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Circular No. 21/2005-Customs Duty, Dated: 06.04.2005

I am directed to invite your attention to the above mentioned subject and to say that references have been received from the various quarters, requesting for grant of DEPB benefits in respect of supply of goods from the units in DTA to units in SEZ during the period from 01.04.2003 to 11.5.2004.

Circular No. 21/2005-Cus.
6th April, 2005

  F.No. 605/49/2005- DBK

Government of India

Ministry of Finance

Department of Revenue

Central Board of Excise & Customs

Subject:    Admissibility of DEPB benefits in respect of supply of goods from the Units in Domestic Tariff Area (DTA) to Units in Special Economic Zone ( SEZ) during the period from 01.04.2003 to 11.5.2004- Regarding.

I am directed to invite your attention to the above mentioned subject and to say that  references have been received from  the various quarters, requesting for grant of DEPB benefits in respect of supply of goods from the units in  DTA to  units  in SEZ during the period from 01.04.2003 to 11.5.2004.

2.Under the  Finance Act, 2002 a new Chapter  XA containing special provisions relating to Special Economic Zone was inserted in the Customs Act, 1962.  Section 76-I of this Chapter provided that  “any goods admitted to a Special Economic Zone from the Domestic Tariff Area for the purposes

authorized under this Chapter shall be eligible for drawback under Section 75 of the Customs Act, 1962 as if such goods are export goods  for the purposes of that Section”.  Later on, a new Chapter 7 was inserted for Special Economic Zones in the EXIM Policy 2003-2004 announced on 01.04.2003.  Paragraph 7.1 (b) of the said Policy had clearly provided that goods going into the SEZ area from DTA shall be treated as exports. To bring this provision into effect, a notification (No.  57/2003-Cus dated 01.04.2003) was issued under Section 25(1) of the Customs Act, 1962 amending notification No. 45/2002-Cus dated 22.4.2002 to include a proviso to the effect that in respect of Duty Entitlement Pass Book issued against supplies made to a unit in Special Economic Zone (SEZ), this condition shall apply for the purpose of permitting import of goods under DEPB Scheme.  An explanation was also inserted in the notification that “Special Economic Zone (SEZ) has the same meaning as assigned to it in paragraph 9.48 of the Export & Import Policy”. Vide Circular No. 25/2003-Customs dated 1st April, 2003, the Board had clarified that “henceforth, supplies made by DTA units to units in SEZ would be entitled to DEPB benefits”.

3. However, in this entire process  it was observed that Chapter XA of the Finance Act, 2002 had not been brought into effect, as stipulated, through a notification in the Official Gazette.  This happened only on 11.5.2004 when by issue of notification No. 59/2004-Cus dated 30.4.2004, the special provisions relating to Special Economic Zones, as incorporated in Chapter XA of the Customs Act, 1962, were brought into operation.  Thus, from that date all supplies made by units in DTA to units in SEZ  were treated as physical exports.  The Board had, therefore, issued a Circular  (Circular No. 11/2004-Cus dated 5.2.2004) clarifying that till the operation of Chapter XA of the Customs Act, 1962 the benefit of DEPB Scheme does not become legally available in respect of supplies made by DTA units to SEZ units.

4.The question of  how to treat  the supplies from DTA to SEZ units for the period between 01.04.2003 and 11.5.2004 has been examined in consultation with the Ministry of Law.  The Ministry of Law has advised that in view of the notification ( No. 57/2003-Cus ) issued under Section 25(1) of the Customs Act, 1962 on 01.04.2003 (which does not refer to Section 76A of Chapter XA  of the said Act but to the EXIM Policy) DEPB benefit has been conferred independently of Chapter XA with effect from that date.  This notification has not been withdrawn, and a statutory notification of this kind cannot be amended by an executive Circular (referring to the Circular No. 11/2004-Cus dated 5.2.2004).  Under the circumstances, the Ministry of Law has opined that the notification  issued under Section 25(1) of the Customs Act, 1962 still prevails and, therefore, DEPB benefits would be available for the supplies made by DTA units to SEZ units with effect from 1st April, 2003, the date of issue of notification.

5.  The Ministry has accepted the opinion of the Ministry of Law.  It is accordingly clarified that the benefit of DEPB  Scheme would be admissible  in respect of supply of goods from  units in DTA to units in SEZ during the period from 01.04.2003 to 11.5.2004.

6.     The Circular No. 11/2004- Cus dated 5.2.2004 stands withdrawn.

7.     Suitable Public Notices for information of the trade and Standing Orders for guidance of the staff may kindly be issued accordingly.  Difficulties faced, if any, in implementation of this Circular may be brought to the notice of the Board.

8.     Receipt of this Circular may kindly be acknowledged.

R.K.Talajia

Officer on Special Duty ( Drawback )

Categories: Custom Duty
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