SEZ units face disputes from several directions: the Development Commissioner, customs and GST authorities, the developer or lessor, and counterparties. The correct forum depends on who has acted and under which law.

1. Show-cause notices

A show-cause notice may allege violation of the SEZ Act, the SEZ Rules, the Letter of Approval or the bond-cum-legal undertaking, and may propose penalty under Rule 54 of the SEZ Rules read with the Foreign Trade (Development and Regulation) Act, 1992, or cancellation of the Letter of Approval. Reply in time, with documents, and challenge jurisdiction where the officer is not competent. Courts have examined this: the Madras High Court quashed a show-cause notice issued by a Development Commissioner demanding excise duty, holding the Development Commissioner was not a proper officer for that purpose.

2. Customs and GST matters

Demands for duty and tax are adjudicated by the authorised tax officers under a procedure notified in 2016, with review and appeal under the Customs, Central Excise, service tax or GST laws, as applicable. The Telangana High Court in GMR Aerospace Engineering v. Union of India considered the entitlement of an SEZ unit to service tax exemption under Section 26 of the SEZ Act.

3. Appeals within the SEZ framework

Orders of the Unit Approval Committee or Development Commissioner on approvals, extensions and cancellations are generally appealable to the Board of Approval constituted under Section 8 of the SEZ Act. Observe limitation and pay attention to the form of the appeal.

4. Writ petition to the High Court

Where the order is without jurisdiction, in breach of natural justice or contrary to the statute, a writ petition under Article 226 lies to the High Court. Units in Falta and other zones in West Bengal approach the Calcutta High Court. Courts normally expect alternative remedies to be exhausted, though exceptions apply for jurisdictional errors and pure questions of law.

5. Disputes with the developer or lessor

Disputes over rent, arrears, maintenance charges or termination are contractual. Check the arbitration clause in the lease or agreement; interim relief such as an order restraining dispossession can be sought from the court under Section 9 of the Arbitration and Conciliation Act, 1996. Where there is no arbitration clause, a civil suit lies, and mediation is useful.

Practical tips

• Keep a compliance file with approvals, bonds, returns and correspondence.
• Calendar all limitation and reply dates.
• Seek a stay promptly when cancellation or recovery is threatened.

Need Guidance? Contact KC LEGAL

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This article is for general information only and is not legal advice. Law and procedure change; please verify the current position for your specific case. Last reviewed: November 2026.