Breather for Essar as law ministry bats for Hazira SEZ
Law ministry has concluded that vacant land would not only include land that is barren but also that which is available with the developer and is free from encumbrances.
NEW DELHI: The Essar group’s SEZ for steel in Hazira, Gujarat, has received a reprieve with the law ministry turning down revenue department’s contentions. The law ministry, which had sought the attorney general’s opinion on the alleged violation of rules by the developers, has rejected the revenue department’s argument that the SEZ land was not vacant when the developers applied for SEZ status and, thus, it should not be recognised as an SEZ. Instead, the law ministry has recommended no action against the zone.
As per the rules under the SEZ Act, a SEZ has to be set up on vacant land. The revenue department interprets vacant as being completely empty. However, the law ministry has concluded that vacant land would not only include land that is barren but also that which is available with the developer and is free from encumbrances, a source said.
In case of Essar’s Hazira SEZ, the issue of pre-existing structures cropped up because Essar originally had not planned an SEZ at the location and was actually considering expanding the capacity of its existing steel plant in Hazira. However, in 2005, it decided to invest in a steel SEZ to avail of the tax concessions given to SEZs. It approached the government with a proposal for a steel SEZ in December 2005. The revenue department’s contention is that Essar had already built structures at the site before it applied for SEZ status.
The law ministry’s definition of vacant now absolves Essar of the charges made by the finance ministry and it would continue to enjoy the status of an SEZ.
Though this opinion has come only in the case of Essar’s SEZ, the interpretation is significant and could have larger implications for the scheme on the whole.
The revenue department had slapped a Customs duty evasion case against the zone and had also alleged that it had started operations before it was notified in September 2006. The Special Economic Policy does not allow conversion of existing units into SEZs. The directorate general of Customs & excise intelligence (DGCEI) had conducted investigations to ascertain when production and sales from the steel plant located within the SEZ started and given its report to the commerce ministry. The commerce ministry had then forwarded it to the law ministry to seek its opinion.
The SEZ had received board of approvals’ nod in June 2006. The board, however, had added a condition that the zone could start production and sale only after fencing the boundary. The Essar zone was subsequently notified in September 2006.
As per the rules under the SEZ Act, a SEZ has to be set up on vacant land. The revenue department interprets vacant as being completely empty. However, the law ministry has concluded that vacant land would not only include land that is barren but also that which is available with the developer and is free from encumbrances, a source said.
In case of Essar’s Hazira SEZ, the issue of pre-existing structures cropped up because Essar originally had not planned an SEZ at the location and was actually considering expanding the capacity of its existing steel plant in Hazira. However, in 2005, it decided to invest in a steel SEZ to avail of the tax concessions given to SEZs. It approached the government with a proposal for a steel SEZ in December 2005. The revenue department’s contention is that Essar had already built structures at the site before it applied for SEZ status.
The law ministry’s definition of vacant now absolves Essar of the charges made by the finance ministry and it would continue to enjoy the status of an SEZ.
Though this opinion has come only in the case of Essar’s SEZ, the interpretation is significant and could have larger implications for the scheme on the whole.
The revenue department had slapped a Customs duty evasion case against the zone and had also alleged that it had started operations before it was notified in September 2006. The Special Economic Policy does not allow conversion of existing units into SEZs. The directorate general of Customs & excise intelligence (DGCEI) had conducted investigations to ascertain when production and sales from the steel plant located within the SEZ started and given its report to the commerce ministry. The commerce ministry had then forwarded it to the law ministry to seek its opinion.
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The SEZ had received board of approvals’ nod in June 2006. The board, however, had added a condition that the zone could start production and sale only after fencing the boundary. The Essar zone was subsequently notified in September 2006.
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