A discussion revolves around whether an SEZ Unit, that has not exited from a Special
Economic Zone (SEZ), is eligible to clear capital goods under the Export Promotion Capital
Goods (EPCG) Scheme, as governed by Rule 74(4) of the SEZ Rules, 2006, when transferring
them to the Domestic Tariff Area (DTA).

Let’s delve into our Chronicle, uncovering a crucial facet of SEZ clearance.
ISGEC HEAVY ENGINEERING LTD VERSUS C.C. -AHMEDABAD 2023 (9) TMI 466 – CESTAT AHMEDABAD

Introduction

In the matter of the eligibility for the Export Promotion Capital Goods (EPCG) Scheme and the clearance of capital goods from a Special Economic Zone (SEZ) to the Domestic Tariff Area (DTA), the central question revolves around whether an appellant who has not exited from the SEZ is eligible to clear capital goods under the prevailing EPCG Scheme, as per Rule 74(4) of the SEZ Rules, 2006.

Relevant Legal Framework

1. SEZ Act, 2005 – Section 30: This section outlines the terms for the removal of goods from SEZ to DTA, requiring payment of Customs duties based on the rate of duty and tariff valuation on the date of removal.
   2. SEZ Rules, 2006 – Rule 34: Rule 34 prescribes that goods admitted in SEZ must be used solely for approved operations, as determined by the Unit Approval Committee under Rule 49(1) of the SEZ Rules, 2006.
   3. SEZ Rules, 2006 – Rule 74(4): This rule pertains to the removal of capital goods from SEZ to DTA, specifying that such removal can occur after use in a Special Economic Zone, subject to payment of duty and depreciated value, calculated from the date of commencement of production

 Interpretation of Statutory Provisions:

Specific Provisions Take Precedence: The interpretation of these statutory provisions is guided by the principle that when a specific method or scheme is outlined in legislation, it necessarily prohibits any alternative method not explicitly provided for. Therefore, the one-time availment of the EPCG Scheme at the time of exit from the SEZ cannot be extended to allow its use under Rule 34 of the SEZ Rules, 2006. This restriction is reinforced by the inclusion of the term ” on license ” in Rule 34, emphasizing the need for a specific authorization.
Lack of Applicable Mandate: It is noteworthy that neither the EPCG Scheme nor any mandate or opinion from administrative authorities, such as Development Commissioners, approving the use of the EPCG Scheme by customs, has been produced by the appellant. This absence of specific authorization or guidance further supports the interpretation that EPCG Scheme availment until exit from the
SEZ unit is not permissible.

Conclusion

In light of the aforementioned legal principles and the absence of compelling evidence or administrative approvals, it is held that the appellant is not eligible for EPCG Scheme benefits under Rule 34 of the SEZ Rules, 2006, without having exited from the Special Economic Zone. Consequently, the order of the Commissioner (Appeals) is upheld, and the appeal is dismissed on the grounds of lacking merit.