SC Upholds Gujarat HC Ruling: SEZ Supplies Exempt from Export Duty

The Supreme Court has ruled that goods moved from a Domestic Tariff Area (DTA) to a Special Economic Zone (SEZ) will not attract export duty under the Customs Act, 1962. The Court clarified that such movement is a domestic supply, not an export outside India.

A Bench of Justice BV Nagarathna and Justice R Mahadevan dismissed the Union of India’s appeal against a Gujarat High Court judgment that exempted companies, including Adani Power Ltd., from paying export duty on DTA-to-SEZ transfers.

The Union government had earlier argued that SEZs are treated as foreign territory for trade purposes, and therefore, supplies from DTA to SEZ should be treated as exports under the Customs Act. However, the companies countered this by citing the SEZ Act, 2005, which defines supplies from DTA to SEZ as “exports” only for availing SEZ-related benefits, not for levying duties.

The Court examined Section 12 of the Customs Act (charging provision for export duty) and Section 2(m) of the SEZ Act, 2005. It observed that while the SEZ Act creates a legal fiction by deeming DTA-to-SEZ supplies as “exports,” this is limited to granting benefits under the SEZ scheme and does not expand the scope of the Customs Act to impose export duty.

The Bench agreed with the Gujarat High Court’s view that levying export duty on DTA-to-SEZ transfers would go against the purpose of SEZs, which were established as duty-free enclaves to promote exports from India.

Quoting the High Court, the Supreme Court noted:
“Levy of export duty on goods supplied from the Domestic Tariff Area to the Special Economic Zone is not justified. Petitioners cannot be called upon to pay export duty for such movement of goods.”

Accordingly, the appeals were dismissed, providing relief to several companies engaged in supplies to SEZ units.

Case Title: Union of India v. M/s Adani Power Ltd.
Citation: 2025 LiveLaw (SC) 932