CA Bimal Jain
Background: In the Union Budget, 2015 vide Notification No. 06/2015-C.E. (N.T.) dated March 1, 2015 (Effective from March 1, 2015), Export goods have been defined by inserting a Clause (1A) in Explanation 1 to Rule 5 of the Cenvat Credit Rules, 2004 (“the Credit Rules”), which is reproduced as under:
“(1A) “export goods” means any goods which are to be taken out of India to a place outside India“.
Similarly, Notification No. 8/2015–C.E. (N.T.) dated March 1, 2015 has substituted the existing explanation to Rule 18 of the Central Excise Rules, 2002 (“the Excise Rules”) to narrow down the meaning of the term ‘Export’ in the following manner:
“Explanation. – For the purposes of this rule, “export”, with its grammatical variations and cognate expressions, means taking goods out of India to a place outside India and includes shipment of goods as provision or stores for use on board a ship proceeding to a foreign port or supplied to a foreign going aircraft.”.
Accordingly, with the insertion of the words “taking goods out of India to a place outside India”, fate of refunds/ rebate in case of Deemed exports [which is defined under Para 7.01 of Chapter 7 of the Foreign Trade Policy 2015-2020 (Para 8.1 of Chapter 8 of the erstwhile Foreign Trade Policy 2009-14) as “Deemed Exports refer to those transactions in which goods supplied do not leave country, and payment for such supplies is received either in Indian rupees or in free foreign exchange”] raised concerns among the Trade.
Clarification by the CBEC:
The CBEC vide Circular No. 1001/8/2015-CX dated April 28, 2015 (“the Circular”) has clarified that since Special Economic Zone (“SEZ”) is deemed to be outside the Customs territory of India in terms of the provisions under the SEZ Act, 2005, any licit clearances of goods to SEZ from Domestic Tariff Area (“DTA”) will continue to be Export and therefore be entitled to the benefit of rebate under Rule 18 of the Excise Rules and of refund of accumulated Cenvat credit under Rule 5 of the Credit Rules, as the case may be. The relevant text of the Circular is reproduced herein below:
“…..3. It can thus be seen that according to the SEZ Act, supply of goods from DTA to the SEZ constitutes export. Further, as per section 51 of the SEZ Act, the provisions of the SEZ Act shall have over riding effect over provisions of any other law in case of any inconsistency. Section 53 of the SEZ Act makes an SEZ a territory outside the customs territory of India. It is in line of these provisions that rule 30 (1) of the SEZ rules, 2006 provides that the DTA supplier supplying goods to the SEZ shall clear the goods either under bond or as duty paid goods under claim of rebate on the cover of ARE-1.
4. It was in view of these provisions that the DGEP vide circulars No. 29/2006-customs dated 27/12/2006 and No. 6/2010 dated 19/03/2010 clarified that rebate under rule 18 of the Central Excise Rules, 2002 is admissible for supply of goods made from DTA to SEZ. The position as explained in there circulars does not change after amendments made vide Notification No. 6/2015-CE (NT) and 8/2015-CE (NT) both dated 01.03.2015, since the definition of export, already given in rule 18 of Central Excise Rules, 2002 has only been made more explicit by incorporating the definition of export as given in the Customs Act, 1962. Since SEZ is deemed to be outside the Customs territory of India, any licit clearances of goods to an SEZ from the DTA will continue to be export and therefore be entitled to the benefit of rebate under rule 18 of CER, 2002 and of refund of accumulated CENVAT credit under rule 5 of CCR, 2004, as the case may be…..”
The clarification issued by the Board will provide much needed relief to the Trade as well as ‘Make in India’ mission of the Hon’ble Prime Minister.
However, it would not be out of place here to mention that the Circular specifically talks about the clearance made from DTA to SEZ. Accordingly, it is made clear that the benefit under the Excise Rules and the Credit Rules will not cover the clearances made from DTA to Export Oriented Units (“EOUs”).
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(Bimal Jain, FCA, FCS, LLB, B.Com (Hons), Mobile: +91 9810604563, Email: email@example.com)