Introduction

The Special Economic Zone (SEZ) provides a unique economic environment aimed at promoting investment, employment, and exports. Within the SEZ, businesses enjoy various benefits and incentives, including exemption from certain provisions of the law. However, a recent legal dispute has raised questions about the authority and jurisdiction of state authorities to carry out search proceedings within the premises of businesses operating in the SEZ. This article examines the relevant provisions and arguments presented by both parties to determine whether respondent Nos. 4, 5, and 6 had the necessary authority to conduct search proceedings.

Provisions and Analysis

• Section 22 of the SEZ Act deals with investigation, inspection, search, or seizure within the SEZ or its units. The provision states that authorized agencies or officers can carry out such actions if they have reason to believe that a notified offense has been committed or is likely to be committed within the SEZ. Additionally, the provision emphasizes that no investigation, search, or seizure can take place without prior approval of the Development Commissioner, except for cases where an officer authorized by the Central Government carries out the process.
• Considering this provision, it is evident that officers authorized by the Central Government have the power to conduct search or seizure within the SEZ without prior approval. Therefore, the contention of the petitioners, who claim that respondent authorities lacked jurisdiction due to the SEZ being treated as foreign territory, may not hold ground.
• Furthermore, Section 6 of the Integrated Goods and Services Tax (IGST) Act is relevant to the issue. This section authorizes officers appointed under the Central Goods and Services Tax Act to act as proper officers under the IGST Act, subject to the conditions specified by the government through notification. It clarifies that when a proper officer issues an order under one act, they must also issue an order under the other act, thereby establishing the authority of officers to act in a coordinated manner.
• In light of the above provisions, it becomes apparent that respondent authorities have the necessary authority to carry out search proceedings within the SEZ. The Central Government's authorization of officers, as well as the defined functions of proper officers under the CGST Act, extend to officers under the IGST Act. Therefore, the petitioners' argument that respondent authorities lacked authority or jurisdiction is not well-founded.

Applicability of IGST Act and Purpose of Investigation

Another aspect to consider is the applicability of the IGST Act, which applies to the whole of India, including the SEZ. The petitioner's registration under the IGST Act indicates that their business falls within its purview. Section 7 of the IGST Act determines inter-State supply, and subsection (5) explicitly states that supply of goods or services to or by a SEZ unit is treated as a supply in the course of inter-State trade or commerce.

Conclusion

This clarification implies that the petitioners, operating within the SEZ, cannot claim exemption from investigation or inspection. Treating SEZ units as exempt from such proceedings would undermine the purpose of the Act. There is no apparent inconsistency between the SEZ Act and the GST Act in this regard. The Development Commissioner was duly intimated before the search and seizure, as stated in the affidavit, further supporting the authority and jurisdiction of respondent authorities.

RHC Global Exports Private Limited Versus Union of India

GUJARAT HIGH COURT 

Date of order: 06/06/2023

Team Taxonation

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