SEZ units are not exempt from rigors of investigation or inspection by GST Wing

While highlighting that the provisions of IGST Act, 2017 are applicable to whole of India and petitioner has got its registration under IGST Act, the Gujarat High Court held that the petitioner appears to be under mistaken belief that once business of petitioner is carried out through and within SEZ, they are outside the purview of authority of respondents and hence these SEZ units are not exempted from any investigation or inspection.

The High Court clarified that if submission of petitioners is accepted that they are SEZ units and as such not subjected to such rigors of investigation or inspection, same would defeat the very purpose of the Act.

The High Court also elucidated that “the Development Commissioner, SEZ had already been duly intimated before search and seizure by departmental officer while initiating proceedings under Section 67 of the CGST Act and that being so, submission made by petitioners appearing to be not worthy of acceptance”.

Finding that the jurisdiction of Departmental Officers is unquestionable, as the Central Government has already authorized those officers by virtue of a notification dated Aug 05, 2016, the Division Bench comprising of Justice Ashutosh Shastri and Justice J. C. Doshi observed that department is empowered to carry out proceedings in SEZ. 

“Section 6(2) of the GGST Act indicates that where any proper officer issues an order, he is also issuing an order under the CGST Act as authorized by the Act or under intimation to a jurisdictional officer of the Central Government, and as such, it appears that respondents are empowered to carry out search proceedings in SEZ”, added the Bench.

Advocate Saurabh N Soparkar appeared for the Petitioner, whereas Advocate Manisha Lavkukar Shah appeared for the Respondent.

Briefly, the petitioner company is a well-established SEZ unit. Pursuant to some ostensible communication from an officer of the Enforcement Directorate, the petitioner was subjected to a search and seizure operation, and the premises of the petitioner company were sealed. The sealing memo, according to the petitioner, does not reflect any due process followed by the respondent, and it was carried out without arriving at any satisfaction as required under Section 67(1) of the GST Act. The premises of the petitioner were sealed as all employees were before the office of DRI Surat for a recording of statements, and as such, the respondent has sealed the business premises. Simultaneously, the respondent issued a summons under Section 70 of the GST Act, 2017, and directed the directors of the petitioner company to appear before the respondent for the recording of statements and the production of books of accounts.

The petitioner submitted that since the petitioner’s unit was within the area earmarked and is a SURSEZ unit, which is a distinctly foreign territory and, as such, is a tax-neutral or revenue-neutral area, it is hence outside the ambit of the provisions of the CGST Act, 2017 or the SGST Act, 2017. The state authorities are not empowered to initiate any action since every SEZ unit is a tax-neutral zone.

The respondent by drawing attention to Article 246A of the Constitution of India, which prescribes special provisions with respect to goods and services tax, contended that enforcement agencies are notified for exercising power conferred under Section 21(1) of the SEZ Act, 2005.

After considering the submission, the Bench noted that once the Central Government has notified the functions of proper officers, those functions shall also be applicable to be carried out by the officers under the CGST Act, and hence it cannot be said that there was any lack of authority on the part of respondents.

The Bench further noted that it was an attempt on the part of petitioners by filing these kinds of petitions to thwart and delay the legal proceedings that are initiated by respondent authorities, and as such, this move of petitioners appears to be an abuse of the process of law looking at the manner in which the irregularities alleged to have been committed.

The High Court clarified that any officer or agency who is authorized by Central Government may carry out search or seizure or investigation or inspection in the special economic zone or units situated therein and it also suggests that authorized officer of Central Government is empowered to carry out such process without any prior approval or intimation.

So, moment authorization is reflecting, such measure can be undertaken against special economic zone or unit, added the Court.  

Accordingly, the High Court dismissed the petition with a cost of Rs. Ten thousand.

Cause Title: RHC Global Exports Private Limited vs. Union of India [R/SPECIAL CIVIL APPLICATION NO. 5978 of 2023 / 2023-Enterslice-2-HC-Guj-GST]

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