M/s BJ Services Company Middle East Ltd, Survey No. 2301/818 and 2408/819, Ahmedabad Highway, Near Petrol Pump, Barmer, Rajasthan-344001, having IEC No. 0399032088 and PAN-AAACB8529N (applicant, in short) has filed an application dated 21.12.2022, received on 07.01.2023, seeking advance ruling under section 28-H of the Customs Act, 1962, before the Customs Authority for Advance Rulings, New Delhi (CAAR, New Delhi in short). The application was accordingly registered under Serial No. 29/2022 dated 07.01.2023.
2. Re-import of goods/equipment from a Special Economic Zone (SEZ)/Free Trade Warehousing Zone (FTWZ) to Domestic Tariff Area (DTA) is the proposed activity as stated in the application and the applicant vide the aforesaid application has sought ruling on the question of applicability of serial number 5 of Notification No. 45/2017-Cus. dated 30.06.2017 for such re-import of goods/equipment from a SEZ/FTWZ to DTA.
3. The applicant vide their application for advance rulings has inter-alia stated that, they are engaged in providing mining services or support services to mining to oil & gas exploration and production companies across India such as Oil & Natural Gas Corporation and Cairn India; in pursuance to providing the mining services or support services to mining, they will be importing equipment required for providing such services; the equipment being used for oil and gas exploration projects will be imported from outside India at a concessional rate of customs duty under serial number 404 of the Notification No. 50/2017—Customs dated 30.06.2017 on the basis of an essentiality certificate from the respective customer; the said certificate is issued by the customer with a stipulated condition in the contract to export the imported equipment post completion of contract; accordingly, the applicant upon completion of the said contract, would have to export the said equipment; where they foresee that the same equipment will be required for other contracts in India; the applicant will export the equipment to a Logistics Service Provider (LSP) located in a SEZ/ FTWZ; it is pertinent to note that the applicant will not avail any kind of duty incentives or benefits when this equipment is being sent from DTA to SEZ/FTWZ; subsequently, whenever the equipment would be required for a new contract, the applicant would re-import the equipment into DTA under serial number 404 of the Notification No. 50/2017 upon payment of concessional customs duty on the basis of an essentiality certificate issued by the new customer; the Ministry of Finance, vide serial no. 5 of the Notification No. 45/2017-Customs dated 30.06.2017 has exempted Basic Customs duty, IGST and Cess upon re-import of goods from outside into India, subject to the conditions that the same equipment has been reimported which was earlier exported, the importer is not a 100% EOU or unit of FTWZ, the equipment is not imported from any licensed warehouse under Customs and the equipment does not fall in the fourth schedule of the Central Excise Act 1944; on the basis of exemption under the Notification No. 45/2017, the applicant wishes to claim exemption from Basic Customs Duty, IGST and compensation cess; in view of the above, ruling on the following question has been sought:
“Whether the applicant is eligible to claim exemption from payment of customs duty, IGST and compensation cess on reimport of equipment from SEZ/FTWZ into DTA as per serial number 5 of the Notification No. 45/2017, considering the fact the equipment is the same that were brought from the DTA earlier and admitted into the SEZ/FTWZ?”
4. The applicant has further stated that, equipment is imported for the purpose of usage in the petroleum operation and once the project is over, if they foresee that the said equipment will be required in near future for some other projects, they send it to FTWZ for storage purpose. Further the applicant stated that the intent of the Notification No. 45/2017-Cus. is that goods sent from India earlier and subsequently re-imported as such should not suffer any Customs duty; in case the exporter had availed any incentive at the time of sending this equipment out of India, the same may need to be surrendered on re-import of the said equipment; however, the purpose is not to impose any import duty on this equipment; in light of the above discussions, it can be inferred that exemption from duties, taxes and cess should be equally applicable to re-import of equipment from SEZ/FTWZ to DTA as envisaged under serial number 5 of Notification No. 45/2017-Cus. The applicant has also stated that under various legal provisions, the concept of duty exemption on re-import i.e. clearance from SEZ to DTA has been contemplated under the SEZ law, as well viz. rule 48 of Special Economic Zones Rules, 2006 dealing with procedure for sale in domestic tariff area, rule 49 of Special Economic Zones Rules, 2006 dealing with domestic tariff area removals, and stated that it is their understanding that once equipment have been brought in FTWZ without availing any drawback or exports incentives, are subsequently re-imported in the same form into the DTA, even under the SEZ laws the said transaction has to be treated as re-imports and accordingly they are not liable for discharging any customs duties or IGST in view of serial number 5 of the Notification No. 45/2017-Cus.; the understanding of the applicant also finds support from Circular No. 21/2019 dated 24th July 2019 issued by the Central Board of Indirect Taxes & Customs which clarifies that even a movement of goods from India to outside India without pursuant to a transaction of supply and without availing any export incentives, shall be entitled for exemption under residuary entry at serial number 5 of the Notification No. 45/2017-Cus on subsequent re-import of such goods into India in view of the fact that the activity of sending/taking specified goods out of India is neither a supply nor a zero rated supply; in the present case when the equipment will be sent from DTA to FTWZ with the LSP which is not a transaction of supply and no drawback or any other exports incentive is being availed against the same, hence, a further clearance of these equipment in the same form into the DTA should be considered as re-import of equipment from FTWZ to DTA and must be entitled for the exemption from customs duties, IGST and compensation cess as provided in the Notification No. 45/2017-Cus Comments in the matter have been received from the Specified Officer, Arshiya Ltd. FTWZ, Maharashtra, with the approval of the competent authority wherein, it is inter-alia stated that, the importer seeks exemption under Notification No. 45/2017-Cus on the basis of clarification made by CBIC vide Circular No. 21/2019 dated 24th July 2019; on perusal of the said circular, it is apparent that clarification vide the said circular has been issued w.r.t. goods which were exported earlier for exhibition purpose or on consignment basis; however the applicant does not intend to export the goods either for exhibition or on consignment basis instead they intend to export imported goods to LSP in FTWZ for warehousing purpose until start of the next contract; therefore the contention of the applicant is not correct and the reliance placed on the
subject Circular is not correct and/or acceptable; the applicant has to return the goods to their original foreign supplier after completion of every project and hence, their every import from foreign country or from FTWZ to DTA will be treated as a fresh import and cannot be treated as re-import; thus removal of above mentioned re-exported goods from SEZ/FTWZ to DTA can’t be termed as re-import, therefore, exemption vide Notification No. 45/2017-Cus will not be applicable in present case.
6. The applicant has also given further submissions vide their letter dated 19.05.2023, wherein apart from reiterating submissions made earlier vide their application for advance ruling, the applicant has replied to the comments of the concerned Commissionerate wherein it is inter-alia stated that,
– the subject activity is ongoing and present application has been filed seeking ruling to allow the applicant for exporting the goods to LSP in FTWZ and reimporting the same into DTA by availing duty exemption under serial number 5 of Notification No. 45/2017-Cus. and they would like to highlight that the transaction is an ongoing transaction (FTWZ to DTA), however the applicant has filed the application for future transaction for sending of the goods from FTWZ to DTA;
– the Specified Officer has inter-alia observed that reliance placed by the applicant on Circular No. 21/2019 dated 24th July 2019, is incorrect as the circular was issued in a different context and the same has been read out of context by the applicant; the clarification is issued w.r.t. goods exported earlier for exhibition purpose or on consignment basis; however, in the instant case, the applicant is not intending to export the goods for exhibition or on consignment basis instead they intend to export the’ imported goods to LSP in FTWZ for warehousing until start of the next contract. As regard the comments of the concerned Commissionerate vis-a-vis the said circular, the applicant has stated that mere act of taking goods out of India to a foreign country and subsequently bringing back these goods into India, shall still be entitled for the exemption provided vide Notification No. 45/2017-Cus., since such movement of goods qualifies as transaction of exports; in the instant case the equipment will be sent from DTA to FTWZ for the purpose of storage with the LSP and subsequent clearance of these equipment in the same form into the DTA should be considered as re-import of equipment from FTWZ to DTA;
– the Specified officer has erred in assuming the fact that there is a mandatory condition in the EC that imported goods have to be re-exported after completion of the contract; it is clarified that there is no such stipulation under the EC to re-export the goods on completion of the contract or ever under Notification No. 50/2017-Cus. that the imported goods are to be re-exported after completion of contract; it is pertinent to note that the LSP located in the FTWZ would only hold the goods on behalf of the applicant and not for any other party which clearly establishes that the goods remain under the risk and control of the applicant even when such goods are being stored in FTWZ;
– as per the factual scenario, the applicant imports goods from outside India at a concessional rate of customs duty under serial number 404 of Notification No. 50/2017-Cus. and subsequently export the goods to the FTWZ; thereafter, the applicant imports the goods back to the DTA for other projects on need basis and subsequent import from FTWZ to the DTA amounts to `re-import’;
– attention is drawn to rule 48 of the SEZ Rules which provides for procedure of sale in DTA and it is evidently clear that goods which are supplied from DTA and are admitted to SEZ if are subsequently supplied back to DTA without substantial processing or as such, such transaction of supply back of goods to DTA is considered as re-import and such re-import of goods would also be subject to procedures and conditions as applicable for normal re-import of goods from outside India into India; moreover, neither the Notification No. 45/2017-Cusnor does the rule 48(3) of SEZ Rules contemplate the nature of transaction under which the goods should be procured in SEZ except the stipulation that there should not be any export entitlements availed when these goods were admitted into the SEZ;
– as regards comments of the concerned Commissionerate that ‘holding of goods by FTWZ units temporarily cannot be equated with the compliance of condition of export of SEZ for the purpose of re-export in terms of Customs Notification and then to re-export to DTA.’, it is stated that in terms of section 30 of SEZ Act, the goods removed from SEZ to DTA shall be chargeable to Customs duty as leviable on such goods when imported; LSP’s are practically operating in FTWZs which in common parlance are the warehousing units in FTWZ; thus comments of the Specified Officer are completely baseless, more so when there is no condition placed by Notification No. 45/2017-Cus as to the purpose for which goods are exported or re-imported;
– they are not governed by the second proviso to Notification No. 45/2017-Cus which states, ‘Provided further that nothing contained in this notification shall apply to reimported goods-(a) which had been exported by a hundred percent export-oriented undertaking or a unit in a Free Trade Zone as defined under section 3 of the Central Excise Act, 1944’ on the ground that the proviso excludes a situation wherein the goods were exported by a hundred percent export-oriented undertaking or a unit in a Free Trade Zone, the rationale behind the second proviso is that the goods that have enjoyed the benefit of lower or no duty implications by virtue of being exported from the SEZ must not avail yet another benefit under Notification No. 45/2017-Cus when they are reimported; further, the restriction contained under the second proviso does not apply to a situation where the applicant never exported goods from an export-oriented undertaking or a Free Trade Zone; in fact, the applicant merely exported goods to the FTWZ and it never exported goods from an FTWZ; in any case, they are not a 100% EOU or FTWZ unit, therefore the proviso is not applicable.
7. Personal hearing, in the matter was held on 23.05.2023 wherein at the onset, Authorized Representative (AR) of the applicant explained as to why goods used in earlier project, warehoused in FTWZ and then cleared to DTA, for the next project, be treated as re-import. The AR requested to consider provisions under Section 30 and Section 51 of the SEZ Act read with the Rule 48 and Rule 49 of Rules, made thereunder to emphasize that clearance from FTWZ to DTA is re-import. The AR also requested to consider the interpretation of the Customs Manual whereby duties on import followed by export and again duty on re-import without any processing will have double taxation impact, thus, they intend to claim exemption under Notification No. 45/2017-Cus, provisions under the circular referred to in the application for advance ruling, whereby goods exported if the same goods are not accepted by the buyer and reimported then exemptions available on import of such goods should apply on their reimport, as well. The AR thus argued that the exemption under Notification No. 45/2017-Cus when warehoused goods are brought to DTA from FTWZ as the IGST has already been paid, applicability of more than one exemption notification simultaneously referring to judicial pronouncement in the past in this regard and that the exclusion to 100% EOU or FTZ units in the notification no. 45/2017-Cus. are not applicable in the instant application for advance ruling, as the applicant is neither EOU nor FTZ unit.
8. Finding that the application is valid in terms of the provisions of the Customs Act and the CAAR Regulations, 2021, having gone through submissions and additional submissions of the applicant and having heard the applicant, I proceed to examine the question on merits.
9.1 I take note of the comments of the concerned Commissionerate on the application for advance ruling. I find that in-order-to avail exemption under the Notification No. 45/2017-Cus., the importer will have to inter-alia establish, whether the goods are re-imported, whether the re-imported goods have been exported by a hundred percent export-oriented undertaking or a unit in a Free Trade Zone (Special Economic Zone).
9.2 I note from the submissions of the applicant that condition of re-export of the equipment after their import availing exemption under Notification No. 50/2017-Cus. is a condition built in the contract of the importer with their Contractor and the applicants have themselves admitted that it is not a condition prescribed under Notification No. 50/2017-Cus. However, the applicant has attempted to make a case starting with export of such equipment on which exemption vide Notification No. 50/2017-Cus. has been availed. The Notification No. 50/2017-Cus. provides for with conditions prescribed under the notification. Non-fulfilment of suchcompliance condition(s) will make the importer liable to pay differential duty along with interest, fine, penalty etc., as the case may be. It appears that the applicant has introduced concept of ‘export’ in relation to such imported equipment(s) to link it with Notification No. 45/2017-Cus, which is not warranted but un–necessary as the same appears to have been done to confuse the issue for claiming exemption from payment of duties/taxes. Further, there is no doubt that for availment of exemption vide Notification No. 45/2017-Cus, goods must be first exported, and such exemption is not applicable to goods which have been warehoused, as in the current case.
9.3 As per section 7 of the Special Economic Zones Act, 2005, any goods or services exported out of, or imported into, or procured from the Domestic Tariff Area by,-(0 a Unit in a Special Economic Zone; or (ii) a Developer, shall, subject to such terms, conditions and limitations, as may be prescribed, be exempt from payment of taxes, duties or cess under all enactments specified in the First Schedule.
The use of words, ‘imported’, ‘exported’ and ‘procured’, in the above provisions will lead to inference that different meanings have been assigned to these words under the Special Economic Zones Act, 2005 and these words are not to be used inter-changeably. Further, as per the instant application, goods shall first be imported to a Domestic Tariff Area, which after usage by a Sub-contractor gets transferred/warehoused to/in FTWZ by the importer of the goods i.e the applicant. As such this activity is covered under the term, ‘export’ as defined under the Special Economic Zones Act, 2005 as under Subsection (m) of section 2 of the Special Economic Zones Act, 2005, meaning of `export’ inter-alia includes supplying goods, or providing services, from the Domestic Tariff Area to a Unit or Developer. However, when these goods are transferred from FTWZ to DTA or DTA to FTWZ, such transfer of goods is not ‘import’ in terms of the Sub- section (o) of section 2 of the Special Economic Zones Act, 2005. Thus, this activity of transfer of goods from FTWZ to DTA cannot be termed as import/re-import in terms of the Special Economic Zones Act or Customs Act, 1962, thus not covered under section 7 of the SEZ Act, 2005 and hence no exemption from duties/taxes is admissible.
9.4 I also note that as per Sub-section (n) of Section 2 of the Special Economic Zones Act, 2005, “Free Trade and Warehousing Zone” means a Special Economic Zone wherein mainly trading and warehousing and other activities related thereto are carried on.
In order to bring more clarity on the issues involved, reference is drawn to Sub-rule (5) of Rule 18 of the Special Economic Zone Rules, 2006 which inter-alia provides that the Units in Free Trade and Warehousing Zones or units in Free Trade and Warehousing Zone set up in other SEZ, shall be allowed to hold the goods on account of the foreign supplier for dispatches as per the owner’s instructions and shall be allowed for trading with or without labelling, packing or repacking without any processing.
In light of Sub-rule (5) of rule 18 of Special Economic Zones Rules, 2006, it is noticed that Units in FTWZ, hold the goods for dispatches (or Export) as per owner’s instruction. Therefore, taking into consideration the facts/submissions vide the said application for advance rulings, it is observed that Units in FTWZ would be exporting to DTA, the goods, on which the applicant intend to avail exemption under Notification No. 45/2017-Cus However, re-imported goods, which have been exported by Units in FTWZ to DTA, makes the Notification No. 45/2017-Cus, inapplicable.
Attention is also drawn to the provisions where policy related to FTWZ had been framed by way of a chapter in the Foreign Trade Policy issued by Ministry of Commerce, wherein it was inter-alia mentioned that the scheme for FTWZ envisaged duty free import of all goods for warehousing and such goods were also permitted to be sold in the DTA on payment of Customs duties, as applicable on the date of such sale. In the instant case, goods have not been imported for warehousing in FTWZ but performance of a contract for specified purpose for which exemption from duties at the time of import has been claimed vide serial number 404 of Notification No. 50/2017-Cus., thereby goods transferred from FTWZ to DTA cannot be treated as re-imported goods, making the Notification No. 45/2017-Cus, inapplicable.
9.5 The applicant while quoting CBIC Circular No. 21/2019 dated 24th July 2019 has attempted to add another point in their support for claim of exemption vide Notification No. 45/2017-Cus However, I note that the concerned Commissioner has rightly mentioned that the Circular has been issued in a different context and the applicant has tried to read it out of context; it is apparent that the clarification vide the said circular has been issued w.r.t. goods which were exported earlier for exhibition purpose or on consignment basis, however, the applicant does not intend to export the goods either for exhibition or on consignment basis. Moreover, I note that para 5 of the Circular states that the clarification shall apply to all pending matters involving similarly placed exporters and importers, as the case may be. ‘Exporter and Importers’, referred in the instant application cannot be said to be similarly placed as the ‘exporters and importers’ referred to in the Circular.
9.6 I also note that applicant has drawn attention to rule 48 of the SEZ Rules, 2006, however this rule inter-alia states that where goods procured from DTA by a Unit are supplied back to the DTA, as it is or without substantial processing, such goods shall be treated as re-imported goods and shall be subject to such procedure and conditions as applicable in the case of normal re-import of goods from outside India.
In light of the above, it can be convincingly stated that under the SEZ Act, 2005 read with SEZ Rules, 2006, words ‘import’ and ‘procure’ have been assigned different meanings. It is also important to note that activity of bringing goods from a Unit or Developer in SEZ to DTA is not covered under the definition of the term, ‘import’ under the SEZ Act, 2005, therefore such transfer from SEZ to DTA cannot be termed as ‘re-import’. Moreover, as per dictionary meaning of the word, ‘procure’ is `to obtain something’ but when the goods are being warehoused in FTWZ, these are not procured by a Unit or Developer, therefore when transfer of goods from DTA to FTWZ or FTWZ to DTA is neither covered under the term ‘procure’ nor ‘import’, therefore such transfer/supply of goods cannot be treated as ‘reimport’ for application of procedures and conditions as applicable in the case of normal re-import of goods from outside India. Moreover, applicant’s contention to treat such movement of goods from FTWZ to DTA as re-import in terms of provisions under section 30 read with section 51 of the SEZ Act and rules made thereunder, cannot be accepted in light of the above discussion.
10. Considering the foregoing, I am of the view that Notification No. 45/2017-Cus. is not applicable in the instant case. The facts of the application amply indicate that goods have been exported by units in FTWZ, which again makes the said Notification, inapplicable in view of the second proviso of the Notification. Moreover, there is no condition for ‘re-export’ of goods under the Notification No. 50/2017-Cus., however a deeming fiction has been created by bringing in ‘re-export’ which appears to have been done to deviate from the issue and the word ‘export/re-export’ is being un-necessarily equated with warehousing of goods.
11. I rule accordingly.