On 28 August 2025, the Supreme Court of India delivered a significant ruling in Union of India v. Adani Power Ltd. (Civil Appeal No. 4489 of 2023 and connected matters), clarifying the levy of export duty on supplies from the Domestic Tariff Area (DTA) to Special Economic Zones (SEZs)
Background
The appeals arose from judgments of various High Courts (Gujarat, Andhra Pradesh, Karnataka, Madras, and Bombay), which had consistently held that export duty is not leviable on goods supplied from DTA to SEZ units or developers. The Union of India had challenged these findings before the Supreme Court.
The central questions before the Court were:
- Can export duty be imposed under the Customs Act, 1962?
- Can export duty be levied under the Special Economic Zones Act, 2005 (SEZ Act)?
- Can the definition of “export” under the SEZ Act be imported into the Customs Act to justify such levy
Court’s Findings
The Court upheld the interpretation of the High Courts and dismissed the appeals filed by the Union of India.
On the Customs Act, 1962:
Section 12 is the charging section, but “export” under Section 2(18) means taking goods out of India to a place outside India. Supplies to SEZs, which are within India, do not qualify.
On the SEZ Act, 2005:
Section 2(m) of the SEZ Act defines “export” broadly to include supplies from DTA to SEZs. However, Section 51 gives the SEZ Act over riding effect, and it is a self-contained code. The Customs Act definition cannot be expanded to cover SEZ supplies.
On legislative intent:
The Court reaffirmed that movement of goods from DTA to SEZ is not “export” for the purposes of levy of export duty. The SEZ Act envisages such movement as a facilitative measure, supported by exemptions under Section 26:
The Supreme Court concluded that the High Courts had correctly interpreted the law and found no reason to interfere.
Implications of the Judgment
- For SEZ units and developers: This ruling removes ambiguity and confirms that no export duty is payable on DTA-to-SEZ supplies.
- For exporters in DTA: It reinforces the principle that SEZ-related movements are not “exports” under the Customs Act, protecting businesses from an unintended levy.
- For policy clarity: The judgment harmonises the Customs Act and SEZ Act, underscoring that the SEZ Act is a special legislation with overriding effect.
Conclusion
The Supreme Court’s decision settles a long-standing dispute on the interplay between the Customs Act and the SEZ Act. By ruling in favour of the assessee, the Court has reaffirmed that SEZs are to be treated distinctly within India’s trade policy framework, ensuring that supplies made to them from the DTA are not burdened with export duty. This landmark ruling will have far-reaching consequences for SEZ operations, exporters, and India’s trade facilitation regime.
