Re-export of goods from DTA to SEZ must get drawback U/S 74 of CA62

We have imported certain goods on full duty payment. A SEZ unit wants these goods urgently, because their import of such goods duty free may take some time.  Can we supply these goods to a SEZ unit and claim drawback of 98% of the duty paid under Section 74 of the Customs Act, 1962?

 

Section 2(m)(ii) of the SEZ Act, 2005 coves ‘supplying goods, or providing services, from the domestic tariff (SEZ) area to a unit or developer’ within the definition of ‘export’. Section 2(1)(d) of the same Act allows drawback or such other benefits as may be admissible from time to time on goods brought or services provided from the DTA into a SEZ ....... to carry on the authorised operations by the developer or entrepreneur. Section 2(18) of the Customs Act, 1962 says that "export", with its grammatical variations and cognate expressions, means taking out of India to a place outside India. Rule 2(c) of Customs and Central Excise Duties Drawback Rules, 2017, however, covers taking out from a place in DTA to a SEZ also within the definition of ‘export’ but Rule 2(b) of Re-export of Imported Goods (Drawback of Customs Duties) Rules, 1995 does not cover such an activity within the definition of ‘export’. So, there are some cases where the Customs have refused to accept supply of goods from DTA to SEZ as re-export for the purpose of grant of drawback under Section 74 of the Customs Act, 1962 despite clear provision at Section 51 of the SEZ Act, 2005 giving overriding effect to the SEZ laws, in case of any inconsistency with any other laws and the CBEC Circular no.29/2006-Cus dated 27th December 2006 clarification that the supplies from DTA to a SEZ unit, or to SEZ developers for their authorized operations inside a SEZ may be treated as in the nature of exports. So, there is a risk that you may not get the drawback. I think the CBIC should take note of the difficulties of the trade and amend the definition of ‘export’ at Rule 2(b) of Re-export of Imported Goods (Drawback of Customs Duties) Rules, 1995.

 

The notified All Industry Rate (AIR) of Duty Drawback (DBK) for our item is very low. How can we get the AIR for our item enhanced?

 

A: The AIRs for various items are notified by the Finance Ministry on the basis of representative data from a cross section of industry. So, I suggest you write to your export promotion council (EPC) giving details of the duty incidence on the inputs that are used in the manufacture of your export product. The EPC can seek data from other exporters of your item, collate the data and present the case before the Joint Secretary (DBK), the key functionary dealing with such matters in the Department of Revenue. The task would be easier if the standard input-output norms (SION) for your items are notified and the prices for your inputs are available in public domain.