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PJ/Case Law/2020-2021/3643

Whether payment not received in foreign currency should amount to violation of SEZ provision?
GMR Aero Technical Ltd 01/92/171/18/AM-19/PC-VI/343 Dated 28.02.2020
Brief Facts: The appellant has obtained Letter of Approval to set up an SEZ unit for rendering Maintenance Repairs and Overhaul services (MRO Service) for various Aircrafts and its components from DC, VSEZ.   The appellant has provided the service to jet air ways (DTA) but payment is not received in foreign currency as per terms of LOA read with section 2(z)(iii) of the SEZ Act, 2005. Development Commissioner has imposed the penalty Rs.5.0 lakhs for violation of SEZ provision.
Issue- Whether payment not received in foreign currency should amount to violation of SEZ provision?   
Appellant Contentions: Rule 47/48 of SEZ Rules allow sale of goods and services in DTA. No provision specifically restricts the payment be realised only in foreign exchange. Hence, this supply of service cannot be held to be in violation of section 2(Z)(iii) of SEZ Act.
Respondent Contention’s: The section 2(Z)(iii) of SEZ Act, 2005 defines ‘Services’ means such tradeable services which earn foreign exchange. But appellant failed to collect realisation in foreign currency and admitted the mistake on its parts and now requesting for taking lenient view. The appellate authority has told that DC has shown leniency and imposed penalty of Rs. 5.00 lakh which is only 0.56% of the value of service rendered in INR.
Order:The appellant authority has not considered the request of appellant and saying that DC has already taken a lenient view while imposing the penalty.
Comments:Rule 47/48 of SEZ Rules allow sale of goods and service in DTA but section 2(z)(iii) SEZ Act is restrict to realisation of payment in foreign currency. Hence, the appellant has violation the provision of SEZ Act. The penalty amount is rightly imposed on the appellant.
Prepared by: Vijay Chauhan
 
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