Government of India
Ministry of Finance
Department of Revenue
Central Board of Excise & Customs
Subject: Special Economic Zone – procedure governing operation of units.
It is directed to enclose a copy each of notification NO. 79/2000-Cus. And No. 41/2000/CE,both dated 26.5.2000 issued by the Government to implement a new Export Promotion Scheme entitled”Special Economic Zone:. The scheme envisages a simple and transparent policy and procedure for the promotion of exports with minimum paper work. The scheme is detailed under paragraphs 9.30 to 9.43 of the Exim Policy and paragraphs 9.41 to 9.45 of Handbook of Procedures.
2. The most important feature of the scheme is that the Special Economic Zone (SEZ) area shall deemed to be a foreign territory for the purpose of duties and taxes. Therefore, goods supplied to SEZ from the Domestic Tariff Area (DTA) will be treated as deemed exports and goods brought from SEZ to DTA will be treated as imported goods. It may be seen from paragraph 9.30 of the EXIM Policy that in any SEZ, goods ma;y be imported/procured from DTA duty free for the purpose of manufacture of goods and services, production, processing, assembling, trading, repair, reconditioning, re-engineering, packaging or in connection therewith and export thereof. The notifications referred to above have been issued to implement the above Policy Provisions. It may be seen that the duty-fee import facility is not applicable to prohibited goods under the EXIM Policy.
Import and Export :
3.1 The SEZ units may import and export through port, airport, land customs station, ICD. CFS, courier mode (other than valuables) and post parcel. The software development units may import and export through date communication and telecommunication links. So far a exports through date communication and telecommunication links is concerned, the procedure and practice being followed in case of EPZ/STP units may be adopted for SEZ units. As for imports of software through above modes, the units may be asked to file the Bill of Entry within 24 hours of such import along with bank attested invoice and other relevant documents for obtaining notional’out of charge’. The Diirector of the STP/Development Comissioner of SEZ shall certify the value of such software. Further, in case of such software imports, instructions issued by RBI, if any, may be followed.
3.2 In case of imports, the Bill of Entry with specially stamped endorsement as “SEZ Cargo” shall be filed with the Assistant Commissioner/Deputy Commissioner of Customs in the SEZ for assessment. For procurement of goods from domestic may be adopted. In both cases, i.e. both in respect of imported and domestically procured cargo, the goods may be assessed on the basis of documents furnished by the units. There will be no physical examination of goods and ‘out-of-charge’ may be given after verifying the marks and numbers on the packages only.
3.3 When the goods imported are required to be sent to a SEZ located at a station away from thje place of import, the same may be allowed under normal transit procedure. The unit shall file the Bill of Entry with the Assistant Commissioner/Deputy Commissioner of Custom in-charge of the SEZ on the basis of the transit document.
3.4 In case of exports, for assessment of Shipping Bill, the procedure as applicable to EPZs shall apply mutatis mutandis in case of SEZs also. There shall be no routine examination of the export consignment by SEZ Customs authorities and export may lbe allowed on the basis of self-certification by the units. At the gateway port, the SEZ cargo will be sunjected to the examination procedure as per the instructions in force.
3.5 While the cargo to be imported and exported by the SEZ units will not be subjected to routine examination, the Customs authorities may examine such cargo when there is a specific information/intelligence. For this purpose,the orders of the Assistant Commissioner/Deputy Commissioner of Customs will have to be obtained.
4.1 The Assistant Commissioner/Deputy Commissioner of Customs may permit the clearance of goods to DTA without payment of duty for job work/further processing on the basis of a bond furnished by the unit. The bond will be discharged as and when the goods are received back after job work/processing. The goods so processed may be cleared from the job worker’s premises for export directly, provided the jobworker is registered with Central Excise and the procedure as applicable to the EPZ is followed. In such cases, the bond will be discharged after the proof of export is produced. Scrap/waste/remnants/rejects generated at the jobworker’s premises may be cleared there from on payment of applicable customs duty or returned to the SEZ unit.
4.2 The Assistant Commissioner/Deputy Commissioner of Customs may also permit removal of moulds, jigs, tool, fixtures, tackles, instruments, hangers, patterns and drawings to the premises of the sub-contractors subject to the condition that such goods are brought back to the unit on completion of the job work within the stipulated period specified in this behalf.
Temporaty removal of goods into the DTA :
5. Goods may be taken outside the Zone into the DTA temporarily without payment of duty for the purpose of test, repairs, replacement, calibration, refining, processing, display or any other process necessary for manufacture of final product and return there of within the period specified in this regard.Fior this purpose, the unit shall exucute a bond with Assistant Commissioner/Deputy Commissioner of Customs. On receipt of the goods back in the SEZ unit, the bond shall be discharged. In case of failure of the unit to bring back the goods within the prescribed period, the unit shall be liable to pay applicable customs duty on such goods.
Temporaty removal of goods into another SEZ/FOU/FPZ/EHTP/STP unit:
6. The Assistant Commissioner/Deputy Coimmissioner of Customs may permit clearance of goods to another SEZ/EOU/EPZ/EHTP/STP unit without payment of duty for repairs, processing, testing or display and return thereof lwithin the period specified in this regard. Goods may also be sent to SEZ/EPZ/EOU/EHTP/STP units for the purposes of manufacture and export there from subject to maintenance of the unit shall execute a bond with the Assistant Commissioner/Deputy Commissioner or after they have been properly accounted for by way of exports. In case of failure of the unit to bring back the goods withing the prescribed period or failure to account for the goods, the unit shall be laible to pay applicable customs duty on such goods.
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7. The provisions/facilities referred to in paragraphs 4 to 6 above shall not apply to the gem and jewellery units in SEZ. However, these units can receive machine-made or hand-made plain gold, plain silver, plain platinum jewellery from DTA in exchange of gold/silver/platinum of same purity and quantity in weight as that of gold/silver/platinum jewellery as the case may be. The unit shall not be eligible for any wastage or manufacturing loss against exchange of such machine-made or hand-made plain jewellery. The DTA unit exchanging the gold/silver/platinum jewellery with the units in SEZ shall not be allowed any deemed export benefits.
8. Further, the Assistant Commissioner of Customs or Deputy Commissioner of Customs may allow:
9. In case of gem and jewellery units, scrap, dust or sweepings generated in the unit may be allowed to be forwarded to the Government Mint/Private Mint for conversion into standard gold bars and return thereof to the Zone subject to the observance of procedure laid down by the Customs. The said dust, scrap or sweepings may also be allowed clearance into DTA on payment of applicable customs duty on the gold content in the said scfrap, dust or sweepings. Samples of the sweeping/dust shall be taken at the time of clearance and sent to mint for assaying. The assessment may be finalised when the reports are received from the mint.
Inter-Unit transfer :
10. Inter unit transfer of goods, semi-finaished goods or finished goods amongst units in a SEZ may be allowed for the purpose of further production and esport thereof subject to maintenance of accounts by both the receiving and supplying units. Such inter-unit transfer shall not be subject to any Customs checking and may be allowed only on the basis of intimation by the unit to Assistant Commissioner/Deputy Commissioner of Customs.
Duty remission on destruction of goods :
11.1 A provision has been made in the notifications that duty would not be levied on capital goods, raw materials, components, waste or scrap etc. if these goods are destroyed in the presence of the Customs authorities. The notifications may be referred to for details.This provision will, however, not apply to gold, silver, platinum, diamond,precious and semi-precious stones.
11.2 The officers supervising destruction may ensure that goods are destroyed fully rendering them unfit for further use and give certificate to that effect. After destruction of capital goods, raw materials, components, waste pr scrap etc., if the remains have scrap value, the same may be cleared by the unit in DTA on payment of duty applicable to scrap.
DTA Sale :
12.1 The Assistant Commissioner/Deputy Commissioner of Customs may permit sale of finished goods including by-products and services and waste/scrape/remnants/rejects etc. in the DTA on payment of applicable customs duty in accordance with the Export-Import Polity in force. However, where such finished goods (including rejects, waste and scrap materials) are not excisable, customs duty equal in amount to that leviable on the inputs imported/indigenously procured under the notifications and used for the purpose of manufacture of such finished goods, which would have been paid but for the examption under the said notifications, shall be payable at the time of clearance of such finished goods.It may be lknoted that the goods which have been imported for repairing, reconditioning or re-engineering and export thereof, shall not be allowed to be cleared in the DTA. Further, the goods imported as scrap, waste and remnants shall not be allowed to be sold in DTA as such. Sale of the goods in DTA is, however, subject to thecondition that the unit has achieved the NFEP, annually and cumulatively, as specified in the Policy.,
12.2 The DTA Clearance referred to in paragraph 12.1 above shall not be available to the trading units. However, the trading units in the SEZ may be allowed to clear the imported/indigenously procured goods in the DTA without payment of duty to other SEZ/EOU/EPZ/EHTP/STP units. Further, they may be allowed to clear the said goods without payment of duty, if such clearance is against Advance Licences or special duty free entitlements.
Disposal of obsolete goods :
13. The units may be allowed to dispose of obsolete or unusable capital goods, spares and other goods in the DTA on payment of applicable customs duty. Such disposal shall, however, be subject to the Import Policy in force. In case of capital goods, clearance may be allowed on payment of applicable customs duty on the depreciated value thereof and at the rate in force on the date of payment of such duty. In case of other goods (including empty cones, bobbins, containers suitable for repeated use) clearance may be allowed on payment of applicable customs duty on the value at the time of import and at rates in force on the date of payment of such duty. However, no duty may be charged on clearance of used packing materials such as cardboard boxes, polyethylene bags of a kind unsuitable for repeated use. It may be noted lthat the above provisions shall not apply to gold, silver, platinum, diamond, precious and semi-precious stones. Paragraph 5 of the notifications may be referred to for further details.
Valuation of Goods Cleared into DTA:
14. Under the SEZ scheme, the goods cleared from the Zone will be treated as imported goods. Therefore, in case of DTA clearances, though the duty charged will be central excise duty, this duty will be equal to the aggregate of all duties of customs. In other words, the Sez units will have to pay full customs duty (applied duty) on their DTA clearances. In view of this, in case of sale/clearance of goods referred to in the preceding paragraphs,m the valuation will be made as per the provisions of the Customs Act, 1962 and the Customs Valuation Rules, 1988. Further, the DTA sales will be subjected to the same assessment and examination procedure as applicable to imported goods, Licences, wherever applicable, will have to be produced before clearing the goods into DTA.
Maintenance of Accounts :
15. A SEZ unit shall maintain proper account financial year-wise, of all foreign exchange inflow by way of edports and other receipts, all foreign exchange outflow on account of imports, payment of divident, royalty, fees etc., consumption and utilisation of the materials and sale in the DTA. The unit shall submit regularly quarterly statement to the Development Commissioner and the Customs in this regard in the format prescribed at Appendix 16H of the Hand Book of Procedures. For high value items such as gem and jewellery, computer hardware, a monthly statement shall be submitted as prescribed in Appendix 16H to the Development Commissioner and the Customs.
Penal action in case of default :
16. The Commissioner of Customs may kindly ensure that the Customs officials posted in Sezs do not visit the units for verification of records or even otherwise in routine. However, in case of specific information/intelligence which, prima facie, show that there is fraud, collusion, mis-declaration, suppression of information etc. having a bearing on the export performance of the unit or where there is specific information regarding clandestine/unauthorised removal of goods into DTA etc., the Customs officials may visit the units for verification of records, goods etc., so as to initiate proceedings undr Custom Act, 1962. The Assistant Commissioner/Deputy Commissioner may keep a watch on the export performance of the unit and in the event of non achievement of NFEP/specified turnover (in case of trading units) within the stipulated period, action may be taken against the units for recovery of the duty and interest along with penalty. Condition 4 of notification No.79/2000-Cus.dated 26.5.2000 and conditon 5 of notification NO. 41/2000-CE dated 26.5.2000 may be referred to for further details.So far as utilization of imported/indigenously procured goods is concerned, the notifications provide that the same shall be utilized within the period of on year. However,this provision may be interpreted liberally and extension of time may be allowed as a matter of routine unless there is mala fide and diversion of the said goods.
17.1 An existing EPZ unit can opt for SEZ scheme. On conversion, its previous obligations as an EPZ unit shall be subsumed by iuts obligations under the Sez scheme. The raw materials, components, consumables and finished goods lying in stock with the unit at the time of conversion shall be taken as its opening balance under the SEZ scheme. All unutilised DTA sale entitlements of the unit shall cease to exist from the date of conversion as notifified by the Ministry of Commerce and Industry.
17.2 In case an existing EPZ unit decides not to work under the Sez Scheme, it will have to either debond itself on payment of applicable duties on unutilised raw materials, depreciated value of capital goods and other goods imported/procured locally duty free by such unit or convert itself into an EOU. In both cases, the unit will have to physically move out of Sez.
18 The SEZ units may be allowed to operate under a single all-purpose bond, i.e., the units may be allowed to execute B-17 bond a being executed by EPZ units. The procedure and conditions of the present B-17 bond shall apply mujtatis-mutandis in the case of SEZ units also. In the event of execution of B-17 bond, the individual bonds referred to in the previous paragraphs may not be required.
19. Wide publicity may be given by issue of a Public Notice in this regard. Difficulties, if any, faced in the implementation of the above changes, may be brought to the notice of the Board at an early date.