The Central Board of Excise & Customs (the Board) has issued Circular No. 44/2013-Customs dated December 30, 2013 (the Circular) to provide clarification on whether the benefit of exemption of Special Additional Duty (SAD) would be available when goods are cleared from Special Economic Zone/ Free Trade Warehousing Zone (SEZ/FTWZ) to a Domestic Tariff Area unit (DTA) for self-consumption i.e. in the nature of stock transfer from SEZ/FTWZ.
It may be noted that Notification No. 45/2005-Customs dated May 16, 2005 (the Notification) exempts SAD on the goods cleared from SEZ/FTWZ and brought into DTA. However, no exemption is available if such goods are exempt from payment of sales tax when sold in DTA.
The Board has clarified vide the Circular that benefit of exemption of SAD will not be available in terms of the Notification in cases where the SEZ/FTWZ unit has cleared goods to the DTA unit for self-consumption i.e. otherwise than for sale. Therefore, in such cases, SAD will be leviable.
Open Issue:
If the goods transferred from SEZ/FTWZ to the DTA unit, are further utilized for manufacture and the manufactured final products are sold on payment of appropriate sales tax then exemption from SAD in terms of the Notification should continue but the clarification provided in the Circular will start unwanted dispute & litigation.
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Bimal Jain
FCA, FCS, LLB, B.Com (Hons)
Mobile: +91 9810604563
E-mail: bimaljain@hotmail.com
Author Bio
we have imported some goods into SEZ, India.
We have not utilized the Goods.
We are selling it off in DTA as it is Customs Duty and local tax.
Please suggest, at the time of calculating the Customs Duty 4% SAD is to be taken into account or not, as we are charging local VAT.
What if a Power Project is set up in SEZ (NPA) and sales surplus power to DTA
I understand custom duty @ 3 paise/ unit would be applicable
But whether SAD is applicable on such sale in DTA?
Please note that Power in any case whether from SEZ or not is not subject to CST/ sate VAT.
please also clarify, applicability of SAD in following cases;
1. Product “A” produced in SEZ and sold in DTA. No VAT/CST on product ‘A’ whether produced in SEZ or otherwise
2. Product “A” – CST/VAT is applicable but specific exemption available when produced in SEZ & moved to DTA for sale
is there any state providing such exemption as mentioned at 2 above?
– Ajit
as per The Authority for Advance Rulings held 2013-TIOL-01-ARA-CUS that Advance Ruling – Stock Transfer is not Sale – Stock Transfer from SEZ Unit to own DTA unit is eligible for exemption under Notification No 45/2005 Cus
Regarding Circular No. 44/2013-Cus
The Circular has been issued with right intent to ensure that SAD is not exempted when the goods are cleared on stock transfer basis for self consumption but I am afraid that the field officers would create hurdles when goods will be cleared on stock transfer basis by traders for onward sale.
Regarding amendment of Rule 9(ij) of Cenvat Credit Rules, 2004
Though the difficulty in taking credit by the buyer of imported goods from importer will be reduced, there will be reduction of one stage because earlier the importer was treated at par with manufacturer but will be treated as “First Stage Dealer” now. In fact the Importer should be allowed to be registered as importer and the buyer of goods from him should be treated as “First Stage Dealer”