The Central Government may prescribe the manner in which benefits shall be granted to the Developer: High Court Of New Delhi
  The petitioner has filed the present petition under Article 226 of the Constitution of India impugning an order dated 28.12.2016, The petitioner also prays that the petitioner may be allowed benefits under Section 26 of the Special Economic Zones Act, 2005 ( ‘the SEZ Act’) in respect of maintenance and duty-free imports of raw materials and consumables for operation W.P.(C) No.662/2017 and maintenance of the power plant and the same issue was held in the judgement passed by a single bench judge comprising HON’BLE MR JUSTICE VIBHU BAKHRU, in the matter M/S MOSER BAER INDIA LTD  V. UNION OF INDIA &amp; ANR. dealt with an issue mentioned above The petitioner is a company, inter alia, engaged in the generation of electricity, which is captively consumed and also supplied to other units in the Special Economic Zone (SEZ Units). The petitioner had submitted its proposal seeking approval for its power generating unit in MBIL-SEZ. The said proposal was accepted and by a Letter of Approval dated 08.10.2009. The said approval was subject to certain terms and conditions as stipulated in the LoA including that, the approval was valid for one year from the date of issue, within which the petitioner was obliged to implement the project and commence production. It was also stipulated that the LoA would be valid for five years from the date of commencement of production. On 21.03.2012, the Government of India, Ministry of Commerce and Industry, Department of Commerce issued fresh guidelines for power generation in SEZ which superseded the 2009 Guidelines. The said Guidelines continued till 31.03.2015 and during this period the petitioner continued to operate its unit and availed O&amp;M benefits as available under Section 26 of the SEZ Act. In the meanwhile, with the expiry of five years, the LoA expired and in terms of the letter dated 04.12.2014, the LoA was renewed for a further period of five years, that is, till 08.10.2019. So the petitioner submitted its proposal for a fresh Letter of Approval for a power plant unit in the non-conventional energy SEZ, MBIL-SEZ. The same was placed before the Approval Committee at its meeting held on 01.04.2016. The Approval Committee was of the view that a fresh Letter of Approval was not required as the petitioner’s unit was already approved for power generation. However, it noted that O&amp;M benefits were not allowed to the petitioner’s unit during the period 01.04.2015 to 15.02.2016 under the 2009 Guidelines as restored by the Government of India by its letter dated 06.04.2015.The relevant extract of the said letter setting out the few conditions in it. In its appeal, the petitioner raised two issues. First, it claimed that it was entitled to O&amp;M benefits during the period 01.04.2015 to 15.02.2016 under Section 26 of the SEZ Act and the Rules made W.P.(C) No.662/2017 thereunder. Second, it claimed that it was entitled to sell surplus power under Rule 47(3)(c) of the Special Economic Zone Rules, 2006 and the Approval Committee had no power to demand the duties imposed on inputs consumed by an SEZ unit. The Board of Approval rejected the petitioner’s appeal by the impugned order dated 28.12.2016. And, this led the petitioner to file the present petition. It was apparent from the above that the controversy involved in the present petition relates to the questions, (a) whether the petitioner is entitled to O&amp;M for the period 01.04.2015 to 15.02.2016; and (b) whether the condition that no duty-free benefits for transfers to EOU are contrary to the SEZ Act and the Rules made thereunder. The court perused the facts and argument’s presented, it thought that- “In view of the above, the present petition is allowed to the limited extent that the condition imposed by Unit Approval Committee of refunding the O&amp;M benefits obtained by the petitioner during the period 01.04.2015 to 15.02.2016 by its letter dated 18.04.2016, is set W.P.(C) No.662/2017 Page 33 of 33 aside. The impugned order upholding the said condition of the Unit Approval Committee is also set aside. 56. The petition is disposed of in the aforesaid terms”.
IN THE HIGH COURT OF DELHI AT NEW DELHI Judgment delivered on: 25.10.2021 M S MOSER BAER INDIA LTD UNION OF INDIA & ANR Advocates who appeared in this case For the Petitioner Mr Pramod Kumar Rai and Mr Deepak Anand Advocates For the Respondent Ms Suparna Srivastava & Ms Sanjna Dua Advocates for R 1&2 HON’BLE MR JUSTICE VIBHU BAKHRU VIBHU BAKHRU J The petitioner has filed the present petition under Article 226 of the Constitution of India impugning an order dated 28.12.2016 passed by the Board of Approval whereby the petitioner’s appeal against an order dated 18.04.2016 passed by the Unit Approval Committee NOIDA SEZ was rejected. The petitioner also prays that the petitioner may be allowed benefits under Section 26 of the Special Economic Zones Act 2005in respect of maintenance and duty free imports of raw materials and consumables for operation and maintenance of the power plantthe Development Commissioner Noida SEZapproved the same and extended all facilities and entitlements as admissible to a unit in the Special Economic Zonesubject to the terms of the SEZ Act and the Rules made thereunder for undertaking “Authorised Operations”. The said approval was subject to certain terms and conditions as stipulated in the LoA including that the approval was valid for a period of one year from the date of issue within which the petitioner was obliged to implement the project and commence production. It was also stipulated that the LoA would be valid for a period of five years from the date of commencement of production. It is relevant to note that the petitioner’s proposal was for it to be treated as an SEZ unit in terms of the Guidelines issued by the Department of Commerce by its letter dated 27.02.2009which superseded the 2009 Guidelines. The said Guidelines continued till 31.03.2015 and during this period the petitioner continued to operate its unit and availed O&M benefits as available under Section 26 of the In the meanwhile with the expiry of five years the LoA expired and in terms of the letter dated 04.12.2014 the LoA was renewed for a further period of five years that is till 08.10.2019 Thereafter by a letter dated 06.04.2015Department of Commerce Government of India communicated its decision to withdraw the 2012 Guidelines with immediate effectand restore the 2009 Guidelines Guidelines issued in terms of the letter dated 27.02.2009). The said letter expressly stated that the 2009 Guidelines would be the basis for the relevant policy and operational decisions. A copy of the said letter is annexed as Annexure P 8 to the petition and it is not disputed that the same contains a typographical error inasmuch as the letter dated 27.02.2009is referred to as a letter dated The Government of India also issued another letter dated 06.04.2015 addressed to all Development Commissioners Special Economic Zones informing them that henceforth setting up of power plant shall be allowed only in non processing area of SEZs. It further stated that processing power plants presently situated in the processing area would be demarcated as non processing areas and no O&M benefits would be available to such power plants Thereafter on 16.02.2016 the Government of India Ministry of Commerce issued fresh guidelinesextending the O&M benefits to power generating units in the processing zone subject to certain conditions. The petitioner states that it has been operating under the said guidelines and has been extended the O&M benefits subject to the condition proscribing duty free transfer of power to EOUs In the meanwhile the petitioner submitted its proposal for a fresh Letter of Approval for a power plant unit in the non conventional energy SEZ MBIL SEZ. The same was placed before the Approval Committee at its meeting held on 01.04.2016. The Approval Committee was of the view that a fresh Letter of Approval was not required as the petitioner’s unit was already approved for power generation. However it noted that O&M benefits were not allowed to the petitioner’s unit during the period 01.04.2015 to 15.02.2016 under the 2009 Guidelines as restored by the Government of India by its letter dated 06.04.2015 Accordingly it directed that the said O&M benefits be recovered from the petitioner. The Approval Committee also decided that the petitioner would be entitled to O&M benefits subject to the condition that duty free transfer of power to its EOU shall not be allowed. The said conditional approval was communicated to the petitioner by a letter dated 18.04.2016. The relevant extract of the said letter setting out the said conditions is reproduced below: “You will refund an amount of Rs. 1 55 76 751 being the duty foregone on material procured from DTA imported for operation & maintenance of power plant for the period of 01.04.2015 to 15.02.2016 within a period of 15 days from the date of issue of this letter 2. You will comply with the extant Power Guidelines as issued by DOC vide letter No. P6 3 2006 SEZdated 16.02.2016 3. No duty free benefits for transfer of power to EOU shall be allowed 4. All other terms and conditions of LOA dated 08.10.2009 shall remain unchanged 5. You shall execute fresh additional Bond cum LUT within 15 days of this letter 6. You shall confirm acceptance of the above terms and condition to this office immediately.” Aggrieved by the aforesaid decision the petitioner preferred an appeal to the Board of Approval constituted under Section 8 of the SEZ In its appeal the petitioner raised two issues. First it claimed that it was entitled to O&M benefits during the period 01.04.2015 to 15.02.2016 under Section 26 of the SEZ Act and the Rules made thereunder. The petitioner claimed that such benefits could be denied in terms of instructions issued by the Government of India. It also claimed that on correct interpretations of the communication dated 06.04.2015 the benefit of the 2009 Guidelines were not denied to the petitioner Second it claimed that it was entitled to sell surplus power under Rule 47(3)(c) of the Special Economic Zone Rules 2006and the Approval Committee had no power to demand the duties imposed on inputs consumed by an SEZ unit. The petitioner claimed that it was entitled to such duty free procurement on its inputs irrespective of whether the goods manufactured were cleared for export in the Domestic Tariff Areawhether the petitioner is entitled to O&M benefitsfor the period 01.04.2015 to 15.02.2016 andwhether the condition that no duty free benefits for transfers to EOU is contrary to the SEZ Act and the Rules made thereunder Insofar as the validity of the condition that no duty free benefits would be allowed for transfer of power to EOU is concerned it is common ground that the interpretation of Rule 47(3) of the SEZ Rules is dispositive of the said controversy. Rule 47(3) of the SEZ Rules is set out below “47(3) Surplus power generated in a Special Economic Zone’s Developer’s Power Plant in the SEZ or Unit’s captive power plant or diesel generating set may be transferred to Domestic Tariff Area on payment of duty on consumables and raw materials used for generation of power subject to the following conditions namely:— a) proposal for sale of surplus power received by the Development Commissioner shall be examined in consultation with the State Electricity Board wherever considered necessary Provided that consultation with State Electricity Board shall not be required for sale of power within the same Special Economic Zone b) norms for production of a unit of power shall be approved by the Approval Committee sale of surplus power to other Unit or Developer in the same or other Special Economic Zone or to Export Oriented Unit or to Electronic Hardware Technology Park Unit or to Software Technology Park Unit or Bio technology Park Unit shall be without payment of duty for sale of surplus power in Domestic Tariff the Unit shall obtain permission from the Specified Officer and the State Government authority e) duty on sale of surplus power to the Domestic Tariff Area shall be as provided for in this rule.” Sub ruleof Rule 47 of the SEZ Rules clearly specifies that surplus power generated in SEZ Developer’s plant or an SEZ Unit’s captive power plant may be transferred to Domestic Tariff Area on payment of duty on consumables and raw materials used for generation of the power. The reference to the duty under Clauseof Sub ruleof Section 26 of the SEZ Act the Central Government has the powers to prescribe the manner and the terms and conditions subject to which benefits under Section 26(1) of the SEZ Act are to be granted Lastly it was submitted that the Board of Approval was bound by the policy decisions. It is also stated that the Central Government had the power to issue directions on questions of policy and in terms of Section 9(6) of the SEZ Act the Board of Approval was bound by the same Before examining the scheme of the SEZ Act and before addressing the aforesaid issues it would be relevant to refer to the relevant Guidelines 17. As noted above the petitioner had sought approval for its power generating unit in the ‘processing area’ of the MBIL SEZ in terms of the 2009 Guidelines. The approval as sought for by the petitioner was granted by the LoA dated 08.10.2009. The petitioner was granted all the facilities and benefits as admissible to a unit in an SEZ subject to the provisions of the SEZ Act and the Rules made thereunder The 2009 Guidelines made a distinction between a power plant set up by a developer co developer in the non processing area of an SEZ as a part of the infrastructure facility and a unit set up in the SEZ to generate power as a product or as a captive power plant located in the ‘processing area’. Whereas a power plant set up by a developer co developer as a part of the infrastructure facility was entitled to fiscal benefits for its initial setting up it was not entitled to fiscal benefits in regard to its operation and maintenance activities in terms of Rule 27(3 of the SEZ Rules The relevant extracts of the 2009 Guidelines are set out below “Generation transmission and distribution of power in Power plant set up by developer Co developer A power plant to be set up by developer co developer in an SEZ as part of infrastructure facility will be in the non processing area of SEZ and will be entitled to fiscal benefits only for its initial setting up and no fiscal benefit would be admissible for its operation and maintenance in terms of Rule 27(3) of the SEZ Rules There will be no obligation to achieve positive Net Foreign Exchange Earningfor such power plants Constituents to whom it can supply power Such a power plant can supply power to other facilities located in the non processing area of the same SEZ facilities located in the non processing area of other SEZs SEZ units located in the processing area of the same SEZ SEZ units located in the processing area in other SEZs facilities located in the processing area of the same SEZ facilities located in the processing area of other SEZs and also Domestic Tariff AreaA unit set up within the SEZ A unit can be set up within the SEZ to generate power as a product or have a captive power plant and will be located in the processing area. Such a power plant will be entitled to all the fiscal benefits covered under section 26 of the SEZ Act including the benefits for initial setting up maintenance and the duty free import of raw materials and consumables for the generation of the power in such plants With respect to SEZs in sectors such as IT ITES Gem and Jewelry. Biotech etc. where a minimum built up area is stipulated under the SEZ Rules and in respect of which generation of power has been approved by the Board of Approval as authorized operation to the Developer Co developer within the processing area in such cases generation of power will be carried out as a unit without any separate demarcation of the area for that purpose. However such unit will maintain separate accounts as a power generating unit These units will enjoy duty free import of capital goods raw materials and consumables for the generation of power and such duty free imports of capital goods raw material and consumables etc. would be counted towards the NFE obligations of the unit Constituents to whom it can supply power Such a unit can supply power to other SEZ Units located in the processing area of the same SEZ SEZ units located in the processing area of other SEZs facilities located in the non processing area of the same SEZ facilities located in the non processing area of other SEZs facilities located in the processing area of the same SEZ facilities located in the processing area of other SEZs and iii) A single power plant in an SEZ A single stand alone power plant can be set up in an SEZ in which there would be no other units. Such a power plant will be treated as a unit in the processing area and will be entitled to all fiscal benefits covered under Section 26 of the SEZ Act including benefits for initial setting up maintenance and the duty free imports of raw material and consumables for generation of power in such a plant The duty free import of capital goods raw material and consumables etc. would be counted towards the NFE obligation of the unit as applicable to such units under Rule 53 of the SEZ Rules 2006 Constituents to whom it can supply power Such a power plant can supply power to the facilities in the non processing area of the same SEZ facilities in the non processing area of other SEZs SEZ units located in other SEZs and DTA.” The 2009 Guidelines were superseded by the 2012 Guidelines In terms of the said Guidelines O&M benefits were extended to power generating units set up by developers co developers as a part of the infrastructure facilities in the processing zone. Such benefits were not available to units set up in the ‘non processing’ area of the SEZ Insofar as the petitioner is concerned the 2012 Guidelines did not materially affect the petitioner’s entitlement to O&M benefits under Section 26 of the SEZ Act The 2012 Guidelines were withdrawn with effect 01.04.2015 and the 2009 Guidelines were restored in terms of the letter dated 06.04.2015 issued by the Government of India. The said letter is “No. P 6 3 2006 SEZ Government of India Ministry of Commerce & Industry Department of Commerce Udyog Bhawan New Delhi Dated 6th April 2015 Subject: Guidelines for Power Generation in Special Economic Zone regarding The undersigned is directed to say that guidelines for power Economic Zone issued vide this Ministry s letter of even number dated 21st March 2012 stand withdrawn with immediate effect i.e. 1st April 2015 The guidelines for Power Generation Transmission and Distribution in Special Economic Zone issued vide this Department s letter of even number dated 27th February 2012 sic 27th February 2009] are hereby restored and will henceforth be the basis for relevant policy and operational Under Secretary to the Govt. of India Tel 011 23062496 Chief Secretaries of all States UT s All Development Commissioners of SEZs Ministry of Power Govt. of India Shram Shakti Bhawan Rafi Marg New Delhi Department of Revenue{CBDT CBEC) Govt. of DG EPCES” The aforesaid letterclearly indicates that the Government of India had decided to withdraw the 2012 Guidelines and restore the 2009 Guidelines without any additional condition. The aforesaid decision of the Government of India to withdraw the 2012 Guidelines would have no material impact on the petitioner insofar as the O&M benefits are concerned as undisputedly it was entitled to the same in terms of the 2009 Guidelines. However according to the respondents the O&M benefits were no longer available to the petitioner by virtue of another letter of the same date letter dated 06.04.2015) that was circulated to all the Development Commissioners of Special Economic Zones. The said letter is also referred to as the Second Letter. The contents of the said letter dated 06.04.2015 are at the centre of the controversy in the present petition The said letter is reproduced below Government of India Ministry of Commerce & Industry Department of Commerce Udyog Bhawan New Delhi Dated: 6th April 2015 Ail Development Commissioners Special Economic Zones Subject: Guidelines for Power Generation in Special Economic With reference to subject cited above I am directed to inform that the above mentioned guidelines issued vide this Department s letter of even number dated 21st March 2012 have been withdrawn by the Government with immediate effect i.e 1st April 2015. Further the Power Guidelines issued vide this Department s letter of even number dated 27th February 2009 have been resorted. A copy of the communication in this regard is enclosed In pursuance of the above cited decision you are informed that henceforth setting up of power plants shall be allowed only in the Non Processing Area of SEZs. Further those power plants which are presently situated in Processing Areas of SEZs shall be demarcated as Non Processing Areas and no operation and maintenanceGovt. of India” 25. On 16.02.2016 the Government of India issued fresh guidelines the ‘2016 Guidelines’). The relevant extract of the said Guidelines are set out below “A power plant including non conventional energy to be set up by the developer co developer in an SEZ as part of infrastructure facility will be in the Non Processing Area of SEZ only and will be entitled to fiscal benefits only for initial setting up and no fiscal benefit would be admissible for its operation and maintenance. There will be no obligation to achieve positive Net Foreign Exchange NFE) for such power plants. Such a power plant can supply power to DTA after meeting the power to payment of the SEZ subject customs duty as determined by DoR keeping in view the duty foregone on initial setting up of the power ii. Henceforth no single stand alone power plant will be permitted to be set up in to SEZ in which there would be no other units iii. Henceforth setting up of captive power plant including non conventional energy power plant can be permitted in Processing Area as a unit and it will be subject to NFE obligations. Such a power plant will be entitled to all the benefits covered under section 26 of the SEZ Act including the benefits of initial setting up maintenance and the duty free import of raw materials and consumables for the generation of the power. They can sell power to DTA on payment of customs duty as determined by DoR keeping in view the duty on installation as well as O&M and including service tax exemptions Those Power Plants In SEZs which were approved to issue of Power prior to 27.02.2009 and subject Guidelines and Provisions of SEZ Act & Rules either as an infrastructure facility by Developer Co developer or as a unit in the Processing Area will be permitted to operate. It is relevant that during period of installation of such plants duty benefits on capital investment of mega power plants were available under the then prevalent policy guidelines even in the DTA area Henceforth such power plants will be allowed O&M benefits only with regard to the average monthly power supplied to entities within the same SEZ during the preceding year. Henceforth no O&M benefits including service tax exemption will be allowed for power supplied to DTA other SEZs EOUs from such power plants. The surplus power generated in such power plants may be transferred to DTA without payment of duty keeping inconsideration of the fact that no duty free benefits on raw materials consumables etc have been availed for generation of such power. However those power plants not having the capacity of the mega power plant as given in DoR Notification No. 21 2002 Customs dated 01.03.2002 will be required to pay duty for sale in DTA on accounts of duty free import of capital goods as determined by DoR 2. These guidelines would be effective with effect from 16th February 2016.” In the aforesaid backdrop the first and foremost question to be addressed is whether the operations carried out by the petitioner cease to be “authorised operations” by virtue of the letter dated 06.04.2015 whereby the 2012 Guidelines were superseded. It is necessary to note that by the LoA dated 08.10.2009 the petitioner was extended the facilities and entitlements as admissible to a unit in the SEZ for undertaking ‘authorised operations’. The LoA also expressly specified the authorised operations as under Setting up of Power Plant generating Power1740 MW.” in Processing area for The LoA also specified the Projected Annual Exports for the entire five year term of the LoA It is also material to note that there is no dispute that the petitioner’s generating unit is located in ‘the processing zone’ of MBIL The expression “authorised operations” is defined under Section 2(c) of the SEZ Act to mean “operations which may be authorised under sub sectionof section 4 and sub sectionof section 15.” Section 4(2) of the SEZ Act empowers the Board of Approval to authorize the Developer to undertake the operations in an SEZ as may be authorized by the Government. Sub sectionof Section 15 of the SEZ Act expressly provides that the Development Commissioner may issue a letter of approval to the person concerned to set up a unit and undertake such operations which the Development Commissioner may authorise and such operations would be mentioned in the letter of Act as under The word “Developer” is defined under Section 2(g) of the SEZ “(g) “Developer” means a person who or a State Government which has been granted by the Central Government a letter of approval under sub section 10) of section 3 and includes an Authority and a Co is also relevant to refer to the definition of the term ‘entrepreneur’ as defined under Section 2(j) of the SEZ Act. Section 2(j of the SEZ Act reads as under “2(j) “entrepreneur” means a person who has been granted a letter of approval by the Development Commissioner under sub section 9) of section 15.” Section 3 of the SEZ Act contains provisions for the procedure for making a proposal to establish an SEZ Zone. Any person who intends to set up an SEZ is required to make a proposal to the State Government for the purpose of setting up the SEZ. The State Government may on receipt of the proposal shall forward the same with its recommendation to the Board of Approval within such period as may be prescribed in terms of Section 3(7) of the SEZ Act. The Board of Approval upon receipt of the proposal may approve the said proposal subject to such terms and conditions as it may deem fit to impose or modify or reject the proposal. In terms of Section 3(8) of the SEZ Act the Central Government may prescribe the requirement for establishing an SEZ including the terms and conditions subject to which the shall undertake the “authorised operations” and his obligations and entitlements In the event the Board of Approval approves the proposal without any modification or approves the same with modifications which are accepted by the concerned person or the State Government it is required to communicate the said approval to the Central Government Section 3(10) of the SEZ Act provides that on receipt of such communication from the Board of Approval the Central Government shall issue a letter of approval on such terms and conditions as may be approved by the Board to the developer It is relevant to note that the letter of approval as mentioned under Section 3(10) of the SEZ Act is with respect to the proposal to set up an SEZ and not a unit within an existing SEZ Section 4 of the SEZ Act provides for the establishment of an SEZ by a developer after grant of the letter of approval under Section 3(10) of the SEZ Act. Sub sectionof Section 4 of the SEZ Act entitles the Board of Approval to authorise a developer to undertake such operations that may be authorised by the Central Government in the SEZ. It is clear from the Scheme of the SEZ Act that the ‘authorised operations’ under Section 4(2) of the SEZ Act are such operations that a developer who establishes the SEZ in terms of the letter of approval issued under Section 3(10) of the SEZ Act is entitled to carry out in the Section 15 of the SEZ Act contains provision regarding setting up a unit in an SEZ. In terms of Sub sectionof Section 15 of the SEZ Act any person who intends to set up a Unit for carrying on the “authorised operations” in an SEZ is required to submit a proposal to the Development Commissioner. The Development Commissioner is required to submit the same to an Approval Committee for its approval If such approval is granted in terms of Sub sectionof Section 15 of the SEZ Act the Development Commissioner is required to issue a letter of approval to the person concerned to set up a unit and undertake such operations which the Development Commissioner may authorise Sub sectionof Section 15 of the SEZ Act entitles the Central Government to inter alia prescribe the requirements subject to which the Approval Committee shall approve modify or reject the proposal It is also entitled to prescribe the terms and conditions subject to which a unit shall undertake the “authorised operations”. The relevant extract of Section 15 of the SEZ Act is set out below “15.Any person who intends to set up a Unit for carrying on the authorised operations in a Special Economic Zone may submit a proposal Development Commissioner concerned in such form and manner containing such particulars as may be Provided that an existing Unit shall be deemed to have been set up in accordance with the provisions of this Act and such Units shall not require approval under 3) The Approval Committee may either approve the proposal without modification or approve the proposal with modifications subject to such terms and conditions as it may deem fit to impose or reject the proposal in accordance with the provisions of sub sectionAny person aggrieved by an order of the Approval Committee made under sub sectionmay prefer an to the Board within such time as may be 8) The Central Government may prescribe a) the requirementssubject to which the Approval Committee shall approve modify or reject any proposal referred to in subsection(b) the terms and conditions subject to which the Unit shall undertake the authorised operations and its obligations and entitlements 9) The Development Commissioner may after approval of the proposal referred to in sub sectiongrant a letter of approval to the person concerned to set up a Unit and undertake such operations which the Development Commissioner may authorise and every such operation so authorised shall be mentioned in the letter of approval.” It is apparent from Sub sectionof Section 15 of the SEZ Act that the Central Government has ample powers to impose certain terms and conditions subject to which a unit can carry out its operations In view of the above it is clear that the Central Government can introduce terms and conditions by notifying Rules or issuing guidelines in terms of which an approval may be granted The letter of approval as contemplated under Section 15(9) of the SEZ Act is required to be issued by the Development Commissioner pursuant to the proposal submitted under Section 15(1) of the SEZ Act The person who is granted the letter of approval falls within the definition of an “entrepreneur” within the meaning of Section 2(j) of the SEZ Act. Section 15(9) of the SEZ Act makes it specifically clear that the letter of approval shall mention the operations that the concerned person is authorised to undertake. Thus the scope of the expression “authorised operations” is well defined and the same has to be stated in the letter of approval In the present case the letter of approval dated 08.10.2009 expressly indicates the operations activities that the petitioner is authorised to undertake. In the aforesaid circumstances the contention that the operations of generating electricity were rendered unauthorised by the Central Government by the letter dated 06.04.2015 whereby the 2009 Guidelines were reinstated is unpersuasive. There is nothing to in the three Guidelinesthat the effect and the import of the said guidelines was to render the operations being carried out by the concerned unit as unauthorised operations. The letter of approval has been granted specifying the authorised operations and the same cannot be altered by general guidelines which at best qualify to be a policy decision by the Central Government It is next contended that the Central Government is entitled to demarcate processing areas and non processing areas and the unit established by the petitioner had ceased to be a unit in the processing area whereby rendering it ineligible for O&M benefits. The said contention is also not supported by the scheme of the SEZ Act Section 6 of the SEZ Act requires that the Central Government may demarcate the areas falling within the SEZ into the processing area and non processing areas. Section 6 of the SEZ Act is set out below “6. The areas falling within the Special Economic Zones may be demarcated by the Central Government or any authority specified by it as the processing area for setting up Units for activities being the manufacture of goods or rendering services or warehousing purposes or c) the non processing areas for activities other than those specified under clauseor clauseof the SEZ Rules expressly provides that the letter of approval would specify the items of manufacture or particulars of service activity. Rule 19(3 of the SEZ Rules expressly provides that only an entrepreneur holding the letter of approval shall be entitled to set up a unit in the processing area of the SEZ. The proviso also expressly provides that proposals for setting up a unit in the SEZ would be entertained only after the processing area has been demarcated under Rule 11 of the SEZ Rules The import of the contentions advanced on behalf of the respondent is that notwithstanding that specific provisions have been made under the SEZ Act and the Rules for demarcation of processing and non processing zones prior to the issuance of the letter of approval the Central Government can re demarcate the areas under the SEZ Zone as a measure to deny the benefits available to a unit in terms of the SEZ Act. Plainly this militates against the scheme of the SEZ Act and the SEZ Rules and thus the said contention is unsustainable It is material to note that two letters dated 06.04.2015 have been placed on record. The First Letter communicates the decision of the Government of India to withdraw the 2012 Guidelines with effect from 01.04.2015. The second paragraph of the said letter communicates the decision to restore the 2009 Guidelines and further directs that the same would “henceforth be the basis for relevant policy and operational decisions”. There is no ambiguity in the language of this letter. The use the word ‘henceforth’ clearly indicates that the decision as communicated in the said letter is required to be applied prospectively and the 2009 Guidelines would be the basis for all relevant policy and It appears that this letter was forwarded under the cover of the Second Letter. This letter as noted before is at the centre of the controversy. The last line of the first paragraph of the Second Letter indicates that the copy of the communication regarding the decision of the Government to withdraw the 2012 Guidelines and restore the 2009 Guidelines is enclosed. It is thus apparent that the First Letter was sent under the cover of this letter. Insofar as the first paragraph of this letter is concerned there is no controversy. The second paragraph of the Second Letter also indicates that the communication contained therein is pursuant to the Government’s decision as communicated under the First Letter dated 06.04.2015. This is clear from the opening words of the second paragraph which reads as “in pursuance of the above cited decision”. This letter was circulated to all Development Commissioners informing them that “henceforth setting up of power plants shall be allowed only in the non processing area of SEZs”. There is no cavil with this direction as well. The dispute essentially relates to the second sentence of the second paragraph of this letterwhich directs that those power plants which are presently situated in the processing areas of the SEZ would be demarcated as non processing areas and no O&M benefits would be available to such power plants. Clearly this does not follow from the decision of the Government of India as communicated in the First Letter. On the contrary this direction runs contrary to that decision. In terms of the 2009 Guidelines which were directed to be restored by the First Letter permitted setting up of power plants in the processing areas of the SEZ and specified that O&M benefits would be available to such units. Thus there is a clear repugnancy between the First Letter and the Second This Court is of the view that this is an apparent error as the Second Letter was addressed to all Development Commissioners forwarding the First Letter. As noticed above the opening words of the second paragraph of the Second Letter indicates that it is in pursuance to the decision to withdraw the 2012 Guidelines and restore the 2009 Guidelines as contained in the communication enclosed the First Letter dated 06.04.2015. The First Letter does not contain any decision that the processing areas of the SEZ would be re demarcated to place those units which are operating in the processing area of the SEZ to be placed in a non processing area. The purport of the Second Letter dated 06.04.2015 appears to be essentially to amplify the decision as communicated by the First Letter. Read in the aforesaid context the import of the direction that the power plants which are situated in processing areas of the SEZ would be demarcated as non processing areas could only be applicable to those power plants in the processing areas in respect of which a letter of approval had not been issued or if issued was not renewed. As noticed above the exercise of demarcation is required to precede the issuance of the letter of approval 48. Under the 2009 Guidelines a power plant could be set up by the developers co developers as a part of the infrastructure facilities only in the non processing area of the SEZ. However under the 2012 Guidelines this condition was relaxed and therefore with the reinstatement of the 2009 Guidelines such units would now require to be placed in the non processing area. The Second Letter thus would be applicable only to such units and not the ones that were other wise permissible to be established in the processing areas under the 2009 It is essential to note that one of the principal difference between the 2009 Guidelines and the 2012 Guidelines is that whereas under the 2009 Guidelines a power plant set up by a developer co developer as a part of infrastructure facility was required to be placed only in a non processing Area of the SEZ and would not be entitled to any O&M benefits. However a power plant or unit set up within the SEZ to generate power as a product or as a captive power plant could be located in a processing area and if this was done the power plant would be entitled to fiscal benefits under Section 26 of the SEZ Act. The 2012 Guidelines expanded the benefit In terms of the 2012 Guidelines O&M benefits were also extended to power generating units set up by the developers co developers as a part of the infrastructure facility in the processing area. With the restoration in the 2009 Guidelines the power units set up by developers co developers as a part of the facility of the SEZ were required to be placed in the non processing areas. It is apparent that it is in that context that the second paragraph of the Second Letter dated 06.04.2015 mentions that those power plants situated in processing areas are required to be demarcated as non processing areas Keeping apart the question whether such a direction is valid it is clear that this would be the logical sequitur for restoring the 2009 Guidelines in respect of those power units. However the petitioner’s unit was granted approval in the processing area under the 2009 Guidelines and therefore restoration of the 2009 Guidelines cannot possibly require the petitioner’s unit to be demarcated as a non processing area. As stated above the direction in the second paragraph of the Second Letter must be read as applicable only to those power plants which are set up by developers co developers as a part of the facility or utility for the SEZ and not as a separate unit set up within the SEZ to generate power as a product or as a captive power plant in terms of Clauseof the 2009 Guidelines as set out above In view of the above even assuming that the Central Government had the power to re demarcate areas post issuance of the letter of approvals the Second Letter on the basis of which the petitioner has been denied the O&M benefits with effect from 01.04.2015 to 16.02.2016 cannot be construed in the manner so as to be applicable to the petitioner’s unit which was granted the LoA under the 2009 Insofar as the respondent’s contention that the Board of Approval is required to follow the policy decisions of the Central Government is concerned there is no dispute that it is required to do so. Section 9 of the SEZ Act contains provisions regarding the duties powers functions of the Board of Approval. Section 9 of the SEZ Act is set out below “9. Duties powers and functions of Board.Subject to the provisions of this Act the Board shall have the duty to promote and ensure orderly development of the Special Economic Zones 2) Without prejudice to the generality of the provisions contained in sub sectionthe powers and functions of the Board shall include granting of approval or rejecting proposal or modifying such proposals for establishment of the Special Economic Zones b) granting approval of authorised operations to be in the Special Economic Zones by the c) granting of approval to the Developers or Units other than the Developers or the Units which are exempt from obtaining approval under any law or by the Central Government) for foreign collaborations and foreign direct investments in the Special Economic Zone for its development operation and maintenance d) granting of approval or rejecting of proposal for providing infrastructure facilities in a Special Economic Zone or modifying such proposals e) granting notwithstanding anything contained in the IndustriesAct 1951 a licence to an industrial undertaking referred to in clauseof section 3 of that Act if such undertaking is established as a whole or part thereof or proposed to be established in a Special Economic Zone f) suspension of the letter of approval granted to a Developer and appointment of an Administrator under subsectionof section 10 g) disposing of appeals preferred under sub sectionof section 15 sectionof section 16 h) disposing of appeals preferred under sub i) performing such other functions as may be assigned to it by the Central Government 3) The Board may if so required for purposes of this Act or any other law for the time being in force relating to Special Economic Zones by notification decide as to whether a particular activity constitutes manufacture as defined in clauseof clause 2 and such decision n of the Board shall be binding on all Ministries and Departments of the Central Government The Board may delegate such powers and functions to one or more Development as it may deem fit Commissioners for effective and proper discharge of the functions of the Board 5) Without prejudice to the foregoing provisions of this Act the Board shall in exercise of its powers or the performance of its functions under this Act be bound by such directions on the questions of policy as the Central Government may give in writing to it from time to time 6) The decision of the Central Government whether a question is one of policy or not shall be final.” It is apparent from the plain language of Section 9(5) of the SEZ Act that the Board of Approval would “in exercise of its powers or performance of its functions” be bound by the directions of the Central Government on the questions of policy under the SEZ Act. Clearly if the policy of the Central Government is not to permit power plants to be set up in processing areas the Board of Approval is required to ensure that no letter of approval is granted to a unit or a developer to do so. However that does not mean that the Board of Approval is required to proceed to cancel an existing letter of approval even though there is no default on the part of the entrepreneur in complying with the terms and conditions or its obligations subject to which the letter of approval was granted to him. As noticed above the letter of approval granted to an entrepreneur can be cancelled if the conditions as stipulated under Section 16(1) of the SEZ Act are met and not otherwise. The letter of approval granted to a developer for setting up an SEZ may also be suspended in terms of Section 10 of the SEZ Act 53. However the Board of Approval cannot for the purpose of cancelling a letter of approval re demarcate the processing areas and non processing areas in an SEZ. Demarcation of such areas is not to be done for the purpose of cancelling existing letter of approvals Section 26 of the SEZ Act provides for certain exemptions drawbacks and concessions available to developers and entrepreneurs Sub sectionof Section 26 of the SEZ Act also provides that the Central Government may prescribe the manner and the terms and conditions subject to which the exemptions concessions drawback or other benefits shall be granted to a developer or an entrepreneur under Section 26(1) of the SEZ Act. Chapter IV of the SEZ Rules prescribes the terms and conditions for availing exemptions drawbacks and concessions and there is no dispute that the petitioner would require to meet those terms and conditions. As noted above the controversy in this case is not regarding the petitioner complying with any terms and conditions for grant of concessions under Section 26(1) of the SEZ Act Such concessions are available by virtue of Section 26 of the SEZ Act as well as the SEZ Rules. The dispute in the present case relates to the direction to re demarcate the petitioner’s power plant as a non processing unit for the purposes of the 2009 Guidelines. The direction to re demarcate is clearly not traceable to Section 26(2) of the SEZ Act In view of the above the present petition is allowed to the limited extent that the condition imposed by Unit Approval Committee of refunding the O&M benefits obtained by the petitioner during the period 01.04.2015 to 15.02.2016 by its letter dated 18.04.2016 is set aside. The impugned order upholding the said condition of the Unit Approval Committee is also set aside The petition is disposed of in the aforesaid terms OCTOBER 25 2021 VIBHU BAKHRU J Page 3