Point of Law : Petitioner having licence to trade, storage of goods outside the SEZ area namely in a bonded warehouse, for the reasons stated earlier, cannot automatically confer power on the DRI Officers to initiate proceedings under the Customs Act.

ORDER :

C. Praveen Kumar, J.

The present Writ Petition came to be filed to declare the Order-in-Original No.VIZ-CUSTOM-000-COM-009-20-21, dated 30.06.2020, passed by the 1st respondent pursuant to the reply given to the Show Cause Notice dated 11.12.2014, as illegal, arbitrary and without jurisdiction.

2. The circumstances, which lead to filing of the present Writ Petition, are as under:-

(a) The 1st petitioner is a private limited company engaged in manufacture of Bio-Diesel and Glycerine at Visakhapatnam Special Economic Zones (VSEZ). It was registered as a unit of Special Economic Zone (SEZ) with Visakhapatnam Special Economic Zone (VSEZ) vide Letter of Approval (LOA) dated 17.05.2006, granted by the Board of Approvals (BOA), New Delhi, for conducting authorized operations of manufacture of Bio Diesel and Glycerine. The Commerce Ministry issued another LOA dated 30.07.2009, allowing trading in Bio Diesel, as an authorized operation, by the 1st petitioner.

(b) It is seen from the Statement of Objects and Reasons of the Special Economic Zones Act, 2005 [for short, “the Act”], the Government of India has announced the Special Economic Zone scheme in April, 2000 with a view to provide internationally competitive environment for exports. The objectives of Special Economic Zones includes 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 lead growth. The SEZ units are put under the administrative control of the Development Commissioners under the Ministry of Commerce to grant necessary permissions, to provide other facilities and also to undertake investigation and impose penalties for violation of any of the provisions of the Act.

(c) Before introduction of SEZ Act, 2005, the working of SEZ was regulated by the provisions contained in Chapter XA of the Customs Act, 1962. As per Notification dated 14.03.2006, the provisions of Chapter XA of the Customs Act, 1962 were specifically made not applicable to the working of the SEZ. The Central Government through Ministry of Commerce and in exercise of the power granted under Section 21(1) of the SEZ Act, 2005 specified the officers with the powers of investigation, inspection or search or seizure as provided under the said Act and the Development Commissioner of the respective SEZ has been made the Enforcement Officer under sub-section (2) of Section 21 of the Act. The officers of Customs are notified as proper officers under the SEZ Act, 2005 only with effect from 05.08.2016, with a condition that the said Officer is required to report before the 3rd respondent within seven days, the details of action if any, initiated by it. Therefore, any violation by a unit in SEZ was to be investigated under the SEZ Act, 2005 only by the Development Commissioner i.e., respondent no.3 herein till 05.08.2016.

(d) The petitioner has been undertaking authorized operations i.e., manufacture of Bio Diesel and export of the same and also trading of the said goods as permitted under the Letters of Approval, dated 17.06.2006 and 30.07.2009, from its manufacturing premises located within the SEZ area at Visakhapatnam. During 2009-10 and 2010-11, the petitioner imported four consignments of Fatty Acid Methyl Ester (FAME) of different grades from M/s. Natural Bio Energy LLC, USA and exported Bio Diesel manufactured with certain specifications, after undertaking blending and other operations on the imported FAME with the Bio Diesel of different grades manufactured at the factory situated in VSEZ.

(e) The petitioner imported four consignments by duly filing Bill of Entries, transferred and stored the material in the Bonded Warehouse of M/s.East India Petroleum Ltd (EIPL) at Visakhapatnam. It is also to be not