The Punjab and Haryana High Court has dismissed the SEZ unit’s plea and held that refund concessions for unused or damaged goods under Rule 25 of the SEZ Rules.
The bench of Justice Lisa Gill and Justice Meenakshi I. Mehta has observed that the goods were not utilised and hence are required to refund the concessions availed as per the provision of Rule 25 of the SEZ Rules.
The petitioner claims to be a body incorporated under Companies Act, 1956, engaged in the business of developing industrial and urban townships, other infrastructural projects including development of First Operational Special Economic Zone (SEZ) in Punjab that is approved for IT and ITES sector.
The petitioner was granted approval for setting up SEZ for an area of 13.75 hectares in plot No. A-40A, Focal Point, Industrial Area-VII Extension, District Mohali vide notification dated 02.11.2006 issued by Ministry of Commerce and Industry, Department of Commerce. This area was subsequently reduced to 10.12 hectares.
Petitioner, it is stated, receives goods from Domestic Tariff Area (DTA) suppliers from all over the country. Notification dated 10.05.2008 was issued in exercise of powers conferred under Section 25(1) of Customs Act, 1962 exempting goods and falling under Head of Second Schedule to Customs Tariff Act, 1975, when exported out of India, from so much of the duty of customs leviable thereon under Second Schedule as is in excess of the amount calculated at the rate specified in corresponding entry in column (4) of table.
This notification was then amended vide subsequent notification dated 13.06.2008. It is pleaded that there was lack of clarity about the scope and coverage of these entries and customs formations had even sought to charge export duty on items such as forging of iron and steel structuring and articles. Government of India, Ministry of Finance, Department of Revenue, Tax Research Unit (SEZ Section), issued clarification that Second Schedule of Customs Tariff Act was not aligned with Harmonized System of Nomenclature (HSN) and in order to remove any ambiguity, coverage of these entries were reproduced in the table. Communication dated 30.06.2008 was issued by Government of India, Ministry of Commerce and Industry, Department of Commerce (SEZ Section) with regard to applicability of export duty on steel products supplied by units in DTA to SEZ.
Issue regarding imposition of custom duty on steel was statedly raised by petitioner with department vide communication in the year 2008 while requesting movement of steel to be permitted into SEZ without payment of export duty.
Action of department regarding levy of custom duty on import of steel was challenged by petitioner by way of CWP-18122-2008 which was admitted on 29.03.2010. Respondent by way of interim order was restrained from levying export duty on movement of goods from Domestic Tariff Area to Special Economic Zone subject to petitioner maintaining its accounts relating to goods in question in accordance with provisions of law with rider that restraint order is subject to final decision of writ petition and in case writ petition is dismissed, petitioner shall be liable to deposit requisite duties alongwith interest in accordance with law.
The operation of Rule 27(9) and Rule 25 of SEZ Rules are different. Rule 27 (9) of SEZ Rules provides that goods and parts thereof imported or procured from Domestic Tariff Area [Domestic Tariff Area as per Section 2(i) means the whole of India (including territorial waters and continental shelf) but does not include area of Special Economic Zones] when found to be defective or otherwise unfit for use or which may have been damaged or become defective after such import or procurement may be sent outside SEZ without payment of duty for repairs and replacement to the supplier or its authorized dealers or be destroyed.
The Company on 20.09.2013 had sought permission for extension of unutilized goods under Rule 12(5) of SEZ Rules. Extension was granted to petitioner for utilization of these goods upto 19.09.2014. Petitioner again submitted a request on 08.09.2014, for an extension of three years. It is upon query of respondent (Specified Officer) that goods in question were categorized by petitioner into three categories and thereafter the third category was further divided into another two sub-categories. Petitioner was granted extension till 31.03.2016 for utilization of goods mentioned in category A and B and insofar as the third category is concerned petitioner was asked to refund the amount of benefit availed by it on such goods which had become damaged and unfit for use after such procurement with reference to Rule 25 of SEZ Rules. Communication 26.11.2025 is crystal clear and categoric.
The court dismissed the writ petition.
Case Details
Case Title: M/s Quarkcity India (Pvt.) Ltd. Versus UOI
Case No.: CWP-22284-2016
Date: September 24, 2025
Counsel For Petitioner: Vishal Gupta, Advocate
Counsel For Respondent: Sourabh Goel, Advocate
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