No Export Duty On Transfer From Domestic Tariff Area To SEZ : Supreme Court Dismisses Union's Appeal Against Adani Power

Observing that the movement of goods from a Domestic Tariff Area (DTA) to a Special Economic Zone (SEZ) is a domestic supply and not an export outside India, the Supreme Court provided relief to Adani Power Ltd. and other entities from paying export duty under the Customs Act, 1962, for the movement of goods from DTA to SEZ.

A bench of Justice BV Nagarathna and Justice R Mahadevan dismissed the Union of India's appeal against a judgment of the Gujarat High Court which ruled that export duty cannot be levied for movement from a Domestic Tariff Area (DTA) to an SEZ. The High Court had held that it was a domestic supply and not an export outside India, therefore exempted from the payment of the export duty.

The Union government had levied export duty on goods supplied from the DTA to SEZs, arguing that the transaction fell under the Customs Act's definition of "export," which simply means "taking out of India to a place outside India." The revenue authorities contended that since SEZs are considered foreign territory for trade operations, any supply to them was an "export." However, the companies challenged this, relying on the specific and expansive definition of "export" within the SEZ Act, 2005, which explicitly includes three types of transactions, including "supplying goods... from the Domestic Tariff Area to a Unit or Developer."

The Court affirmed the reasoning adopted by various High Courts which stated that the SEZ Act creates a self-contained legal framework where the movement of goods from the DTA to an SEZ is defined as a form of "export" for the purposes of entitlements and benefits under that Act, but it is not an "export" out of India that would trigger a levy under the Customs Act.

The Court agreed with the Gujarat High Courts' view that imposing an export duty on such domestic transfers would contradict the very purpose of SEZs, which are designed to be duty-free enclaves to promote exports from India.

The Gujarat High Court had held :

"In view of the above discussion and findings arrived at as well as conclusion drawn, the levy of export duty on goods supplied from the Domestic Tariff Area to the Special Economic Zone is not justified. The petitioners are, therefore, not to be called upon to pay export duty on movement of goods from Domestic Tariff Area to Special Economic Zone units or developments."

The Court examined Section 12 of the Customs Act, 1962, and Section 2(m) of the SEZ Act, 2005, noting that Section 12 is the charging provision which levies export duty only on goods physically exported out of India. While Section 2(m) of the SEZ Act deems movement of goods from the Domestic Tariff Area (DTA) to a Special Economic Zone (SEZ) as “exports,” the Court clarified that this deeming fiction operates only to extend benefits under the SEZ scheme, not to impose export duty. Since the power to levy duty flows exclusively from Section 12 of the Customs Act, DTA-to-SEZ transfers cannot be taxed as exports.

“On a conjoint reading of the aforesaid provisions, we find that Section 12 of the Customs Act, 1962 is the charging Section. However, under Section 26 of the SEZ Act, power is reserved to grant an exemption or a concession if under the provisions of the Customs Act, 1962, a duty is leviable as per the charging Sections.”, the court said.

Accordingly, the appeals were dismissed.

Cause Title: UNION OF INDIA THROUGH SECRETARY & OTHER VERSUS M/S ADANI POWER LTD.

Citation : 2025 LiveLaw (SC) 932

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Appearance:

For Appellant(s) : Mr. N Venkataraman, A.S.G. Ms. Nisha Bagchi, Sr. Adv. Ms. Swarupma Chaturvedi, Sr. Adv. Mr. Gurmeet Singh Makker, AOR Mr. Raghvendra S Srivatsa, Adv. Mr. Ishaan Sharma, Adv. Mr. Mukesh Kumar Maroria, AOR Mr. Shashank Bajpai, Adv.

For Respondent(s) : Mr. Vikram S. Nankani, Sr. Adv. Mr. Kumar Visalaksh, Adv. Mr. Udit Jain, Adv. Mr. Pranav Bansal, Adv. Mr. Praveen Kumar, AOR Mr. Shamik Shirishbhai Sanjanwala, AOR Mr. Aditya Tripathi, Adv. Ms. Aarushi Gupta, Adv. Mr. Ks Naveen Kumar, Adv. Mr. S Sukumaran, Adv. Mr. Anand Sukumar, AOR Mr. Bhupesh Pathak, Adv. Mr. Bhupesh Kumar, Adv. Mrs. Ruche Anand, Adv. Mr. Vikram S. Nankani, Sr. Adv. Mr. Kumar Visalaksh, Adv. Mr. Udit Jain, Adv. Mr. Abhishek Vikas, AOR Mr. R. Parthasarathy, AOR Mr. Chirag M. Shroff, AOR Mr. Sahil Monga, AOR Mr. Gurmeet Singh Makker, AOR Ms. Charanya Lakshmikumaran, AOR Ms. Neha Choudhary, Adv. Ms. Umang Motiyani, Adv. Mr. Ayush Agarwal, Adv. Ms. Nitum Jain, Adv. Mr. Swastik Mishra, Adv. Ms. Medha Sinha, Adv. Mr. A. Lakshminarayanan, AOR Mr. Niranjan, J.V., Adv. Mr. M Laxmi Mahendraa, Adv. 9 Mr. M Munusamy, Adv. Mr. Pinaki Misra, Sr. Adv. M/S. Karanjawala & Co., AOR Ms. Ruby Singh Ahuja, Adv. Mr. Dhruv Dewan, Adv. Ms. Akanksha Thapa, Adv. Ms. Megha Dugar, Adv. Ms. Shruti Pandey, Adv. Mr. Tribhuvan N Singh, Adv. Mr. Sudarsh Menon, AOR Mr. Udbhav Singh, Adv. Mrs. Nimisha Menon, Adv.