d) such number of officers, not exceeding ten, not below the rank of the Joint Secretary to the Government of India, to be nominated by the Central Government to represent the Ministries or Departments of the Central Government dealing with commerce, industrial policy and promotion, science and technology, small scale industries and agro and rural industries, home affairs, defence, environment and forests, law, Overseas Indian Affairs and urban development - Members, ex officio:

e) a nominee of the State Government concerned - Member, ex officio:

f) the Director General of Foreign Trade or his nominee - Member, ex officio:

g) the Development Commissioner concerned - Member, ex officio:

h) a Professor in the Indian Institute of Management, being a society registered under the Societies Registration Act, 1860 (21 of 1860) or the Indian Institute of Foreign Trade, being a society registered under the Societies Registration Act, 1860 (21 of 1860), as may be, nominated by the Central Government-Member, ex officio:

i) an officer not below the rank of Deputy Secretary to the Government of India dealing with the Special Economic Zones in the Ministry or Department of the Central Government, dealing with commerce to be nominated by the Central Government-Member-Secretary, ex officio:

Provided that the member, being the Joint Secretary nominated under clauses (b) to (d) of this sub-section may, if he is unable to attend the meeting of the Board, authorise any other officer to attend the meeting of the Board on his behalf.

(1) The Central Government may appoint any of its officers not below the rank of Deputy Secretary to the Government of India as the Development Commissioner of one or more Special Economic Zones.

(2) The Central Government may appoint such officers and other employees as it considers necessary to assist the Development Commissioner in the performance of his functions in the Special Economic Zones established by a Developer (other than the Central Government) under this Act on such terms and conditions as it deems fit.

(3) Every Development Commissioner, officer and other employee shall be entitled to such salary and allowances and subject to such terms and conditions of service in respect of leave, pension, provident fund and other matters as may, from time to time, be specified by the Central Government.

‘Section 8 (2) (h) of the SEZ Act enables the Central Government to nominate a Professor from either the Indian Institute of Management or the Indian Institute of Foreign Trade, (both of which are Societies registered under the Societies Registration Act, 1860), as an Ex-officio member of the Board……. Similarly, while Sub-section (1) of Section 11 of the SEZ Act requires the Central Government to appoint only its officers, not below the rank of Deputy Secretary to the Government of India, as Development Commissioners, sub-section (2) of Section 11 gives it a wider latitude in appointing officers and employees to assist the Development Commissioner. Section 11(2) empowers the Central Government to appoint such officers and other employees as it considers necessary. The "Officers" and "employees" referred in Section 11(2) need not, necessarily, be officers and employees of the Central Government. While Sections 8(2)(h) and 11(2) enable the Central Government to appoint persons other than its officers, Section 11(1), however, mandates it to do so’.[72].

Duties, Powers and Functions of the Board
The Board shall have the duty to promote and ensure orderly development of the Special Economic Zones[73]. It may be noted here that within a span of about 190 days after the SEZ Act came into force in February 2006 there was a mad rush and 388 proposals on an average two per day reached the Union Industry and commerce Ministry. There being a tremendous rush of entrepreneurs to set up SEZ, one of the observers raised a question.” If SEZ developers spend huge sums on infrastructure and are unable to attract enough export units, they will soon run into severe financial crisis..”[74] However, the Board is bestowed with the duty of orderly development of the SEZs in the country.

Powers and Functions of the Board
The powers and function of the Board include
· Granting of approval or rejecting or modifying such proposals for establishment of SEZs[75]
· Granting approval of authorized operations to be carried out int eh SEZ by the developer[76]
· Granting approval to the Developer or units for foreign collaborations and fdi in the SEZ for its development operation and maintenance[77]
· Granting approval or rejecting proposal for providing infrastructure facilities in a SEZ or modifying such proposals.[78]
· Granting a licence to an industrial undertaking in an SEZ[79]
· Suspension of the letter of approval granted to a developer and appointment of an Administrator under sub section (1) of section 10 [80]
· Disposing of appeals preferred under sub section (4) of Section 15[81]
· Disposing of appeals preferred under sub section (4) of Section 16[82]
· Performing of such other functions as may be assigned to it by the central government

The Board is empowered to decide as to whether a particular activity constitutes

Chapter IV deals with the Appointment and functions of development commissioner.

Appointment of Development Commissioner
(1) The Central Government may appoint any of its officers not below the rank of Deputy Secretary to the Government of India as the Development Commissioner of one or more Special Economic Zones.

(2) The Central Government may appoint such officers and other employees as it considers necessary to assist the Development Commissioner in the performance of his functions in the Special Economic Zones established by a Developer (other than Central Government) under this Act on such terms and conditions as it deems fit.

(3) Every Development Commissioner, officers and other employee shall be entitled to such salary and allowances and subject to such terms and conditions of service in respect of leave, pension, provident fund and other matters as may, from time to time, be specified by the Central Government.

Functions of Development Commissioner
(1) Every Development Commissioner shall take all steps in order to discharge his functions under this Act to ensure speedy development of the Special Economic Zone and promotion of exports therefrom.

(2) Without prejudice to the generality of the foregoing provisions, the Development Commissioner shall-

(a) guide the entrepreneurs for setting up of Units in the Special Economic Zone;

(b) ensure and take suitable steps for effective promotion of exports from the Special Economic Zone;

(c) ensure proper co-ordination with the Central Government or State Government Departments concerned or agencies with respect to, or for the purposes, of Clauses (a) and (b);

(d) monitor the performance of the Developer and the Units in a special Economic Zone;

(e) discharge such other functions as may be assigned to him by the Central Government under this Act or any other law for the time being in force; and

(f) discharge such other functions as may be delegated to him by the Board.

(3) Every Development Commissioner shall be overall in charge of the Special Economic Zone and shall exercise administrative control and supervision over the officers and employees appointed under Sub-section (2) of Section 11 (including the officials deputed to such Special Economic Zone) to discharge any of the functions under this Act.

(4) Without prejudice to the provisions of Sub-sections (1) to (3), every Development Commissioner shall discharge such functions and exercise such powers as may be delegated to him by a general or special order by the Central Government or the State Government concerned, as the case may be.

(5) Every Development Commissioner may call for such information from a Developer or Unit from time to time as may be necessary to monitor the performance of the Developer or the Unit, as the case may be.

(6) The Development Commissioner, may, delegate any or all of his powers or functions to any of the officers employed under him.[83]
Thus, Section 2(h)of the Act defines 'Development Commissioner' to mean the Development Commissioner appointed for one or more Special Economic Zones under sub-section (1) of Section 11.

Sub-section (1) of Section 11 of the SEZ Act requires the Central Government to appoint only its officers, not below the rank of Deputy Secretary to the Government of India, as Development Commissioners. Sub-section (2) of Section 11 gives it a wider latitude in appointing officers and employees to assist the Development Commissioner. Section 11(2) empowers the Central Government to appoint such officers and other employees as it considers necessary. The "Officers" and "employees" referred in Section 11(2) need not, necessarily, be officers and employees of the Central Government. While Sections 8(2)(h) and 11(2) enable the Central Government to appoint persons other than its officers, Section 11(1), however, mandates it to do so.[84]

The Development commissioner is required to be in charge of the SEZ and to exercise administrative control and supervision over the officers and his assistant employees. He is directly responsible to the Central Government[85]. The Development Commissioner is also something like a link person between the Central and the state governments. Inter alia, he is required to guide the entrepreneurs in setting up units in the SEZ and to ensure and take suitable steps for the promotion of exports from the SEZ. Furthermore, he has to monitor the performance of the developer and the units in the SEZ[86].

At the SEZ level, presumably below the Development Commissioner, there is the Approval Committee, of which the Development Commissioner is an ex officio member. This committee basically has to approve, reject or modify proposals for setting up SEZ units, i.e. to approve the import or procurement of goods from the domestic tariff area or outside India as well as approving the provision of services by companies from outside India or the DTA.

The utilisation of goods or services or warehousing or trading in the SEZ has to be monitored by the Approval Committee. Upon former approval by the Development Commissioner, it can also allow foreign collaborations and FDI for setting up a unit, including investments by people outside India. The developer or entrepreneur is responsible to the Approval Committee for complying with conditions set forth in the Letter of Approval or permission[87].

The Development Commissioner is what the state government and the BoA are on the national level, but at the Zone level. This means that any person intending to set up a unit for carrying out authorized operations in the SEZ has to submit a proposal to the Development Commissioner, who then forwards the same to the Approval Committee. The Committee then decides on the application[88]. It also has the power to cancel the Letter of Approval if the proposal contravenes the terms and conditions in it. Applications for offshore banking have to be made directly to the Reserve Bank of India, which can specify the terms and conditions subject to which an offshore banking unit may be set up and operated in the SEZ on its own.[89]
Single Window Clearance

Constitution of Approval Committee[90]
Central government is empowered to constitute an Approval Committee within six months from the date of commencement of the Act for the existing SEZs[91]. In case of other SEZs established after the commencement of the Act, the committee shall be constituted within 6 months from the date of establishment of such SEZ.[92] Notification shall be issued for the constitution of the committee for every SEZ. The committee to be called Approval Committee exercise the powers and perform the functions specified in Section 14.[93]
Composition of the Approval Committee

The approval committee shall consist of the development commissioner chairperson, ex officio[94], two officers of the central government to be nominated by that government as members ex officio[95], two officers of the central government to be nominated by that government to represent the Ministry or Department dealing with revenue as members ex officio[96], one officer of the central government to be nominated by that government to represent the Ministry or Department dealing with economic affairs (financial services) as member ex officio[97], two officers of the state government[98] to be nominated by that government as members ex officio, a representative of the Developer concerned-special invitee[99].

Chapter V deals with the single window clearance. Constitution of Approval committee powers and functions of the Approval Committee, Setting up of Unit, cancellation of letter of approval to entrepreneur, setting up and operation of Offshore Banking unit, setting up of International Financial Services center, Single application form return etc, Agency to inspect, Single enforcement officer or agency for notified offences, Investigation inspection search or seizure, Designated courts to try suits and notified offences, appeal to High court, offences by companies[100].

The Approval Committee shall approve the import or procurement of goods from the Domestic Tariff Area, in the Special Economic Zone for carrying on the authorized operations by a Developer; approve the providing of services by a service provider, from outside India, or from the Domestic Tariff Area, for carrying on the authorized operations by the Developer, in the Special Economic Zone; monitor the utilization of goods or services or warehousing or trading in the Special Economic Zone; approve, modify or reject proposals for setting up Units for manufacturing or rendering services or warehousing or trading in the Special Economic Zone; allow foreign collaborations and foreign direct investments (including investments by a person outside India) for setting up a Unit; monitor and supervise compliance of conditions subject to which the letter of approval or permission, if any, has been granted to the Developer or entrepreneur; and perform such other functions as may be entrusted to it by the Central Government or the State Government concerned, as the case may be.

Setting up of ‘Unit’
The procedure for setting up of a Unit for carrying on the authorised operations[101] in a Special Economic Zone is similar to that of the establishment of the SEZ. Any person, who intends to set up a Unit, shall submit a proposal to the Development Commissioner[102]. The Development Commissioner shall then submit the same to the Approval Committee. Upon approval, the Development Commissioner shall grant a ‘Letter of Approval’ to that person to set up a Unit.

Setting up and Operation of Offshore Banking Unit
An application for setting up and operation of an Offshore Banking Unit (Branch of a Bank) in a Special Economic Zone may be made to the Reserve Bank. The Reserve Bank shall, if it is satisfied that the applicant fulfills all the conditions specified, grant permission to such applicant for setting up and operation of an Off-shore Banking Unit.

Setting up of International Financial Services Centre:
The Central Government shall approve only one International Financial Services Centre in a Special Economic Zone.

Special Fiscal Provisions for SEZs
Chapter VI deals with special fiscal provisions for special Economic zones such as exemptions, drawbacks and concessions to every developer and entrepreneur. Provisions of Income Tax Act, 1961 to apply with certain modifications in relation to Developers and entrepreneurs, duration of goods or services in special economic zones, transfer of ownership and removal of goods, domestic clearances by units[103].

SEZ Authority
Chapter VII deals with constitution of special Economic zone Authority, Officers of the Authority and other staff, Special provision for transfer of officers or other employees to the Authority and the functions of the Authority, Grants and loans by Central government, constitution of Fund and its application, Accounts and Audit, directions by Central government, Returns and reports, power to supersede Authority, members officers and other employees of authority[104].

The Central Government shall, by notification in the Official Gazette, constitute, for every Special Economic Zone, an Authority to be called the ‘……… (Name of the Special Economic Zone) Authority’ to exercise the powers conferred on, and discharge the functions assigned to, it under this Act. Every Authority shall be a body corporate by the name aforesaid, having perpetual succession and a common seal. Every Development Commissioner of the Special Economic Zone for which he is appointed as such shall be the Chief Executive of the Authority concerned.

Miscellaneous Aspects
Chapter VIII deals with miscellaneous aspects such as the Reference of dispute, limitations in case of dispute, Applicability of provisions of the Act to existing Special Economic Zones, person to whom communication may be sent under the Act, Employees Identity Card, authorities responsible for administration of the Special Economic zones, Protection of action taken in good faith to the Government, power to modify provisions of the Act or other enactments in relation to Special Economic Zones, power of state Government to grant exemptions to from state taxes levies and duties to the Developer or the entrepreneur, Overriding effect is given to the Act on any law for the time being in force, certain provisions contained in the Customs Act, 1962 and the SEZ Rules 2003 and the SEZ Customs Procedure Regulations - not to apply to the Special Economic zones, special economic zones to be ports, air ports, inland container depots, land stations etc., in certain cases, rule making power to remove difficulties to Central Government and specific power to amend First schedule, Amendment of certain enactments specified in the Third Schedule and Savings.[105] .

Taxation of SEZ
# Any goods or services exported out of, or imported into, or procured from the Domestic Tariff Area by –(i) a Unit in a Special Economic Zone; or(ii) a Developer;

# Shall, subject to such terms, conditions and limitations, as may be prescribed, be exempt from the payment of taxes, duties or cess under all enactments specified in the First Schedule.

# The Second Schedule to the Act makes modifications to the Income-Tax Act, 1961.

# The Developer of SEZs, who was hitherto getting a deduction under Section 80IA (4) (iv), will get such exemption under Sec. 80IAB.

# The units located in SEZs, hitherto getting deduction under Sec. 10A (1A), will continue to get the deduction under the new Sec. 10AA. Additional tax on dividend distributed out of the profits from units in SEZs will not be levied in view of the amendments to Sec. 10(34) and 115-O.

# The financiers being an infrastructure capital fund or infrastructure capital company for such projects, hitherto exempt under Sec. 10(23G), will continue to get the same exemption in respect of projects covered by SEZs by an amendment made in 10(23G) by substituting Sec. 80IA(4) by Sec. 80IAB(3).

# Tax on capital gains on shifting of assets to an SEZ is spared by insertion of Sec. 54GA. The benefit of the above concessions would be for ten consecutive years out of the first 15 years.

# Banking Units — scheduled banks in India, foreign banks having offshore banking units in an SEZ and units of International Financial Services Centre — are entitled to a 100 per cent deduction of income for the first five consecutive years and 50 per cent thereafter.

# This is secured by insertion of Sec. 80LA, while a consequential amendment to Sec. 197A ensures that no deduction of tax at source will be made for any payment of interest on deposits or borrowings made to a non-resident or a resident not ordinarily resident, while Sec. 10(15) (viii) exempts such non-residents themselves who will not be liable to tax.

Grievance Redressal
The State Government, in which the Special Economic Zone is situated, may, with the concurrence of the Chief Justice of the High Court of that State, designate one or more courts to try all suits of a civil nature arising in the Special Economic Zone; and to try notified offences committed in the Special Economic Zone.

Appeal Against The Designated Court:

An appeal against any decision of a designated court can be filed in the High Court of that State, within 60 days from the date of communication of the court's decision or order to the appellant. An extension of a further period of 60 days may be granted by the High Court, if the appellant can show sufficient cause for the delay in filing an appeal, to the satisfaction of the High Court.

Appeal Against Orders of The Approval Committee:
Any person aggrieved by an order passed by the Approval Committee for setting up of a Unit in a Special Economic Zone or for cancellation of the Letter of Approval for the same, can make an appeal to the Board, within 30 days from the date of communication of such an order to him.

If an appeal is preferred after the expiry of 30 days, the appellant must show sufficient cause for the delay by making an application in this regard and supporting it by an affidavit.

The Board, upon being satisfied with the appellant's cause for delay, shall admit the appeal for reasons to be recorded in writing, before the expiry of 45 days from the date of communication of the Approval Committee's order to the appellant.

After considering and giving a hearing of the appeal, the Board shall pass the appropriate orders and give directions to give effect to its orders. The Order of the Board shall be in writing and after signing it, the Board shall cause it to be communicated to the appellant and to the Approval Committee.

Reference of Disputes to Arbitration:
Any dispute of a civil nature arising in a Special Economic Zone among two or more entrepreneurs / two or more Developers / an entrepreneur and a Developer, shall be referred to arbitration, if the court or courts to try suits regarding such dispute have not been so designated by the State Government.

No dispute shall be referred to arbitration on or after the date of the designation of a court or courts by the State Government to try suits regarding such dispute.

A dispute which has been referred to arbitration shall be settled or decided by an Arbitrator appointed by the Central Government, in accordance with the provisions of the Special Economic Zone Act, 2005, and the Arbitration and Conciliation Act, 1996.

Fiscal Benefits Under The SEZs Act, 2005 Read with The SEZ Rules, 2006
The Benefits Available Under The Special Economic Zones Act with reference to several other enactments/ are :

· Central value added tax (Cenvat)
·  Customs duty/ Cess etc.,
· Value Added Tax at state level,
· Income Tax
· Service Tax
·  Central Sales tax
·  Securities Transaction Tax
·  Exemptions of tax , duties or Cess in 21 Acts
· Stamp Duty[106] etc.,

The following are the relevant provisions of the Act read with the Rules

# Chapter VI of Special Economic Zones Act, 2005 (Section 26 to Section 30) relates to “Special Fiscal Provisions for SEZ”
# Chapter IV of Special Economic Zones Rules, 2006 (Rule 22 to Rule 46) relates to “Terms and conditions subject to which entrepreneur and developer shall be entitled to exemptions, drawbacks and concessions”
# Chapter V of Special Economic Zones Rules, 2006 (Rule 47 to Rule 52) relates to “conditions subject to which goods may removed from Special Economic Zones to DTA”
Exemption Available to Sub Contractor [107]

Exemptions, drawbacks and concessions on the goods and services allowed to a Developer or Co-developer will also be available to the contractors appointed by such Developer or Co-developer
All the documents in such cases should bear the name of the Developer or Co-developer along with the contractor
Documents should be filed jointly in the name of the Developer or Co-developer and the contractor[108]

The First Schedule
The First Schedule to The Special Economic Zones Act, 2005 contains the list of enactments under which several exemptions are given for the SEZs.[109] Detailed explanation is added at the Annexure under each of the Twenty One enactments enlisted under the First schedule.
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To be taken to Annexures

1. The Agricultural Produce Cess Act, 1940
# This Act is made to make better financial provision for the Indian Council of Agricultural Research
# It imposes on certain articles a Cess by way of customs duty at the rate of .5% on export, the proceeds of which shall be paid to the Council.(Sec 3)
# It imposes Cess on 21 items which are as under:
# Bones, bristles, butter, cereals other than rice and wheat, drugs, fiber for brushes, fish, fruits, ghee, hides, manures, oilcakes, pulses, seeds, skins, spices, tobacco, vegetables, wheat, wheat flour, wool,

2. The Coffee Act, 1942

# A duty of excise is levied at rate not exceeding Rs 6 per 100 weight as may be fixed by the Central Government on all coffee
# A duty of customs is levied on all code produced in India and exported from India at rate not exceeding Rs 6 per 100weight as may be fixed by the Central Government (sec 11)
# The proceeds of the duty of customs and of the duty of excise reduced by the cost of collection is paid to the the Indian Coffee Market Expansion Board (Sec 13)

3. The Mica Mines Labour Welfare Fund Act, 1946
# An Act to constitute a fund for the financing of activities to promote the welfare of labour employed in the mica mining industry.
# A duty of customs is levied on all mica exported at such rate, not exceeding 6.25 % ad valorem, as may from time to time be fixed by the Central Government (Sec 2)
# Proceeds of the duty of customs recovered is paid to the credit of Mica Mines Labour Welfare Fund (Sec 2)
# Fund utilise the money to promote the welfare of labour employed in the mica mining industry

4. The Rubber Act, 1947
# Act for the development of the rubber industry
# A duty of excise is levied on all rubber produced in lndia at such rate not exceeding Rs 2 per kg of rubber as the Central Government may fix.(Section 12(1)
# The proceeds of the duty of excise collected under this section reduced by the cost of collection is first credited to the Consolidated Fund of lndia
# Amount collected Paid by the Central Government to the Rubber Board for being utilised for the purpose of this Act (Section 12(7)

5. The Tea Act, 1953 .
# An Act to Provide for the control by the Union of the tea industry, including the control, in pursuance of the International Agreement now in force, of the cultivation of tea in, and of the export of tea from, India and for that purpose to establish a Tea Board and levy a customs duty on tea exported from India.
# Customs duty- on tea exported or taken outside India at such rate not exceeding Rs 2 per 100 pounds as the Central Government may notify in the Official Gazette (Sec 25)
# The proceeds of the cess levied under is first credited to the Consolidated Fund of India and the Central Government may pay to the Tea Board (Sec 26)

6. The Salt Cess Act, 1953
# A cess in the nature of excise duty is levied on all salt manufactured
# in the case of salt manufactured in a private salt factory, at the rate of two annas per standard maund
# in the case of salt manufactured in a salt factory solely owned or solely worked by the Central Government at the rate of three and a half annas per standard maund (Section 3)
# It is used to meet the expenses incurred on the salt organisation maintained by Government and on the measures taken by Government in connection with the manufacture, supply and distribution of salt.

7. The Medicinal and Toilet Preparations (Excise Duties) Act, 1955
# An Act for the levy and collection of duties of excise on medicinal and toilet preparations containing alcohol, opium, Indian hemp or other narcotic drug or narcotic.
# Toilet preparation means any preparation which is intended for use in the toilet of the human body or in perfuming apparel of any description, or any substance intended to cleanse, improve or alter the complexion, skin, hair or teeth, and includes deodorants and perfumes (Section 2(k))
# Rate of duty

Description of dutiable goods

Rupees five per gallon of the strength of London proof spirit. All other Medicinal and toilet preparations not otherwise specified containing alcohol -Rupees three per gallon Ayurvedic preparations containing self generated Alcohol, which are capable of being consumed as ordinary alcoholic beverages. Rupees seventeen and ann as eight per gallon of the strength of London proof Spirit. Medicinal and toilet reparations, containing alcohol,

8. The Additional Duties of Excise (Goods of Special Importance) Act, 1957
# A duty of excise at the rate or rates specified in the First Schedule to this Act in respect of the following goods,namely, sugar, tobacco, cotton fabrics, rayon or artificial silk fabrics and woolen fabrics produced or manufactured in India
# The duties of excise shall be in addition to the duties of excise chargeable on such goods under the Central Excises and Salt Act, 1944 (Section 3)

9. The Sugar (Regulation of Production) Act, 1961
# Where the quantity of sugar produced in a factory during any year exceeds the permissible quota fixed for it for that year
there shall be levied and collected on the quantity of sugar which is produced in excess of the permissible quota
# a special duty of excise at the rate at which the duty of excise is chargeable on sugar under the Central Excises Act
# The special duty of excise shall be in addition to the duty of excise chargeable on sugar under the Central Excises Ac

10. The Textiles Committee Act, 1963
An Act to provide for the establishment of a Committee for ensuring the quality of textiles and textile machinery and for matters connected therewith.
The Committee may levy such fees as may be prescribed--
(a) For inspection and examination of textiles,
(b) For inspection and examination of textile machinery,
(c) for any other service which the Committee may render to the manufacturers of textiles and textile machinery (Section 12)

11.The Produce Cess Act, 1966
· An Act that provides for the imposition of cess on certain produce for the improvement and development of the methods of cultivation and marketing of such produce and for matters connected therewith
# A cess is levied for the purposes of this Act on every produce specified First Schedule, which is exported from any customs port to any port beyond the limits of India, a duty of customs at such rate, not exceeding the rate specified in the First Schedule
# A cess is levied for the purposes of this Act, on every produce specified in the Second Schedule, a duty of excise at such rate, not exceeding the rate specified in Second Schedule (Section 3)

12. The Marine Products Export Development Authority Act, 1972
# An Act to provide for the establishment of an Authority for the development of the marine products industry
# A cess is levied on all marine products which are exported at rate not exceeding 3% as the Central Government decide (Sec 14(1))
# The cess levied shall be in addition to any access or duty leviable on marine products under any other law for the time being in force. (Sec 14(2))
# The proceeds of the cess is first credited to the Consolidated Fund of India and the Central Government pay to the Marine Products Export Development Authority from out of such proceeds, after deducting the expenses (Sec 15)

13. The Coal Mines (Conservation and Development) Act, 1974
An Act to provide for the conservation of coal and development of coal mines and for matters connected therewith or incidental thereto.
Excise Duty - on all coal raised and despatched, and on all coke manufactured and despatched, from the collieries in India at the rate not exceeding Rs 10 per tonne (sec 6)
Custom duty - on all coal (including soft and hard coke), imported or brought into India from any place outside India, a duty of customs at the rates equivalent to the rates of duty of excise (sec 7)
Amount collected shall be disbursed by the Central Government to the owners, agents or managers of coal mines (Sec 9)

14.The Oil Industry (Development) Act, 1974
# An Act to provide for the establishment of a Board for the development of oil industry and for that purpose to levy a duty of excise on crude oil and natural gas and for matters connected therewith.
# Excise duty- on every item specified in column 2 of the Schedule at such rate not exceeding the rate set forth in the corresponding entry in column 3 of the Schedule (Sec 15)
# The proceeds of the duties of excise levied under shall first be credited to the Consolidated Fund of India and the Central Government pay to the Oil Industry Development Fund (sec 16)

The Tobacco Cess Act, 1975
# An Act to provide for the Levy and collection, by way of cess, of a duty of excise on virginia tobacco and a duty of customs on tobacco, for the development of tobacco industry
# Excise duty-at the rate of 1 paisa per kg on virginia tobacco which is produced in India and sold at a registered auction platform. (Sec 3)
customs duty -at rate not exceeding 1% ad valorem, as the Central Government may specify on all tobacco which is exported.(Sec 4)
# The proceeds shall first be credited to the Consolidated Fund of India and the Central Government may pay to the Board, for utilised for the purposes of the Tobacco Board Act, 1975 (Sec 5)

16. The Additional Duties of Excise (Textile and Textile Articles) Act, 1978
An Act to provide for the levy and collection of additional duties of excise on certain textiles and textile articles
Excise duty-Goods of the description mentioned in the Schedule are chargeable to duty equal to 10% of the total amount chargeable on such goods. (Sec 3)
Items in schedule are Man-made fibres , Cotton yarn , Woolen and acrylic spun yarn, Non-cellulosic spun yarn,Cotton fabrics, Silk fabrics, Woolen fabrics, Man-made fabrics, Wool tops.

17. The Sugar Cess Act, 1982
# An Act to provide for the imposition of a cess on sugar for the development of sugar industry and for matters connected therewith
# A cess is levied for the purposes of the Sugar Development Fund Act, 1982, a duty of excise on all sugar produced any sugar factory in India, at such rate not exceeding Rs 15 per quintal of sugar (Sec 3)
# The proceeds of the duty of excise levied under section 3 shall be credited to the Consolidated Fund of India (Sec 4)

18. The Jute Manufactures Cess Act, 1983
# An Act to provide for the levy and collection, by way of cess, of a duty of excise on jute manufactures for the purpose of carrying out measures for the development of production of jute manufactures
# Cess is levied on every article of jute manufacture specified in column 2 of the Schedule and produced in India by a duty of excise at such rate not exceeding the rate specified in the corresponding entry in column 3 thereof (Sec 3)
# The proceeds of the duty of excise levied shall first be credited to the Consolidated Fund of India and the Central Government may pay to the Jute Manufactures Development Council for the purposes of the Jute Manufactures Development Council Act, 1983 (Sec 4)

19. The Agricultural and Processed Food Products Export Cess Act, 1985
# An Act to provide for the levy and collection, by way of a cess, of a duty of customs on the export of certain agricultural and processed food products for the development and promotion of their export
# Custom duty- at a rate not exceeding 3% by way of a cess on all Scheduled products, which are exported.
(Sec 3)
# The proceeds of the duties of customs levied shall first be credited to the consolidated Fund of India and the Central Government may pay to the Agricultural and Processed Food Products Export Development Authority (Sec 4)

20. The Spices Cess Act, 1986:
# An Act to provide for imposition of cess on all spices which are exported for the purposes of carrying out measures for the development of export of spices.
customs duy-on spices at such rate not exceeding 5% , ad valorem (Sec 3)
# proceeds of the duty of customs levied credited to the consolidated Fund of India and the Central Government may pay for the purposes of the Spices Board Act, 1986 (Sec 3)

21. The Research and Development Cess Act, 1986:
# An Act to provide for the levy and collection of a cess on all payments made for the import of technology for the purposes of encouraging the commercial application of indigenously developed technology  and for adapting imported technology to wider domestic application
# a cess is levied at such rate not exceeding five per cent, on all payments made towards the import of technology (Sec 3)
# The proceeds of the cess levied and collected shall first be credited to the Consolidated Fund of India and the Central Government may pay to the Technology Development Board constituted under the Technology Development Board Act, 1995 for the purposes of the Board (Sec 4)
# Terms and conditions for availing exemptions, drawbacks &concessions[110]

(i) The Unit shall execute a Bond-cum-Legal Undertaking in Form H, with regard to its obligations regarding proper utilization and accountal of goods and regarding achievement of positive net foreign exchange earning;

(ii) The Developer and Co-Developer shall execute the Bond-cum- Legal Undertaking in Form D with regard to their obligations regarding proper utilization and accountal of goods

(iii) The Bond-cum-Legal Undertaking shall be jointly accepted by Development Commissioner and by the Specified Officer:

Activities Covered in Bond-cum-Legal Undertaking[111]
# the movement of goods between port of import or export and the Special Economic Zone;
# the authorized operations, as applicable to Unit or Developer;
# temporary removal of goods or goods manufactured in Unit for the purposes of repairs or testing or calibration or display or processing or sub-contracting of production process or production or other temporary removals into Domestic Tariff Area without payment of duty
# re-import of exported goods.
# Responsibility for Execution of Bond cum-Legal Undertaking[112] proprietorship concern /Hindu Undivided Family/partnership firm /company

Status of Entrepreneur or Developer

proprietor /Karta /all the partners or authorized partner(s)/Managing Director of the company or any other authorized person

Responsibility
Value of Bond-cum- Legal Undertaking[113]

# Equal to the amount of effective duties leviable on import or procurement from the Domestic Tariff Area of the projected requirement of capital goods, raw materials, spares, consumables, intermediates, components, parts, packing materials for three months
# The Bond-cum-Legal Undertaking
amount shall be monitored quarterly or yearly on the basis of Quarterly Progress Report or Annual Progress Report

An Exception[114]

# Any goods for the personal use of or consumption by officials, workmen, staff, owners or any other person in relation to a Unit or Developer, shall not be eligible for exemptions, drawbacks and concessions or any other benefit.
# Relevant Provisions under The Income Tax Act,1961 which provide for the Benefits
· Non applicability of MAT to SEZ [115]115JB(6)

· Deduction from income of OBU and IFSC 80LA

· Deduction is respect of profits and gains in development of SEZ 80-IAB

· Exemption of Capital gain on transfer of asset in case of shifting of Industrial Undertaking from Urban Area to SEZ[116]

· Exemption to newly established Units in SEZ[117]

· Interest received on deposit with Offshore Banking Unit is exempt 10(15)(viii)

Relevant Sections in Income Tax Act, 1961

No Tax Deduction at Source[TDS] on interest on deposits made with Offshore Banking Unit by Non-resident or person not ordinary resident in India 197A

Exemption from dividend distribution tax in respect of income of SEZ[118]

Changes in the Income Tax Act 1961 relating to SEZ made by Special Economic Zones Act 2005 w.e.f 10/02/2006

# Exemption to newly established Units in SEZ [119]
# Exemption to Unit who begins to manufacture or produce articles or things or provide any services during the PY relevant to any AY commencing on or after 01.04.2006
# Deduction – Total 15 Years
# 100% of Profits from export
# for 5 consecutive years

# 50% of Profits from exports -for further 5 assessment years
# 50% of Profits for as credited to “ Special Economic Zone Re-investment Reserve Account” for next 5years
# Absence of restrictive proviso in new Sec. 10AA dealing with Reconstruction, reconstitution of business in existence
# Use of Special Economic Zone Re-investment Reserve Account[120]

Acquiring machinery or plant
# Until the acquisition of the machinery or plant for the purposes of the business of the undertaking other than
# for distribution by way of dividends or profits or
# for remittance outside India as profits or
# for the creation of any asset outside India
# Mis-use of Special Reserve Account[121] If the Special Reserve Account is mis- utilized, then the deduction would be taken back in the year in which the Special Reserve Account is mis- utilized.

If the Special Reserve Account is not utilized for acquiring new plant and machinery within three years as stated above then the deduction would be taken back in the year immediately following the period of three years.

Consequences for merger and de -merger[122]
# Where an undertaking is transferred to another company under a scheme of amalgamation or de-merger, the deduction under section 10AA shall be allowable in the hands of the amalgamated or the resulting company.
# However, no deduction shall be admissible under this section to the amalgamating company or the de -merged company for the previous year in which amalgamation or de -merger takes place.

Exemption of Capital Gain on Shifting to SEZ[123]
Exemption of capital gains on transfer of assets in cases of shifting of industrial undertaking from urban area to any Special Economic Zone.

The exemption is available to all categories of assesses on capital gain arising on the transfer of certain capital asset of industrial undertaking from urban area to SEZ. (whether developed in an urban area or not)
The Asset transferred should be machinery or plant or building or land or any rights in building or land
The capital gain should be utilized within one year before or three years after the date of transfer for the specified purpose.
(i) purchased machinery or plant

(ii) acquired building or land or constructed building

(iii) shifted the original asset and transferred the establishment of such undertaking to the Special Economic Zone; and

(iv) incurred expenses on such other purposes as may be specified in a scheme framed by the Central Government for the purposes of this section.

# The amount of capital gain which is not so utilized for the specific purposes should be deposited in an account with any specified bank or institution and utilized in accordance with the scheme notified by the Central Government
Exemption: to the extent of cost and expenses incurred
Amount of Capital Gain > Cost and expenses incurred for specified Purposes.
Entire Capital Gain exempt
Amount of Capital Gain < = Cost and expenses incurred for specified Purposes
Result
Situation

Definition of Urban area
Urban area means any such area within the limits of a municipal corporation or municipality as the Central Government may, having regard to the population, concentration of industries, need for proper planning of the area and other relevant factors, by general or Special order, declare to be an urban area for the purposes of this sub-section.

Deduction in respect of profits by SEZ Developer[124]
Deductions in respect of profits and gains from industrial undertakings or enterprises engaged in development of Special Economic Zone.

# An undertaking which develops a special Economic Zone notified on or after 1.4.2005 will not be eligible to claim deduction under section 80-IA.but will now be claiming deduction under new section 80 – IAB.
# Available to an assessee , being a Developer whose gross total income, includes any profit and gains derived by an undertaking or an enterprise from any business of developing a Special Economic Zone, notified on or after 1.4.2005 under Special Economic Zones Act,2005
# A deduction of an amount equal to 100% of the profits and gains derived from such business for 10 consecutive assessment years.
# The assessee has the option of claiming the said deduction for any 10 consecutive assessment years out of 15 years beginning from the year in which a SEZ has been notified by the Central Government

Transfer of Undertaking
# If a taxpayer who develops a special economic zone on or after April 1, 2005 (“transferor”) transfers the operation/maintenance of such zone to another developer (“transferee”), then deduction shall be allowed to the transferee for the remaining period of 10 years as if the operation and maintenance were not so transferred.
# Similar rule will be applicable in the case of amalgamation of an Indian company which has developed a Special Economic Zone with another Indian company.

No Tax on Distributed Profits[125]
No tax on dividends would be chargeable in respect of the total income of an undertaking or enterprise engaged in
(a) developing a SEZ or
(b) developing and operating a SEZ or
( c) developing, operating and maintaining a SEZ

IF such dividend (whether interim or otherwise) is declared, distributed or paid by such Developer or enterprise, on or after the 1st day of April, 2005 out of its current income
No tax either in the hands of the Developer or enterprise or person receiving such dividend
Other Related Income Tax Provisions

Industrial Park Scheme

# The Central Government framed the scheme for industrial parks,-Industrial Park Scheme, 2002 in exercise of the powers conferred by clause (iii) of sub-section (4) of section 80 IA of the Income-tax Act, 1961
# scheme was applicable for any undertaking which develops, develops and operates or maintains and operates an Industrial Park for the period beginning on the 1st day of April, 1997 and ending on the 31st day of March, 2006
# this has been extended up to 31.03.2009 by the Finance Act,2006
# Eligibility- deduction of 100 % profits derived from such business for ten consecutive years.
# Assessee can claim deduction for any ten consecutive years out of fifteen years beginning from the year in which the undertaking develops/operates/maintains the Industrial park.

Investors in SEZ
Exemption is provided to investors in Special Economic Zones under Sec 10 (23G) of the Income Tax Act, 1961.
Undertaking developing and building housing projects
# Sec 80- IB (10) - Deduction in respect of profits and gains from certain industrial undertakings other than infrastructure development undertakings
# Deduction: For projects approved before the 31st day of March, 2007 by a local authority shall be hundred per cent of the profits derived in the previous year relevant to any assessment year from such housing project
# Conditions:
(a) Such undertaking has commenced or commences development and construction of the housing project on or after the 1st day of October, 1998 and completes such construction,

(i) In a case where a housing project has been approved by the local authority before the 1st day of April, 2004, on or before the 31st day of March, 2008;
(ii) in a case where a housing project has been, or, is approved by the local authority on or after the 1st day of April, 2004, within four years from the end of the financial year in which the housing project is approved by the local authority.

(b) The project is on the size of a plot of land which has a minimum area of one acre

(c) the residential unit has a maximum built-up area of one thousand square feet where such residential unit is situated within the city of Delhi or Mumbai or within twenty-five kilometres from the municipal limits of these cities and one thousand and five hundred square feet at any other place; and

(d) The built-up area of the shops and other commercial establishments included in the housing project does not exceed five per cent of the aggregate built-up area of the housing project or two thousand square feet, whichever is less.]

Special provisions in Respect of Certain Undertakings
Special category states

# Arunachal Pradesh
# Assam
# Manipur
# Meghalaya
# Mizoram
# Nagaland
# Sikkim
# Tripura

one hundred per cent of such profits and gains for five assessment years commencing with the initial assessment year and thereafter, twenty-five per cent (or thirty per cent where the assessee is a company) of the profits and gains.

one hundred per cent of such profits and gains for ten assessment years commencing with the initial assessment year;

# manufactures or produces any article or thing, not being any article or thing specified in the Thirteenth Schedule
# manufactures or produces any article or thing, specified in the Fourteenth Schedule

Himachal Pradesh/Uttaranchal /Sikkim/ Any North Eastern States

Undertaking
Undertaking must manufacture in any Export Processing Zone or Integrated Infrastructure Development Centre or Industrial Growth Centre or Industrial Estate or Industrial Park or Software Technology Park or Industrial Area or Theme Park

Benefits to Offshore Banking Unit

Interest Income from Offshore Banking Unit is exempt

In computing the total income of previous year of any person any income by way of interest received by

# Non resident or
# a person who is not ordinarily resident in India
on a deposit made on or after the 1st day of April, 2005, in an Offshore Banking Unit shall not be included (Section 10(15)(viii))

Deductions in respect of certain incomes of Offshore Banking Units and International Financial Services Centre[126]

Assesses covered
Scheduled bank, or, any bank incorporated by or under the laws of a country outside India; and having an Offshore Banking Unit in a Special Economic Zone; or

(ii) Unit of an International Financial Services Centre

Amount of deduction[127]-
(a) 100% of such income for 5 consecutive assessment years beginning with the assessment year relevant to the previous year in which

the permission,under 23(1)(a) of the Banking Regulation Act, 1949 or
permission or registration under the Securities and Exchange Board of India Act, 1992 (15 of 1992) or
any other relevant law was obtained, and thereafter;
(b) 50% of such income for next 5 consecutive assessment years.

Income Exempted[128]-

Income refers to income :

(a) from an Offshore Banking Unit in a Special Economic Zone; or

(b) from the business referred to in Section 6(1) the Banking Regulation Act, 1949 with an undertaking located in a Special Economic Zone or any other undertaking which develops, develops and operates or develops, operates and maintains a Special Economic Zone; or

(c) from any Unit of the International Financial Services Centre from its business for which it has been approved for setting up in such a Centre in a Special Economic Zone.

80LA….

# A report from a Chartered Accountant in Form No. 10CCF certifying that the deduction has been correctly claimed in accordance with the provisions of this section should be submitted along with the return of income.
# A copy of permission obtained under section 23(1)(a) of Banking Regulation Act should be submitted along with the return of income.

Case Laws

Courts and Tribunals have held that the requirement to file the report along with the return of Income is directory and not mandatory Citation: 251 ITR 693- Commissioner of Income-tax vs. Hemsons Industries (Andhra Pradesh High Court)

“ The mere fact that the assessee failed to enclose the audit report along with the return itself would not disentitle him to claim the benefit, and, on the other hand, if he files the audit report before the assessment order is passed, he will be entitled to the deduction


No deduction of Tax[129]
No deduction of tax shall be made by the Offshore Banking Unit from the interest paid
(a) on deposit made on or after the 1st day of April, 2005, by a non-resident or a person not ordinarily resident in India; or
(b) on borrowing, on or after the 1st day of April, 2005, from a non-resident or a person not ordinarily resident in India.

Exemption from service tax

# The exemption from payment of service tax on taxable services rendered to a Developer or a Unit (including a Unit under construction)
# by any service provider
# shall be available for the authorized operations in a Special Economic Zone – Section 26(1)(e) and rule 31

Exemption from Central Sales tax

# Every Developer and the entrepreneur is entitled exemption from the levy of taxes on the sale or purchase of goods other than newspapers under the Central Sales Tax Act, 1956 if such goods are meant to carry on the authorized operations by the Developer or entrepreneur. – Sec 26(1)(g)
# This is subject to the condition that the dealer selling goods in the course of inter state trade or commerce to a registered dealer under the Central Sale Tax Act, 1956 shall furnish a declaration in Form – I prescribed under the Central Sales Tax (Registration and Turnover) Rules, 1957.- Proviso to Rule 32

Changes made in Central Sales tax, 1956 [130]
# No CST shall be payable by any dealer in respect of sale of any goods made by such dealer,
# in the course of inter-State trade or commerce,
# to a registered dealer( developer of SEZ or SEZ Unit as the case may be)
# for the purpose of manufacture, production, processing, assembling, repairing, reconditioning, re-engineering, packaging or for use as trading or packing material or packing accessories in an unit located in any Special Economic Zone,
# if such registered dealer has been authorised to establish such unit by the authority specified by the Central Government in this behalf. (Development Commissioner is of SEZ is authorized to permit a person to set up unit in SEZ) [131]

Securities Transaction Tax
Every Developer and the entrepreneur shall be entitled to exemption from the securities transaction tax leviable under section 98 of the Finance (No. 2) Act, 2004 in case the taxable securities transactions are entered into by a non-resident through the International Financial Services Centre. Sec 26(1)(f)

Exemption from Stamp Duty under Indian Stamp Act, 1899
# Exemption from stamp duty on any instrument executed, by, or, on behalf of, or, in favour of the Developer, or Unit or in connection with the carrying out of purposes of the Special Economic Zone.( Section 3 Third Proviso of Indian Stamp Act,1899)
# Effected by Change in Indian Stamp Act,1899 by Special Economic Zones Act ,2005 Third Schedule ,Part III

Foreign Exchange Management Act Provisions relating to SEZ
Foreign Direct investment
FDI is allowed through automatic route for all manufacturing activities in SEZ except
Arms and ammunition , Explosives and allied items of defense equipments, Defense aircrafts and warships,
Atomic substances, Narcotics and Psychotropic Substances and hazardous Chemicals,
Distillation and brewing of Alcoholic drinks and
Cigarette/cigars and manufactured tobacco substitutes.

Item 20 of Annexure B of Schedule I of Foreign Exchange Management ( Transfer or Issue of Security by a person Resident outside India) Regulations, 2000
· 100% FDI in trading activity will not be permitted
· SEZ Unit can manufacture articles reserved for SSI even if foreign equity exceeds 24%.No License is required (Department of Industrial License Press Note No 5 dated 29-03-2000 Notification 7(11)/2000-IP dated 04-12-2000)
· No Time Limit for export of export proceeds which is normally 6 months for others (Foreign Exchange Management (Export of Goods and Services) Regulation 2000)
· Branch office may be set up in SEZ to undertake manufacturing and service activities without permission of RBI in those sectors where 100% FDI is permitted (Foreign Exchange Management (Establishment in India of Branch or other place of businesses) Regulation 2000)
· DTA units can pay for goods in Foreign Exchange for which goods are supplied by SEZ to DTA – RBI Circular 8/2005-06 dated 01/07/2005
· A Unit Located in SEZ can open ,hold and maintain Foreign currency account with authorized dealer in India (Foreign Exchange Management (Foreign currency accounts by a person resident in India), Regulations, 2000
· A Unit in SEZ can enter into contract in commodity exchange or market outside India to hedge the price risk in the commodity on export/import without prior approval of RBI ( Foreign Exchange Derivative Contracts) Regulation ,2000

SEZ can raise ECB for its own requirements and borrowed funds shall not be transferred to its sister concern or any other Unit in DTA[132]

Possibility for the Foreign Buyer to Dispatch Documents
· SEZ Units can dispatch export documents direct to consignee outside India.
· These need not be routed through authorized dealer
· Remittance should be obtained and GR/SDF form should be submitted to authorized dealer with in 21 days for monitoring[133]

Job Work Abroad and Direct Dispatch[134]
SEZ Units can undertake Job work abroad and export goods from that country itself
Exporter has to make satisfactory arrangement for realization of full exports proceeds

Some notable points
· SEZs may be established mainly for manufacturing of the goods, for providing services. They may also be established as free trade and warehousing zones[135].

·  SEZs may be categorized mainly into three/ four types. They may be a multi-product SEZ[136], sector specific SEZ, Port or Airport based [137]SEZ and free trade and warehousing zones[138]. There may also be Port based Multi-product SEZ[139]

· SEZs are given autonomy for self rule - self administering, self enforcing and self adjudicating bodies. Therefore, it may be stated that there will be absolute non interference by the state.

·  There will be 100% tax exemption and relaxation from the enforcement of labour laws. As Jaivir Singh pointed out,’…..the envisioned labor regime in SEZs has been consciously structured to promote the non- implementation of the laws…...’ Basing on the two reasons i) placing the implementation of labour laws in the office of the Development Commissioner rather than the Labor commissioners and …………’ and ii) scope for mitigating the labour law with the utilization of the provisions of the Industrial Disputes Act contrary to the interests of the labour labeling all economic activity in an SEZ as a ‘public utility service’. [140]

·  They will not have any burden to comply with any sort of minimum obligation to export.

·  Except for certain kind of offences there may be no investigation or inspection carried out in any of the SEZs without prior approval from the Development commissioner.

· The Development Commissioner will be entrusted to the overall administration and supervision of the SEZ and exercise all necessary controls and co operations to foster speedy and effective development of the SEZ concerned. The development commissioner shall be appointed by the central government.

· As a whole the Special Economic Zones (SEZ) Act, 2005 reflects the government policy and indeed provides for a systemic approach for the establishment of SEZs and Units. [141]
· The onus is on the Government to check and ensure that this Act is not used as a medium for exploiting the original land owners in the name of economic development and growth.

· ‘Identifying the area for SEZ’ may be the crux of the problem so that care needs to be taken that only barren land is utilized for the purpose to avoid agricultural land as the Land Acquisition Act requires utilization of agricultural land for agricultural purpose only.
--------------------------------------------------------------------------------
[1] www.tribuneindia.com/2007/20070131/biz.htm SEZ policy sustainable. New Delhi, January 30
[2] Justice K.A. Puj in Essar Steel Ltd v. Union of India Gujarat High Court held, “………reliance on Section 53 of the SEZ Act 2005 to contend that a Special Economic Zone is a territory outside India, is misconceived. Section 53 provides that the Zone would be deemed to be a territory outside the customs territory of India for the purposes of undertaking the authorized operations. The term customs territory cannot be equated to the territory of India and in fact, such term has been defined in the General Agreement of Tariffs & Trade, to which India is a signatory, to mean an area subject to common tariff and regulations of commerce and that there could be more than one customs territory in a country. Moreover such an interpretation would lead to a situation where a Special Economic Zone would not be subject to any laws whatsoever. The entire SEZ Act 2005 would be rendered redundant since it is stated to extend the whole of India. In any case, various provisions of the SEZ Act would be endered redundant and unworkable if the Special Economic Zone was to be considered an area outside India. This is apart from the fact that such a declaration would be constitutionally impermissible…..” http://legalperspectives.blogspot.com/search?q=sez

[3] Section 9A (2A) Reliance Industries Ltd Vs. Designated Authority and Ors. www.LegalDuniya.com, 11 September, 2006
[4] GO Ms.No.151 dated 09.04.2002 Policy statement of Government of AndhraPradesh
[5] Mohan Lal Sharma vs Union Of India (Uoi) And Ors. Raj HC http://www.indiankanoon.org/doc/930090/AIR 2007 Raj 244, RLW 2007 (4) Raj 3247
[6] J.M. Panchal, C.J. Mohan Lal Sharma vs Union Of India (Uoi) And Ors www.indiankanoon.org/doc/930090/ -
[7] The researcher feels that the exemption from anti dumping duty needs consideration by the courts in view of the Environmental Protection Laws.
[8] Builders’ Association of India URL: www.bainet.org, URL: www.ciionline.org
[9] http://www.sezindia.nic.in
[10] Nooti Ram Mohan Rao J.AP High court in Parke-Davis Employees Union,. rep. By its General SecretaryK. Bucha Reddy. The A.P. Industries Infrastructure Corporation Limited www.indiankanoon.org/doc/989239/ - The number of SEZ functioning etc., may be taken as at the date of judgment i.e., 30-09-2008
[11] Nooti Ram Mohan Rao J.AP High court in Parke-Davis Employees Union,. rep. By its General SecretaryK. Bucha Reddy. The A.P. Industries Infrastructure Corporation Limited www.indiankanoon.org/doc/989239/ -
[12] See the definition of ‘ export’ in section 2 sub section (m) of the SEZ’s Act, 2005
[13] Mohan Lal Sharma vs Union Of India (Uoi) And Ors. Raj HC http://www.indiankanoon.org/doc/930090/AIR 2007 Raj 244, RLW 2007 (4) Raj 3247
[14] Parke-Davis Employees Union, vs.The A.P. Industries Infrastructure Corporation Limited, APHC www.indiankanoon.org/doc/989239/
[15] Section 1 (ii) of the SEZs Act, 2005 see also Essar Steel Ltd. v.Union of India [Guj HC]
[16] Section 1 (3) of the SEZ Act, 2005 It shall come into force on such date as the Central government may by notification in the official gazette appoint and different dates may be appointed for different provisions of this Act and any reference in any such provision to the commencement of this Act shall be construed as a reference to the coming into force of that provision
[17] Section 2 of the Special Economic zones Act, 2005
[18] Section 2 (za) of the SEZs Act, 2005
[19] Mohan Lal Sharma vs Union Of India (Uoi) And Ors. Raj HC http://www.indiankanoon.org/doc/930090/AIR 2007 Raj 244, RLW 2007 (4) Raj 3247
[20] Section 2 (k) of the SEZs Act, 2005
[21] Section 2 (n) of the SEZs Act, 2005
[22] Section 2(v) of SEZ Act, 2005
[23] Jona Aravind Dohrmann, Special Economic Zones in India – An Introduction, ASIEN 106 (Januar 2008), S. 60-80
[24] Section 2 (g) of the SEZs Act, 2005
[25] Section 2 (f) of the SEZs Act, 2005
[26] Section 2 (zc) of the SEZs Act, 2005
[27] Section 2 (m) SEZ Act
[28] See Anindita Dey / Mumbai January 28, 2010, 0:34 IST SEZ Act needs overhaul: CBEChttp://www.business-standard.com/india/news/sez-act-needs-overhaul-cbec/383867/
[29] Section 2 (e) ibid.
[30] Seciton 2 (h) of the SEZ Act, 2005
[31] Ahmed Ehtesham Kawkab, S/O Mr. ... vs The Government Of India, Ministry ...AP HC http://indiankanoon.org/search/?formInput=judgments on SEZs
[32] Section 2 (i) of the SEZs Act, 2005
[33] ‘……the definition of "manufacture" contained in Section 2(r) of me Special Economic Zones Act, 2005, incorporated in Section 10AA of the Income Tax Act with effect from 10.2.2006, which is essentially the same as the definition contained in the EXIM Policy, applies to Section 10A also. We, therefore, hold that blending of tea is a manufacturing activity which entities the appellant-assessee for exemption under Section 10A of the Income Tax Act for the assessment year 2004-2005….’ High Court of Kerala Girnar Industries v. CIT http://www.itatonline.org/forum/index.php?action=profile;u=1330;sa=showPosts
[34] Section 2 (r) of the SEZs Act, 2005
[35] Section 2 (z ) of the SEZs Act, 2005
[36] Chapter II of SEZ Act
[37] (Sections 3) of the SEZs Act, 2005
[38] (Section 4) of the SEZs Act, 2005
[39] (section 6) of the SEZs Act, 2005
[40] Mohan Lal Sharma vs Union Of India (Uoi) And Ors.Raj HC Mohan Lal Sharma vs Union Of India (Uoi) And Ors. Raj HC http://www.indiankanoon.org/doc/930090/AIR 2007 Raj 244, RLW 2007 (4) Raj 3247
[41] AGASTYA BIO-PHARM INDIA LTD Vs UNION OF INDIA WP(C).No. 2144 of 2009(E) the High court of Kerala directed the Principal Secretary to Govt. of Kerala to
[42] (sec. 3 para. 3 SEZ Act)
[43] sec. 3 para. 4 SEZ Act.
[44] sec. 3 para. 4 SEZ Act
[45] sec. 4 para. 1 SEZ Rules See also Jona Aravind Dohrmann, Special Economic Zones in India – An Introduction, ASIEN 106 (Januar 2008), S. 60-80
[46] Section 3 (8) ibid
[47] Ibid
[48] Section 3 (9) SEZ Act
[49] Secton 3(9) (b) SEZ Act
[50] Section 3(9) (c)
[51] Section 3 (10)
[52] Parke-Davis Employees Union, vs.The A.P. Industries Infrastructure Corporation Limited, APHC www.indiankanoon.org/doc/989239/
[53] Section3 ( 5) SEZ Act
[54] Section 3 (6) ibid
[55] Section3( 7) ibid
[56] Section 3 of the Special Economic Zones Act, 2005
[57] Procedure for submitting Application for the establishment of an SEZ: 1. Applications (15 copies) indicating the name and address of the applicant, status of the promoter (whether individual/ private company/ State Government / Non-Resident Indians (NRIs) etc) along with a project report covering the following particulars shall be submitted to the Chief Secretary of St ate.

· Location of the proposed zone with details of existing and proposed infrastructure.
· Area of the proposed SEZ and its area distance from the nearest sea port / airport / rail/ road head etc).
· Financial details including investment proposed, mode of financing the project and viability of the project.
· Details of foreign equity and repatriation of dividends etc (if any).
· Clarification on whether the zone will allow only certain specific industries or b e a multi product zone or is a port /airport-based zone.

2. The State Government shall forward the application along with their commitment to the following, to the Department of Commerce, Government of India:

The area incorporated in the proposed SEZ is free from environmental prohibition.
Water, electricity and other services would be provided as required.
Full exemption in electricity duty and taxon sale of electricity for self-generated and purchased power.
To allow generation, transmission and distribution of power within the SEZ.
Exemption from St ate Sales Tax, Octroi and tax, turn over taxand taxes, duty, Cess, levies on supply of goods from a Domestic Tariff Area to SEZ units.
· For units inside the zone, the powers under the Industrial Disputes Act and other related Acts would b e delegated to the Development Commissioner.

· The zone will be declared as a Public Utility Service under the Industrial Disputes Act.
· Single point clearances system would b e provided to the units in the zone under St ate Law/Rules.

3. The proposal incorporating the commitments of the State Government shall be considered by the Board of Approval (BOA).
4. On acceptance of the proposal by the BOA, the Department of Commerce will issue a Letter of Permission to the applicant. See www.b-i.biz b-i@b-i.biz 93.
[58] ibid
[59] Proviso 1 Section 4 ibid
[60] Proviso 2 section 4 ibid
[61] Section 5 SEZ Act
[62] Section 6 (a) SEZ Act
[63] Section 6(b) SEZ Act
[64] Section 6 ( c) SEZ Act
[65] [Domestic Tariff Area means the whole of India (including the territorial waters and continental shelf) but does not include the areas of the Special Economic Zones] Section 2 (i)
[66] Section 7 SEZ Act

[67] In Muthoot Technopolis vs The Tahazildar, Kanayannur Taluk on 17 June, 2008 Kerala High court in a review petition has held ‘… ..At best, once it is accepted that the petitioner is a co- developer, what the petitioner possibly can claim is the benefit of Exts.P1 and P2 government orders. Ext.P1 provides that the units set up within the Cochin Special Economic Zone are eligible for the benefits mentioned therein which includes exemption from the payment of property tax. Ext.P2 provides that the industrial units and other establishments established within the Special Economic Zone in the State are exempted from tax, cess etc as leviable under Section 200 of the Kerala Panchayat Raj Act, 1994…. what was claimed by the petitioner was exemption from the Kerala Building Tax Act, 1975. Therefore, even if it is conceded for the sake of argument that the petitioner is a co-developer and is eligible for the benefit of Exts. P1 and P2 still that does not make them eligible in any manner for the benefit of exemption under the provisions of the Kerala Building Tax Act…’ http://indiankanoon.org/search/?formInput=judgments on SEZs

[68] First Schedule contains the list of 21 Enactments –viz,1.) The Agricultural Produce Act 1940,2).The Coffee Act, 1942 , 3).The Mica and Mines Labour Welfare Fund Act, 1946, 4. The Rubber Act, 1947, 5.The Tea Act, 1953, 6).The Salt Cess Act, 1953, 7). The Medicinal and Toilet Preparations (Excise Duties) Act 1955 8). The Additional Duties of Excise (Goods of Special Importance ) Act , 1957, 9)The Sugar (Regulation of Production ) Act, 1961, 10) The Textile Committee Act, 1963, 11) The Produce Cess Act, 1961,12) The Marine Products Export Development Authority Act, 1972.14) The Coal Mines Act, 1974, 15) The Oil Industry Act, 1974, 16) The Tobacco Cess Act, 1975, 17) The Sugar Cess Act, 1982, 18) The Jute Manufacaturers Cess Act, 1983,19) The Agricultural Processed Food Products Export Cess Act, 1985, 20) The Spices Cess Act, 1986, and 21) The Research and Development cess Act,1986,

[69] Section 8 SEZ Act
[70] Section 9 SEZ Act
[71] Section 10 SEZ Act
[72] Ahmed Ehtesham Kawkab, vs The Government Of India,..AP HC http://indiankanoon.org/search/?formInput=judgments on SEZs
[73] Section 9 (1) SEZ Act
[74] ‘Special Economic zones, export boom or real estate rip off’ Cover story Fortune India, September 15, 2006 page 73
[75] Section 9 (2) ( a) SEZ act
[76] Section 9(2) (b) ibid
[77] See Section 9(2) ( c ) SEZ Act
[78] See Section 9 (2) ( d) SEZ Act
[79] See Section 9 (2) ( e) SEZ Act
[80] See Section 9 (2) ( f) SEZ Act
[81] See Section 9 (2) ( g) SEZ Act
[82] See Section 9 (2) ( h) SEZ Act
[83] Dhabji Meghji Maheshwari And 55 ... vs Hindustan Lever Limited And 3 Ors. on 29 October, 2007 http://www.indiankanoon.org Gujarat High Court - Cites 16 - Cited by 0 - (2008) 1 GLR 124 - H Rathod
[84] Ahmad Esthesham Kawkab vs. Union of India APHC http://www.indiankanoon.org/doc/1362599/
[85] Sec. 12 para. 3 SEZ Act
[86] sec. 12 SEZ Act
[87] sec. 14 SEZ Act
[88] sec. 15 SEZ Act
[89] Jona Aravind Dohrmann, Special Economic Zones in India – An Introduction, ASIEN 106 (Januar 2008), S. 60-80
[90] Section 13 SEZ Act
[91] Section 13(1) ( a) SEZ Act
[92] Section 13 (1 ) (b) SEZ Act
[93] Section 13 (1) ibid
[94] Section 13 (2) (a ) SEZ Act
[95] Section 13 (2) (b) SEZ Act
[96] Section 13 (2) ( c ) SEZ Act
[97] Section 13 (2) (d) SEZ Act
[98] Section 13 (2) ( e ) SEZ Act
[99] Section 13 (2) (f) SEZ Act
[100] Sections 13-25
[101] Justice K.A. Puj in Essar Steel Ltd Vs. Union of India Gujarat High Court held, “………reliance on Section 53 of the SEZ Act 2005 to contend that a Special Economic Zone is a territory outside India, is misconceived. Section 53 provides that the Zone would be deemed to be a territory outside the customs territory of India for the purposes of undertaking the authorized operations. The term customs territory cannot be equated to the territory of India and in fact, such term has been defined in the General Agreement of Tariffs & Trade, to which India is a signatory, to mean an area subject to common tariff and regulations of commerce and that there could be more than one customs territory in a country. Moreover such an interpretation would lead to a situation where a Special Economic Zone would not be subject to any laws whatsoever. The entire SEZ Act 2005 would be rendered redundant since it is stated to extend the whole of India. In any case, various provisions of the SEZ Act would be endered redundant and unworkable if the Special Economic Zone was to be considered an area outside India. This is apart from the fact that such a declaration would be constitutionally impermissible…..” http://legalperspectives.blogspot.com/search?q=sez see also Jamshedpur Utilities and Services Company Limited vs. state of Maharastra case Mumbai High Court http://www.indiankanoon.org/doc/633882/
[102] Section 15 (1) SEZ Act
[103]sections 26 to 30 of the Special Economic zones Act, 2005
[104] Ibid Sections 31 to 41
[105] Ibid sections 42 to 58 of the Act
[106] Avinash Kumar Chauhan Vs. Vijay Krishna Mishra www.LegalDuniya.com Civil Appeal NO. 7350 of 2008 17 December, 2008 Supreme Court of India Chapter II of the Act provides for stamp-duties. Section 3, which is the charging Section reads as under :- "3. Instruments chargeable with duty. - Subject to the provisions of this Act and the exemptions contained in Schedule I, the following instruments shall be chargeable with duty of the amount indicated in that Schedule as the proper duty therefor, respectively, that is to say-(a) every instrument mentioned in that Schedule which, not having been previously executed by any person, is executed in India on or after the first day of July, 1899; (b) every bill of exchange payable otherwise than on demand or promissory note drawn or made out of India on or after that day and accepted or paid, or resented for acceptance or payment, or endorsed, transferred or otherwise negotiated, in India; and (c) every instrument (other than a bill of exchange or promissory note) mentioned in that Schedule, which, not having been previously executed by any person, is executed out of India on or after that day, relates to any property situate, or to any matter or thing done or to be done, in 8 [India] and is received in India. Provided that no duty shall be chargeable in respect of-(1) any instrument executed by, or on behalf of, or in favour of, the Government incases where, but for this exemption, the Government would be liable to pay the duty chargeable in respect of such instrument; (2) any instrument for the sale, transfer or other disposition, either absolutely or byway of mortgage or otherwise, of any ship or vessel, or any part, interest, share or property of or in any ship or vessel registered under the Merchant Shipping Act 1894, or under Act 19 of 1838, or the Indian Registration of Ships Act, 1841, as amended by subsequent Acts. (3) any instrument executed ,by, or , on behalf of, or, in favour of, the Developer , or Unit or in connection with the carrying out of purposes of the Special Economic Zone, Explanation- For the purposes of this clause, the expressions "Developer", "Special Economic Zone" and "Unit" shall have meanings respectively assigned to them in clause(g), (za) and (zc) of Section 2 of the Special Economic Zones Act, 2005." The other provisions contained in the said chapter deal with the mode and manner of payment etc.
[107] Rule 10 of the Special Economic zones Rules, 2006
[108] Special Economic Zones - FISCAL BENEFITS Rajkumar S. Adukia radukia@vsnl.com , rajkumarfca@gmail.com, http://www.carajkumarradukia.com
[109]
[110] Rule 22(1) of the Special Economic zones Rules, 2006
[111] Rule 22(1)(iii) Special Economic zones Rules, 2006
[112] Rule 22(1)(iv) of the Special Economic zones Rules, 2006
[113] Ibid Rule 22(1)(iv)
[114] Ibid Rule 27(3)
[115] 54GA
[116] 54GA
[117] 10AA
[118] under section 115-O Income Tax Act, 1961
[119] Ibid Section 10AA
[120] S 10AA(2(a)
[121] S 10AA(3)
[122] S 10AA(5)
[123] -Sec 54GA
[124] Sec 80 IAB Income Tax Act
[125] Sec 115O(6) Income Tax Act 1961
[126] 80LA Income Tax Act, 1961
[127] Sec 80LA(1)
[128] Sec 80LA(2)
[129] Section 197A(1C)
[130] Section 8(6) of Central Sales Tax Act, 1956
[131] Ibid
[132] RBI Circular 2/2005-06 dated 01/07/2005
[133] RBI Circular 8/2005-06 dated 01/07/2005
[134] RBI Circular 8/2005-06 dated 01/07/2005
[135] A Free Trade Warehousing Zone (FTWZ) proposed by Messrs Arshiya International Limited at Bori village in Nagpur district –see ‘Chowgules get nod for SEZ in Ratnagiri Chowgules get nod for SEZ in Ratnagiri Herald, English News Daily, Dated Sunday, February 14, 2010
[136] Bharat Sanchar Nigam Limited (BSNL) got approval for the multi-product Dahez SEZ at Bharuch
[137] Reliance SEZ
[138] Id 29
[139] Kakinada SEZ is a Multi product Port Based SEZ as per its web cite www.kakinadasez.org
[140] Jaivir Singh ‘Lablour Law and Special Economic Zones in India’ CLSG Working Paper Series CLSG/WP/09/01 published by Center for the study of Law and Governance, Jawaharlal Nehru University, New Delhi, April 2009
[141] See also Anand Wadadekar

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