INDEX

CHAPTER TOPIC PAGE No.

No.
---- PREFACE 1-2

1 INTRODUCTION 3-5

2 ROLE OF CUSTOM OFFICERS 6-17

3 IMPORT 18-24

4 EXPORT 25-29

5 DTA SALE 30-32

6 SUB-CONTRACTING & TEMPORARY 33-37

REMOVALS

7 GEMS & JEWELLERY UNITS-SPECIAL 38-43

PROVISIONS

8 SECTOR SPECIFIC PROVISIONS 44-53

9 MISCELLANEOUS PERMISSIONS 54-59

10 AUDIT, REFUND, DEMAND & RECOVERY 60-63

11 DEBONDING OR EXIT FROM SEZ 64-67

---- APPENDIX 68-72

---- ANNEXURES 73-182

CHAPTER TOPIC PAGE BY (SH/SMT.)
No. No.
---- PREFACE 1-2 R K CHAUHAN

1 INTRODUCTION 3-5 -----DO-----

2 ROLE OF CUSTOM 6-17 -----DO-----

OFFICERS
3 IMPORT 18-24 -----DO-----

4 EXPORT 25-29 REKHA PRASAD

5 DTA SALE 30-32 S K TYAGI

6 SUB-CONTRACTING (JOB 33-37 S K TYAGI

WORK)
7 G&J UNITS- SPECIAL 38-43 R K CHAUHAN/ REKHA
PROVISIONS PRASAD
8 MISCELLANEOUS 44-53 R K CHAUHAN
PERMISSIONS
9 AUDIT, REFUND & 54-59 R K CHAUHAN
RECOVERY
10 DEBONDING OR EXIT 60-63 REKHA PRASAD
FROM SEZ
---- APPENDIX 64-67 S K TYAGI / REKHA PRASAD
/ R K CHAUHAN
 STANDARD OPERATING PROCEDURES
(NSEZ)

PREFACE

The seven Special Economic Zones of the Government of India have existed for
decades preceding the enactment of the Special Economic Zones Act, 2005. The Exim
Policy in 2000 substituted the Export Processing Zone scheme with the Special
Economic Zone scheme.

SEZ Act was enacted in 2005 and SEZ Rules were notified on 10.02.2006.

NOIDA SPECIAL ECONOMIC ZONE

Noida Special Economic Zone (NSEZ) provides excellent infrastructure,

supportive services and sector specific facilities for the thrust areas of exports like gem,
jewellery and electronics software. Information on the NSEZ, its units, officers,
meetings, vacancies, etc. is given on its website http://www.nsez.gov.in. Details of
various Custom related notifications on SEZ, Exim policy, Foreign Trade procedures,
etc. are provided on the website. For the users, online SEZ system facility is available
which can be used for filing various documents online.

NSEZ, the only Central Government SEZ in the northern India, was set up in
1985, in Noida Phase-II, on a 310 acre plot of land. Government of India has so far
invested a sum of Rs.10726.80 million on its development. NSEZ provides excellent
infrastructure, supportive services and sector specific facilities for the thrust areas of
exports like gem and jewellery and electronics software. This is the land locked SEZ,
contrary to other zones which are situated in Port Towns and hence emphasis of type of
units to be set up is on those with high value and low volume. Proximity to Delhi and
availability of skilled and dedicated manpower makes it ideal for setting up jewellery and
software development units. These two sectors have contributed more than 75 per cent
of the export turn over during the year 2015-16.

1
 The jurisdiction of Noida Special Economic Zone is spread over State & Private
sector SEZs and EOUs in nine states namely Jammu & Kashmir, Himachal Pradesh,
Punjab, Haryana, Rajasthan, Delhi, Uttar Pradesh, Uttaranchal, Madhya Pradesh and
Union Territory of Chandigarh.

NSEZ has 202 developed plots of varying sizes, besides fourteen SDF(Standard
Design Factory) complexes that can accommodate 224 Units including one exclusive
block for trading service units.

Though the Customs wing of NSEZ is manned by a Deputy Commissioner

of Customs, four Appraisers of Customs and 12 Preventive Officers who are
available in the office to assist the SEZ Entrepreneurs in general, a need was felt
to bring out a comprehensive manual of Standard Operating Procedures
encompassing various processes pertaining to Import, Export, DTA sale, Job
work etc. In the Senior Officers’ Meeting held on 14th December 2017, Dr. L. B.
Singhal, Development Commissioner emphasized the need for such SOP for the
purpose of bringing transparency and uniformity of practices among officers.
This would specifically help new officers, as and when they join this office.
Accordingly, Dr. Singhalconstituted a Committee comprising of the following
officers to take up the challenge and put in place an SOPs Manual for NSEZ by
the end of March 2018 :-

(i) Mr.SalikParwaiz, Deputy Commissioner(Customs)- Chairman

(ii) Mrs.Rekha Prasad, Appraiser(Customs)- Member
(iii) Mr. S K Tyagi, Appraiser(Customs)- Member
(iv) Mr. R K Chauhan, Appraiser(Customs)- Member

The present volume is the outcome of the efforts of the Committee under the
able guidance of Dr. L. B. Singhal, Development Commissioner and
Mr.SalikParwaiz, Deputy Commissioner of Customs.

2
 CHAPTER-1

INTRODUCTION

1.1.To instill confidence in investors and signal the Government's commitment to a

stable SEZ policy regime and with a view to impart stability to the SEZ regime thereby
generating greater economic activity and employment through the establishment of
SEZs, a comprehensive draft SEZ Bill prepared after extensive discussions with the
stakeholders. A number of meetings were held in various parts of the country both by
the Minister for Commerce and Industry as well as senior officials for this purpose. The
Special Economic Zones Act, 2005, was passed by Parliament in May, 2005 which
received Presidential assent on the 23rd of June, 2005. The SEZ Act, 2005, supported
by SEZ Rules, came into effect on 10th February, 2006. The main objectives of the SEZ
Act are:

Generation of additional economic activity

Promotion of exports of goods and services
Promotion of investment from domestic and foreign sources
Creation of employment opportunities
Development of infrastructure facilities

With the introduction of SEZ statute, it was expected that this will trigger a large
flow of foreign and domestic investment in SEZs, in infrastructure and productive
capacity, leading to generation of additional economic activity and creation of
employment opportunities.A Single Window SEZ approval mechanism has been
provided through a 19 member inter-ministerial SEZ Board of Approval (BoA). The
applications duly recommended by the respective State Governments/UT
Administration are considered by this BoA periodically. All decisions of the Board of
approvals are with consensus.The SEZ Rules provide for different minimum land
requirement for different class of SEZs. Every SEZ is divided into a processing area
where alone the SEZ units would come up and the non-processing area where the
supporting infrastructure is to be created.

3
1.2. The SEZ Rules provide for:

Simplified procedures for development, operation, and maintenance of the

Special Economic Zones and for setting up units and conducting business in
SEZs;
Single window clearance for setting up of a SEZ;
Single window clearance for setting up a unit in a SEZ;
Single Window clearance on matters relating to Central as well as State
Governments;
Simplified compliance procedures and documentation with an emphasis on self-
certification.

1.3. Indirect Tax Benefitsand Incentives under SEZ Scheme

Customs &IGST:

SEZ units may import or procure from the domestic sources, duty free, all
their requirements of capital goods, raw materials, consumables, spares,
packing materials, office equipment, DG sets etc. for implementation of their
project in the Zone without any license or specific approval, in accordance
with LOA.
Duty/Tax free import/domestic procurement of goods for setting up of SEZ
units (under Rule 30 of SEZ Rules r/w CGST Rules and IGST Act).
Goods imported/procured locally duty free could be utilized over the approval
period of 5 years.
Domestic sale of finished products, by-products on payment of applicable
Custom duty and IGST as per Section 30 of SEZ Act, on the transaction
value.
Domestic sale of rejects, waste and scrap on payment of applicable Custom
duty and IGST on the transaction value.

4
 Service Tax:

Exemption from Service Tax (now part of GST) to SEZ units under Section 26
of SEZ Act,2005 r/w Section 16 of IGST Act,2017.

1.4. Facilities for Domestic suppliers to Special Economic Zone

Supplies from Domestic Tariff Area (DTA) to SEZ are treated as physical export
under Section 2(m) of SEZ Act. The DTA supplier would be entitled to:

Drawback, wherever applicable

IGST Exemption / Refund
Discharge of Export Obligation, if any, on the suppliers

5
 CHAPTER-2

ROLE OF CUSTOM OFFICERS

2.1. With the coming into force of the Special Economic Zones Act, 2005 along with
the Special Economic Zones Rules, 2006 on 10th February 2006, Noida Special
Economic Zone has become an SEZ promoted by the Central Government. The Zone
has its own administrative-regulatory establishment with the Development
Commissioner, NSEZ notified as the Development Commissioner of the Zone under
Section 11 of SEZ Act. The Customs personnel for NSEZ are selected through
deputation from the officers of CBEC. Such officers include the Specified Officer and
Authorized Officers. As per Section 12 of SEZ Act, all officers posted in a Special
Economic Zone function under the administrative control of the Development
Commissioner.

2.2. Specified Officer and Authorized Officer are defined in Rule 2(1)(zd) and Rule
2(1)(c) of the Special Economic Zones Rules, 2006. As such officers are creations of
the said Rules, their power and authority is circumscribed by the content of the Rules
and the limit of their actions shall be the specific provisions of the Rules which require
them to perform a specific function in a particular context.

2.3. The Development Commissioner has control over the NSEZ gates through
adequate safeguards, and by employing security personnel viz. Security Officer, Asstt.
Security Officers who are assisted by various Security Guards (Head Guard/Guard).
The entire Zone is encircled by a boundary enclosure to ensure that the scope for
diversion of non-duty paid goods is eliminated

2.4. Role of Specified Officer:-

Specified Officers, in relation to a Special Economic Zone means Joint/Deputy/

Assistant Commissioner of Customs for the time being posted in the Special Economic

6
Zones. Where no Specified Officer is posted in a Special Economic Zone, the
Development Commissioner may, in terms of the power conferred under Rule 73 of the
Special Economic Zones Rules, 2006, nominate a gazetted officer of Customs to
discharge the functions of the Specified Officer under the Special Economic Zones
Rules, 2006.

The functions of the Specified Officers are specified in the SEZ Rules,2006.
Various permissions which the Specified Officer has the power to grant under the SEZ
Rules and various other functions / duties are as follows :-

Rule Function / Power of Specified Officer

To designate any area or area(s) in the Special Economic Zone
as an area for loading and unloading of import or export cargo:
11(11)
In case of storage area being outside the processing area but
within the Special Economic Zone, the SO may issue safeguards
as may be necessary for the purpose for such storage area.
12(3)
Permission to the Developer to remove goods from the Special
Economic Zone to the Domestic Tariff Area on payment of duty
applicable on such goods.
12(8)
Approval for export or transfer of capital goods and spares by
the Developer (including construction equipment that have
become obsolete or surplus) to another Developer or Unit
13
Disbursal of DBK claims
24(1)
Permission for destruction of goods
27(9)
Permission for examination of import/procurement cargo by the
Authorized Officer based on prior intelligence.
27(10)
Notification of examination area in SEZ
27(11)
To designate Custom area in Processing area of SEZ
28(7)
To refund duty paid on imports through Courier mode
29(2)
To specify procedure for procurement of goods from Nominated
Agency located in SEZ
30(12)

7
 General permission for frequently required goods into and exit
from the Zone (which are not required for carrying out authorized
operations)
33(ii)
To specify safeguards for admission of hazardous goods into
specially designated area or installation in SEZ
33(iii)
Permission for extension of period (to Developer) for utilization
of goods for the authorized operations beyond one year
12(5), 37(1)
Permission for transfer or loan of goods to Units or Developers
in other SEZs or to EOU/EHTP/STP Unit etc. subject to such
conditions as may be imposed.
38(v)
Permission to carry out destruction outside SEZ
39(2)
41(1),
Permission for sub-contracting
42(1)(a)/(c)
Permission to extend the period (beyond the prescribed period)
to bring back the goods sent for sub-contracting
41(1)(a)
Permission for removal of moulds or jigs or tools or fixtures or
tackles or instruments or hangers and patterns and drawings to
the premises of sub-contractor(s),
41(1)(h)
Action to recover the duty on goods in case of failure by the Unit
to bring back the same within the period under sub-clause (h)
42(1)(h)
Permission to export the finished goods directly from the sub-
contractor’s premises subject to prescribed conditions
42(2)
Annual permission to undertake sub-contracting for export on
behalf of a Domestic Tariff Area exporter, subject to prescribed
conditions
43
Annual permission for Contract Farming
44
Permission to export large quantities of cargo (where it may not
be possible to ship the cargo from the SEZ in one consignment)
in parts
46(1)(e )
To prescribe procedure for allowing the handing over of goods to
the courier by the custodian for export by Courier.
46(5)

8
 Approval of Agency for transfer of goods from the SEZ to the
airport for export through passenger baggage.
46(6)
Approval for donation of computer and computer peripherals,
including printer, plotter, scanner, monitor etc.( imported or
procured from DTA) to the recognized non-commercial
educational institutions or registered charitable hospitals etc.
49(4)(c)
Extension of time period beyond 120 days to bring back the
goods.
51(4)
Determination of the amount to be remitted to the Government
by the Unit in the form of Customs Duty in case of cancellation of
LOA under Section 16. .
73

Apart from granting the aforesaid permissions, the Specified Officer may also
generally carry out the following additional functions:-

(a) To issue instructions from time to time for ensuring compliance with the
functions and responsibilities of the Authorized Officers, wherever warranted.
(b) To ensure that the Zone at any time is manned by an Authorized Officer /
Security personnel.
(c) To allot additional charge to any Authorized Officer in the jurisdiction of the
said Specified Officer.
(d) To guide the Authorized Officers in the discharge of their responsibilities and
ensure that the Authorized Officers limit their activities within the ambit of the
SEZ Act 2005 and SEZ Rules, 2006.
(e) To grant various permissions required by the entrepreneur/developer/co-
developer from the Specified Officer in various provisions of the Special
Economic Zones Rules, 2006 with adequate safeguards.

9
2.5. Role of Authorized Officer :-

In NSEZ, the Authorized Officers are appointed under the following two categories
each having distinct functions and duties:-

(i) Appraiser/Superintendent
(ii) Preventive Officer

The Authorized Officers are guided by the provisions of Rule 25, 34, 47(4) and 48(2)
to intercept any goods at the gates or within the Zone if there is suspicion that any
conveyance is carrying goods out of the Zone without proper documentation; or the
goods have not been utilized for the purpose of authorized operations. Rule 25 also
authorizes the S.O./A.O. to take action under Customs Act,1962, Custom Tariff
Act,1975 etc.

Authorized officers (Preventive Officers) are concerned with flow of goods into and
out of the Zone. With the zero rating of imported goods by section 76A of the Customs
Act, 1962 and the provisions of section 53 of the Special Economic Zones Act, 2005
which place Zones outside the customs territory of India in relation to authorized
operations of a developer/co-developer/entrepreneur in a Zone, there is no bar on the
bringing in of any goods into a Zone from outside India in accordance with LOA and
provisions of SEZ Act / Rules. Further, NSEZ is also a deemed port/airport/ICD as
per Rule 11(11) of SEZ Rules. Accordingly, whenever any goods are being cleared
into DTA from NSEZ, the same are treated as imported into India and therefore, the
examination norms apply by virtue of Rule 47(4) and 48(2). The examination of goods
wherever required in case of exports under Rule 46 or in case of DTA sale u/r 48, is
conducted by the Preventive officers. It is pertinent to mention that Rule 45 disallows
export of prohibited items under the ITC(HS) classification of Export and Import items.
However, such export can be made to a place outside India with prior approval of Board
of Approval. Further Rule 18(4)(e) does not permit export of SCOMET items unless it
fulfills the conditions indicated in the ITC(HS) classification of export and import items.

10
 The exemptions and benefits on the goods brought into SEZ are allowed under
Section 26 of the Special Economic Zones Act, 2005 which is always subject to the
terms and conditions relating to admission into and exit from the Zone as provided in
the Special Economic Zones Rules, 2006. Accordingly, the Authorized Officers are
required to monitor the movement (entry / exit) of such goods as the continued benefit
of exemptions and other privileges shall also depend on compliance with the conditions
of temporary removals / sub contracting. These statutory responsibilities of the
Authorized Officers are in relation to goods admitted into the Zone or remaining within
the Zone till removal for export, into the Domestic Tariff Area or destruction
within/outside the Zone. The control of outflow through a proper documentation system
is meant to ensure safeguard of revenue.

SEZ Rules provide for random verification of seal at gate in respect of export
consignments. Export goods are subject to the same level of examination by the
Authorized Officer as is prescribed by Central Board of Excise & Customs from time to
time for similar exports from Domestic Tariff Area. However, unless otherwise specified
in SEZ Rules, all inward and outward movement of goods into or from the Zone by the
Unit or Developer shall be based on self-declaration and no routine examination is
made unless specific orders of the Development Commissioner or the Specified Officer
are obtained. (Ref. : Rule 75 of SEZ Rules,2006)

2.5.1. Role of Authorized Officer (Superintendent/Appraiser)

(i) Assessment :-

The officers of the rank of Superintendent / Appraiser of Customs are generally

assigned the function of assessment. The following types of documents are filed by the
SEZ Entity on SEZ Online system and the same are approved online by the Authorized
Officer :-

11
(a) Bills of Entry(For import) - BOE for Home Consumption is filed for import of goods
required for authorized operations in terms of Rule 29. Generally, the declared value
is accepted since the goods required for authorized operations are exempted from
duty/taxes. When such imported goods are removed for any reason into the Domestic
Tariff Area, such removal into DTA (assessment and valuation thereof) is governed by
Rule 47, 48 & 49 of SEZ Rules,2006 read with the provisions of Customs Act,1962 and
Rules made thereunder.

(b) Shipping Bills :- The value declared in the Shipping Bills is generally accepted as
the repatriated foreign exchange is credited towards fulfillment of export obligation.
However, exports are subject to the restrictions and conditions laid down in Rule 45
read with Foreign Trade Policy.

(c) Bill of Export :- As per Rule 30(6), the assessment of goods brought into SEZ
against a Bill of Export is required to be in accordance with the instructions and
procedures including examination norms laid down by the Department of Revenue as
applicable to export goods. Accordingly, DBK Rules/instructions and schedules as
notified by DoR (MoF) apply in such cases.

(d) DTA Sale:- The BOE for DTA sale is filed under Rule 48. Valuation of goods being
cleared into the Domestic Tariff Area requires careful consideration since there is
revenue angle. In terms of Rule 49, Capital goods are entitled to depreciation in
valuation for the period that the machinery has been put to use for authorized
operations and as per rate specified in this Rule. In accordance with Rule 47(4) and
48(2), Authorized Officers should be particularly careful to follow the provisions of
section 14 of the Customs Act, 1962 and the Customs Valuation Rules in the
assessment. Adoption of any value other than the declared value should be
accompanied by a note explaining the reasons for revision of the value and the legal
sanction for adopting such a revision.

12
 Further, the value for levy of duty is “price at the time and place of
importation” – this definition in section 14 of the Customs Act, 1962 leads to adoption
and acceptance of CIF value in the case of imported goods as the insurance and freight
costs are incurred on the movement to the place of import. In the clearance of goods
into the Domestic Tariff Area, the place of importation is the Gate of the Zone and
hence the CIF value in this case is limited to the invoice value and the cost of freight
and insurance till the gates of the Zone. If goods undergo the destruction procedure, if
the goods merely change form and are then removed into the Domestic Tariff Area, the
assessment shall be on the value declared for the goods and the rate of duty shall be
applicable on the ‘changed form’ of goods including scrap.

Two distinct aspects of SEZ statute in relation to DTA sale are:-

Any goods removed from a Special Economic Zone to the Domestic Tariff Area
shall be chargeable to duties of customs including anti-dumping,
countervailing and safeguard duties under the Customs Tariff Act, 1975,
where applicable, as leviable on such goods when imported.
[ Section 30(a) of SEZ Act].

the rate of duty and tariff valuation, if any, applicable to goods removed from a
Special Economic Zone shall be at the rate and tariff valuation in force as on the
date of such removal, and where such date is not ascertainable, on the date of
payment of duty.
[Section 30(b) of SEZ Act].

(ii) Monitoring of Utilization of goods and Services for Authorized

Operations

(a) In assessing the documents or certifying any documents relating to goods

required by an entrepreneur/developer/co-developer, the Authorized Officer shall

13
 be guided by the sole principle of requirement for authorized operations of the
said entrepreneur/developer/co-developer.
(b) The Authorized Officers are also required to monitor that the general provisions
and safeguards for import, export etc. are being complied with by the Units.

2.5.2. Role of Authorized Officer (Preventive Officer) :-

(i) Examination of goods :-

Wherever required, the examination of cargo or seal verification is generally done by

the Authorized Officer of the rank of Preventive Officer. Examination of cargo or seal
verification may be carried out in the following cases:-

(a) Goods brought from outside India –

In such cases, the examination is restricted to seal verification before endorsing

out of charge on the Bills of Entry. However, with the prior permission of Specified
Officer, Authorized Officer may carry out detailed examination at the place identified by
the Specified Officer.
(See Rules 27 to 29)

(b) Goods procured from the Domestic Tariff Area under export benefits:-

Endorsements in ARE-1 and/or Bill of Export and GST Invoice. Preventive Officer
shall exercise such checks as are prescribed from time to time by the Central Board of
Excise & Customs for export of goods.
[See Rule 30(3), 30(4), 30(5), 30(6), 30(7)]

14
 (c) Goods procured from the Domestic Tariff Area for authorized
operationsunder exemption from taxes but without export benefits:-

Such goods may be examined by the Preventive Officer for quantity, marks and
other relevant particulars given in the ARE1/Invoice/Packing List.in terms of Rule 30(7).

(d) Goods temporarily taken out of the Zone against serially numbered
challans :-
Temporary removals are allowed only against serially numbered challans. Copies
of all such challans should be maintained by the Preventive Officer for complying with
the verification requirements prescribed in the Special Economic Zones Rules, 2006 on
the return of such goods from the Domestic Tariff Area. Goods taken out temporarily out
of SEZ under Rule 50 of SEZ Rules may be verified by the Preventive Officer in terms
of Rule 51(3) i.e. for Identification marks, (make and model and serial number) and
specification of goods. However, Temporary Challan facility is available on SEZ Online
which is being followed at NSEZ. The Unit may also remove such goods for the
purposes specified in Rule 50(2) of SEZ Rules on self attestation basis in terms of
Instruction No. 84 issued by the Deptt. Of Commerce by giving an undertaking to the
Authorized Officer for return of such goods in the format prescribed vide Public Notice
No. 06/2018-Cus dated 05.04.2018 issued by the Deputy Commissioner(Customs),
NSEZ, Noida.

(e) Goods intended for export out of the country under MEIS/other incentive
scheme:-
These goods shall be subject to random check as per CBEC examination norms. CBEC
Circular No. 06/2002-Cus dated 23rd January 2002, 01/2009-Cus dated 13th January
2009 etc. are relevant. Random check, in this context, means the selection of packages
as deemed to be necessary from the packing list just before the goods leave the Zone
and subjecting them to the level of desired verification. This will deter any attempt at
illicit removal of goods.

15
 (f) Export of Jewellery:-

Export of Jewellery from SEZ shall be subject to detailed examination and sealing
before removal from the Zone. Authorized Officers are required to maintain record of all
packages opened by them for the purpose. Examination norms for exports as specified
by CBEC also apply. NSEZ also has one Scanner installed at CWC where the
Jewellery cargo is scanned before its appraisement is undertaken by the Jewellery
Appraiser.

(g) DTA Removal:-

The DTA sale of goods is made under the provisions of Rule 47, 48 and 49 of SEZ
Rules. Since examination, testing etc. are part of assessment process, examination of
DTA cargo is conducted as per import examination norms prevalent at ICDs/ports. Such
examination is verification of the genuineness of declaration made by the SEZ unit or
DTA buyer in respect of the goods covered under the Bill of Entry for Home
Consumption.

(ii) Demand of duty :-

Authorized Officers shall promptly demand duty upon intimation from the concerned
Customs formation that the quintuplicate copy of the Bill of Entry has not been received
from the Special Economic Zone. The responsibility for certification of the Bills of
Entry/ARE-1 and/or Bill of Export is normally to be discharged upon arrival of the goods
and the certification does not have to be delayed till the expiry of deadlines prescribed
in the Special Economic Zones Rules, 2006. In other cases where it comes to notice
that:-

(a) the goods have not been properly accounted for or have been found short on
verification conducted with the permission of or at the direction of the Specified
Officer, or

16
 (b) the goods sent for job work have not been received back with the stipulated time,

the Preventive Officer shall prepare the Demand letter in terms of the BLUT
executed by the Unit for the purpose, and put up the same before the Specified
Officer through Superintendent. For the sake of natural justice, a show cause notice
is generally issued in cases where the Unit does not pay the duty as pointed out in
the Demand letter.

(iii) Sub-contracting :-

The Preventive Officer (PO) at the Gate has to verify the goods being sent out for
job work in terms of Rule 41 and 42 of SEZ Rules,2006.Also, when the goods are
received back under RC (Return Challan), the P.O. compares the same with the DC
(Dispatch Challan) as well as with the samples retained at the time of outward
movement of goods. Also, the P.O. monitors whether the goods have been received
back within the stipulated period of 28/120 days and in case of default, he may put up
the matter for demand of duty on such goods.

2.6. Relevant provisions under SEZ statute:-

Rule 2(c), 2(zd), 11-13, 24, 27-30, 33, 37-39, 41-44, 46-49, 51, 73 and 75 of SEZ
Rules,2006
Section 30 of SEZ Act,2005
Instruction / Circulars:-

Instruction No. 09/2011 dtd.

Role of Specified/Authorized Officers
01.06.2011 issued by DC-Cochin SEZ

17
 CHAPTER-3

IMPORTS

3.1 Items permitted for import into SEZ without duty/tax:- As per Rule 27 of SEZ
Rules, 2006, a Unit or Developer may import without payment of duty, taxes or cess all
types of goods required for authorized operations. These goods include the following:-

Capital goods (new or second hand),

Raw materials,
Semi-finished goods (including semi-finished Jewellery),
Component,
Consumables,
Spares,
Goods and materials for making capital goods,

3.2. Items not permitted to be imported into SEZ (Exceptions / Prohibition):-

(a) Prohibited items under the Import Trade Control (Harmonized System)
Classifications of Export and Import Items.
(b) As per para 2.17 of Foreign Trade Policy, there is prohibition on direct or
indirect import from DPRK(NORTH KORIA)
(c) As per O.M. No. 01/91/171/17/AM06/PC-III/EC/4655 dated 11th July 2017
issued by DGFT(Export Cell), the SEZ Units cannot import ‘Red Sanders
Wood’. Further the SEZ Units which are not required to obtain licenses for
import of Sandalwood, may be mandated to obtain NOC from MOEF&CC for
such import of desired quantity of Sandalwood/products listed in the
restricted category. The SEZ Units are required to route their application
through respective SEZ for grant of NOC through DGFT, New Delhi. The
said O.M. also provides that any subsequent policy changes like QR, MEP,

18
 MIP, CITES clearance, port restriction etc. on these items will also be
applicable to SEZ units, unless specifically exempted.
(d) Vide Public Notice No. 21/2015-2020 dated 31st August 2017, the DGFT has
notified inter-alia the proforma for submission of application for obtaining
the NOC for import of Sandalwood by SEZ Units.
(e) As per para 2.18 of Foreign Trade Policy, direct or indirect import from Iran
of any item, material, equipment, goods and technology mentioned in the
following documents would be permitted subject to the provisions
contained in Annex-B to the United Nations Security Council Resolution
2231 (2015):
(i) Items listed in INFCIRC/254/Rev.9/Part 1 and INFCIRC /254/Rev.7Part
2 (IAEA Documents) as updated by the IAEA from time to time.
(ii) Items listed in S/2006/263 (UN Security Council document) as
updated by the Security Council from time to time.

All the UN Security Council Resolutions/Documents and IAEA Documents

referred hereinbefore are available on the UN Security Council website
(www.un.org/Docs/sc) and IAEA website (www.iaea.org).

3.3. Mode of import:-

A Unit or Developer may import goods directly into the Special Economic Zone or
through any other ports or airports, land customs stations, inland container depots,
foreign post offices, authorized couriers; or through personal baggage of passengers
authorized by the Special Economic Zone Unit; or via Satellite data communication such
as internet or any other telecommunication link.

3.4. No exemption to goods for personal use or consumption:-

Any goods for the personal use of, or consumption by officials, workmen, staff,
owners or any other person in relation to a Unit or Developer, shall not be eligible for
exemptions, drawback and concessions or any other benefit in accordance with the

19
provisions of section 7 or 26. In case of any doubt as to whether any goods or
services are required by a Unit or Developer for authorized operations or not, it
shall be decided by the Development Commissioner.

3.5. No exemption on material for operation and maintenance of

certainfacilities:-

The SEZ Rules do not permitimport of duty-free material for operation and
maintenance of facilities viz. educational institutions, hospitals, hotels, residential and/or
business complex, leisure and entertainment facilities or any other facilities in the non-
processing area of the Special Economic Zone.

3.6. Assessment on the basis of self-declaration :-

Generally, the Appraiser is required to assess the imports by a Developer or a

Unit, on the basis of self-declaration and the goods are not subjected to routine
examination. Where based on a prior intelligence the examination becomes necessary,
the Authorised Officer(s) may carry out such examination after obtaining written
permission from the Development Commissioner or the Specified Officer. [Rule 27(10)
& 27(11)]

3.7. Procedure for import :-

The Unit or Developer shall file Bill of Entry for home consumption in quintuplicate
along with the following documents :-

(i) Bill of Lading or Airway Bill;

(ii) Invoice and Packing list.

The Bill of Entry is filed on SEZ Online system. The Authorized Officer at NSEZ
processes the Bill of Entry online. The registered or assessed Bill of Entry is transmitted

20
to the Customs Officer from NSEZ to the place of import through interface between SEZ
Online and ICEGATE. This transfer is treated as permission for transfer of goods to the
Special Economic Zone Importer. The Appraiser while assessing the BOE should
consider the following aspects:-
(a) Whether the item being imported is required for authorized operations;
(b) Whether the port from where the goods are being imported, is declared as
sensitive by the Customs (CBEC/CBIC).
(c) Whether there is a proper Invoice and packing list. (Packing list should be
checked for proper computation of quantity)
(d) Whether the item being imported is of sensitive nature.
(e) Whether there is any alert against the Unit (issued by the DC office or by the
Specified Officer).
(f) Whether the goods fall under the prohibition clause.
(g) Whether the goods attract Safeguard/Anti-Dumping duty.

3.8. Import through Baggage:-

In the case of import of precious goods through, an Intimation is to be given to

the Authorized Officer (IN Duty) under Rule 29(5)(i) of SEZ Rules. The Authorized
Officer is required to ascertain the genuineness of import and in case of any suspicion,
he should report the matter to the Specified Officer. In case of need, the Specified
Officer may report the matter to the Customs at the port of import for examination of the
cargo. Further, while assessing the BOE for import through baggage, the Appraiser
should necessarily ask for the copy of Detention Receipt (DR) issued by the Baggage
Section of the port.

3.9. Import of precious metals and stones etc. by G&J Units– Special provisions :-

21
(a) The Appraiser should ensure that in case of import of rough diamonds, the shipment
parcel should be accompanied by Kimberley Process Certificate issued by the
Development Commissioner. [Rule 27(6)]

(b) in case of high value parcels imported by Gems and Jewellery Units, there shall
generally be no examination of goods unless so directed by the Specified Officer or the
Development Commissioner. Examination may become necessary on the basis of a
prior intelligence. Such intelligence may be developed on the basis of various factors
i.e. nature of high value goods, value of such goods, port of import, antecedents of the
Unit, past offences booked against the Unit, inputs received from any reliable source
etc. [Rule 29(3), 27(10) & 27(11)]

(c) Import of unused, used or broken jewellery for re-melting, remaking and
repair:-

The Appraiser should ensure that in case of import of unused, used or broken
jewellery by SEZ Unit for re-melting, remaking and repair, subject to the following
conditions:-

(i) The LOA should be valid for import for the aforesaid purpose (i.e. re-melting,
remaking and repair of unused, used or broken jewellery).
(ii) The procedure laid down under Instruction No. 51 dated 25th March 2010
issued by the DoC should be followed.

3.10. Re-import of goods exported by SEZ Units:-

The Appraiser while assessing a BOE for re-import of goods exported earlier
from SEZ should ensure that :-

(i) the identity of the goods is established at the time of re-import; and
(ii) the goods are re-imported within the warranty period or the validity of the
maintenance contract or a period of one year from the date of export,
whichever is later.
[Rule 29(7)]

22
3.11. Re-warehousing – Duty of Authorized Officer (PO):-

(a) The SEZ Importer is required to submit fifth copy of Bill of Entry bearing
endorsement of the Preventive officer(SEZ) to the Customs Officer in charge of the
airport/port/ICD etc. within forty-five days from the date of clearance of goods from
such airport/port/ICD.
(b) In case of any communication received from such port for non-submission of the
RWC (fifth copy of BOE with endorsement), the Authorized Officer shall take steps to
raise demand of applicable duty from the Special Economic Zone importer.
(c) The Preventive Officers should also ensure that final Re-warehousing (confirmation
regarding receipt of goods into the Unit) is done by the Unit on SEZ online within 45
days from the date when the goods were transshipped from the port to NSEZ.

3.12. Type of Bill of Entry to be filed :-

Import from outside India ;- Bill of Entry for Home Consumption [Rule 29(1)]

Import through Baggage :- Bill of Entry for Home Consumption [Rule 29((5)(iv)]

3.13. RELEVANT PROVISIONS:-

Section 7 and 26 of SEZ Act, 2005

Rule 27, 28 and 29 of SEZ Rules, 2006.
Instructions issued by DoC etc.:

Public Notice No. 21/2015-2020

Proforma for obtaining NOC for export of Red
dated 31st August 2017 issued
Sanders Wood / Sandalwood from SEZ.
by DGFT

O.M. No. 01/91/171/17/

AM06/PC-III/EC/4655 dated 11th Regulating export and import of Red Sanders Wood
July 2017 issued by and Sandalwood from DTA and SEZ
DGFT(Export Cell),

23
Instruction No. 47 dated 4th Procurement, Import and Export of Prohibited and
March 2010 Restricted Goods

Declaration of Raw material components etc. imported

th
Instruction no. 51 dated 25 by G&J units in respect of goods to be manufactured
March 2010 by them (Import of unused/used, broken jewellery for
re-melting, remaking and repair

Instruction No. 87 dated 20th Clarification regarding import of non-prime mills left

December, 2016 over, scrap and spurious CRGO material in SEZs.

Public Notice No. 04/2018 dated

5th march 2018 issued by DC Import of Batteries

(Cus), NSEZ

24
 CHAPTER 4

EXPORT

4.1. Items which can be exported from SEZ :- As per Rule 45 of SEZ Rules 2006, a
unit may export goods or services as per the terms and conditions of letter of Approval
including:-

(i) agro products;

(ii) partly processed goods,

(iii) sub–assemblies and components

(iv) by-products, rejects, waste and scrap arising out of the manufacturing process.

4.2. Items which cannot be exported (Exception / Prohibition):-

(a) Prohibited items under the Import Trade Control (Harmonized System)
Classification of Export and Import Items cannot be exported by SEZ
Units.
(b) As per ‘Export Policy of Sandalwood’ issued DGFT vide Notification No.
37/2015-2020 dated 27th January 2017, the export of ‘Sandalwood in any
form, but excluding finished handicraft products of sandalwood, machine
finished sandalwood products, sandalwood oil’ is prohibited. Further, as
per DGFT Notification No. 15/2015-2020 dated 5th July 2017, export of
‘Sandalwood Oil’ has been put under ‘Restricted’ category.
(c) As per O.M. No. 01/91/171/17/AM06/PC-III/EC/4655 dated 11th July 2017
issued by DGFT(Export Cell), the SEZ Units which are not required to
obtain licenses for export of Sandalwood, may be mandated to obtain
NOC from MOEF&CC for such export of desired quantity of
Sandalwood/products listed in the restricted category. The SEZ Units are
required to route their application through respective SEZ for grant of

25
 NOC through DGFT, New Delhi. The said O.M. also provides that any
subsequent policy changes like QR, MEP, MIP, CITES clearance, port
restriction etc. on these items will also be applicable to SEZ units, unless
specifically exempted.
(d) Vide Public Notice No. 21/2015-2020 dated 31st August 2017, the DGFT has
notified the proforma for submission of application for obtaining the NOC
for export of Red Sanders Wood / Sandalwood from SEZ.
(e) As per para 2.17 of Foreign Trade Policy, there is prohibition on direct or
indirect import and export from/to DPRK(NORTH KORIA)
(f) As per para 2.18 of Foreign Trade Policy, direct or indirect Export to Iran
of any item, material, equipment, goods and technology mentioned in the
following documents would be permitted subject to the provisions
contained in Annex-B to the United Nations Security Council Resolution
2231 (2015):
(h) Items listed in INFCIRC/254/Rev.9/Part 1 and INFCIRC /254/Rev.7Part 2
(IAEA Documents) as updated by the IAEA from time to time.
(ii) Items listed in S/2006/263 (UN Security Council document) as updated
by the Security Council from time to time. All the UN Security Council
Resolutions/Documents and IAEA Documents referred hereinbefore are
available on the UN Security Council website (www.un.org/Docs/sc) and
IAEA website (www.iaea.org).

4.3.The Appraiser should ensure that in terms of Rule 45(6), the export of textile items
shall be governed by bilateral agreements, if any.

4.4. Procedure for Export.

(i) The Unit may file Shipping Bill on SEZ Online for export of goods from SEZ
through seaports/airports/ICD/CFS/LCS/by Post (Foreign Post Office)/Courier or by
Personal Carriage (Baggage).
(ii) Documents required are:-
(a) Shipping Bill,
(b) Invoice,

26
 (c) Packing list and
(d) Currency Declaration Form (GR).
(iii) The Appraiser should ensure that the relevant documents (Invoice etc.) should
also be uploaded as attachments.
(iv) The Appraiser will approve the request online after examining all the documents
for their particulars. Quantity shown in Invoice/Pkg list and S/Bill should tally. Further
in case of precious goods/jewellery, it should specifically be seen that particulars of
items are properly shown in the Packing list and computation of weight is proper.
(v) If required, the hard copy of digitally signed Shipping Bill may be signed by the
Appraiser (Cus) to enable clearance of cargo from the port.
(vi) Examination norms are to be followed as per Instructions issued by CBEC/CBIC
from time to time. Instruction No. 2/2018-Cus dated 2nd April 2018 issued by the
Specified Officer, NSEZ may be referred to in this regard.

4.5. Export through Merchant Exporter - A Unit may export the goods directly from
the Special Economic Zone or through any other port where the merchant exporter files
his shipping bill. In such case:-

(i) the goods shall move directly from the Special Economic Zone to the said port of
export on the basis of pink shipping bill (or other Shipping Bill as may be prescribed) as
if these were movement of goods from one warehouse to another.

(ii) Export document shall contain the name of the merchant exporter or the status
holder and the Unit.

(iii) Merchant exporter or status holder, as the case may be, shall export goods under a
free shipping bill and submit a disclaimer that no Drawback, Duty Exemption Pass Book
credit or fulfilment of export obligation under any export promotion scheme under the
foreign Trade policy shall be availed by him on the goods so exported.[Rule 27(11)]

(iv) The GST, as applicable, on such transaction between the SEZ Unit and the
Merchant Exporter, shall be payable in accordance with the GST statute. CBEC
Notification no. 41/ 2017-Integrated tax (Rate) Dated-23.10.2017 has imposed IGST
@0.1% on third party exports.

27
4.6. Transfer of goods from a Unit in another SEZ:- In case of SEZ to SEZ transfer
of goods, the Appraiser should normally assess the Bill of Entry on the basis of a
permission of the Specified Officer of the procuring Unit (of another SEZ) under clause
(v) of Rule 38.

4.7. Exports under Merchandise Export from India scheme (MEIS)-Objective of the
Merchandise Exports from India scheme (MEIS) is to promote the manufacture and
export of notified goods /product. MEIS benefit is available to SEZ units for exports from
SEZ. In such cases, the Appraiser should assess the S/Bill giving the examination order
in accordance with the nature of export goods and the Instructions issued by the CBEC
from time to time.

4.8. Regulatory Mechanism for the Gems and Jewellery Units in SEZ :-

Ministry of Commerce (DoC) has issued the following Instructions which may be
referred to while dealing with the Appraisement and examination of Jewellery cargo :-

(a) Instruction No.D.12/4/2013-SEZ dated 31.12.2013

(b) Instruction No.D.12/4/2013-SEZ dated 25.04.2013
(c) Instruction No. 88 dated 16.08.2017
(d) Minutes of Meeting of Development Commissioners held on 16.10.2017 in DoC
(prescribing that in the Operating Procedure adopted for Gold Testing through
the arrangement with GJEPC, the examination norms for all consignments of
Plain Jewellery intended to be exported to sensitive destinations like UAE,
Singapore, Hong Kong etc. shall be 100%).

4.9. RELEVANT PROVISIONS :

Rule 45 & 46 of SEZ Rules,2006

Instructions issued by DoC :-

Instruction No. 02/2018 (Cus) dated Exports from NSEZ u/r 46 of SEZ Rules,2006-
23.03.2018 issued by DC (Cus), NSEZ Examination Norms for General cargo

Public Notice No. 21/2015-2020 dated Proforma for obtaining NOC for export of Red

28
31stAugust 2017 issued by DGFT Sanders Wood / Sandalwood from SEZ.

O.M. No. 01/91/171/17/AM06/PC-

Regulating export and import of Red Sanders
III/EC/4655 dated 11th July 2017 issued by
Wood and Sandalwood from DTA and SEZ
DGFT(Export Cell),

DGFT Notification No. 15/2015-2020 dated

Export Policy of Sandalwood
5th July 2017

DGFT Notification No. 37/2015-2020 dated

Export Policy of Sandalwood
27th January 2017

Instruction No. D.12/4/2013-SEZ dated

Regarding Gems &Jewellery Units
25.04.2013

Instruction No. D.12/4/2013-SEZ dated

31.12.2013 Regarding Gems &Jewellery Units

Restriction of Gold content upto maximum limit of

Instruction No. 88 dated 16.08.2017 22 Carats for export of Gold jewellery, including
partly processed jewellery, whether plain or
studded and articles

CBEC Notification No. 41/ 2017-Integrated

tax (Rate) Dated-23.10.2017 Levy of IGST on Third party exports.

Para 2.17 & 2.18 of Foreign Trade Policy Prohibition on export to North Korea(DPRK) and
Iran

(Note :- Chapter-7 of this compendium may be referred to for special provisions

relating to G&J Units in SEZ)

29
 CHAPTER 5

DTA SALE

5.1. SALES IN DOMESTIC TARIFF AREA-

(a) SEZ Units may sell goods and services including rejects/waste/scrap/remnants
etc. in the Domestic Tariff Area on payment of Custom duties under Section 30
subject to various conditions. [Rule 47 r/w Section 30]

(b) The goods imported or procured from Domestic Tariff Area(DTA) by a Unit may
be cleared into DTA as it is or without substantial processing, 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:

(c) Valuation and assessment of goods cleared into DTA shall be in accordance
with provisions of Customs Act and rules made thereunder as applicable to
goods when imported into India. [Rule 47(4) & 48(2)]

(d) Section 30 of the SEZ Act, 2005 defines the applicable duties, rate of duty and
tariff valuation, if any, on domestic clearances by SEZ Units.

5.2. Rule 47, 48 and 49 are the relevant rules where provisions and procedures are
given for the clearance of goods into DTA.

(a) A Unit may sell goods and services in the Domestic tariff Area (DTA) on Payment
of duties. The DTA buyer files Bill of Entry for home consumption along with the
required documents with the Appraiser of Customs of NSEZ. However, the SEZ
Unit may also file Bill of Entry for home consumption on the basis of authorization

30
 from Domestic tariff Area buyer. The SEZ unit can prepare and submit Bill of
Entry (DTA Sale) to the DC Customs Office through SEZ Online system.

(b) After filing BOE online, the unit can obtain print out of BOE (DTA Sale) (in 5
copies) from SEZ Online System & submit it to Appraiser/DC Customs along with
necessary supporting documents e.g. Invoice, packing list etc.

(c) In case the Assessing Officer finds everything to be in order, he shall assess the
BOE and update the status in the SEZ Online system. Here Assessing officer
shall issue examination order which may depend on the nature of commodity.
The examination norms as prescribed by CBEC are followed. For example in
case of metal scrap, 100 percent examination is conducted.

(d) The examination is conducted by the Preventive Officer of NSEZ, attending

General Duty. He will examine the goods and inscribe examination report on the
BOE for perusal of the Appraiser before giving out of charge. Here Preventive
Officer will also look into payment details of duty and make a mention of the
same on BOE. Duty payment challan is required to be attached with the relevant
Bill of Entry, while presenting before the Appraiser (OUT Duty) for seeking ‘Out of
charge’ order.

(e) In order to have uniform practice w.r.t. DTA removals against Release
Advice/DEEC or other authorizations and for verification of such authorizations,
the Deputy Commissioner of Customs, NSEZ, Noida has issued Instruction no.
01/2018-Cus dated 5th March 2018 based on the circulars issued by the Central
Board of Customs & Excise.

5.3. RELEVANT PROVISIONS

SECTION 30 OF THE SEZ ACT, 2005

RULE 47, 48 & 49 OF SEZ RULES, 2006

31
 Others :-

DTA removals against Release Advice/Duty

Instruction No. 01/2018-Cus dated
Entitlement Certificate or other authorizations-
05.03.2018 issued by DC(Cus), NSEZ
Need for verification

Instruction No. 10/2009 dated Clarification on Rule 49(4)(b) of SEZ Rules, 2006 –
25.05.2009 issued by DoC removal of used packing materials

Public Notice No. 01/2018 dated

Disposal of E-waste
22.02.2018 issued by DC(Cus), NSEZ

Public Notice No. 04/2018 dated

Disposal of Used Batteries
05.03.2018 issued by DC(Cus), NSEZ

Public Notice No. 05/2018 dated

Management and Disposal of Plastic waste
22.02.2018 issued by DC(Cus), NSEZ

32
 CHAPTER 6

SUB CONTRACTING & TEMPORARY REMOVALS

6.1.SUB-CONTRACTING-LEGAL PROVISIONS

In terms of Rule 41 of SEZ Rules, an SEZ unit obtains prior permission of the
Specified Officer for sub-contracting in DTA which is granted on annual basis. The
permission is granted subject to certain conditions as specified below;

(a) Goods sent for subcontracting are to be brought back within 120 days. However,
in case of Gems & Jewellery, the time limit is 28 days only;
(b) The time limit of 120 days can be extended by the Specified Officer on unit’s
request and merit of the case;however, in case of Gems &Jewellery, no
extension beyond 28 days is permissible;
(c) Cut & Polished Diamonds and precious and semi-precious stones are not
allowed to be taken outside the zone;
(d) Gem and jewellery Unit may receive plain gold or silver or platinum jewellery
from DTA or from an EOU or from a Unit in the same or another Special
Economic Zone in exchange of equivalent content of gold or silver or platinum
contained in the said jewellery after adjusting permissible wastage or
manufacturing loss allowed under the provisions of the Foreign Trade Policy read
with the Handbook of Procedures;
(e) In sub-contracting or exchange, total wastage (i.e. total wastage of the unit
including the wastage of the subcontractor or the supplier of Jewellery on
exchange basis ) is permissible as per the wastage norms FTP read with the
Handbook of Procedures;
(f) Domestic Tariff Area Unit undertaking sub-contracting or supplying jewellery
against exchange of gold or silver or platinum is not entitled for export
entitlements;
(g) Unit engaged in trading or warehousing is not allowed facility of subcontracting of
production or production process in DTA; [ Ref. : Rule 41(1)(g) ]

33
 (h) For sub-contracting from abroad, unit has to get permission from the
Development Commissioner subject to certain conditions as stipulated under
Rule 41(2).
(i) No movement of Prohibited/Restricted goods under sub-contracting is allowed.

[Rule 41]
6.2. SUB-CONTRACTING-PROCEDURES

(a) The goods to be sent for sub-contracting (as per the permission granted by
Specified Officer) are presented at the NSEZ Out gate along-with a Challan
generated on-line ;
(b) The Challan is then presented to the Appraiser/Supdt. (on Out duty) for online
processing of the same who after verifying all details, processes the Challan.
(c) The challan is then transmitted to gate PO (Job-work) to verify the goods and if
found proper, PO allows outward movement of goods (online as well as offline).
On the basis of PO’s report, Appraiser(OUT duty) allows ‘Out of charge’.
(d) The goods after job-work are again presented at In Gate of NSEZ alongwith copy
of Challan on the strength of which goods were originally cleared for job-work.
This challan contains details like quantity / value etc. of the goods to be brought
inside the Zone. These details are verified by the gate PO (Job-work) with the
GST challan of the job worker which is a vital document to verify the correctness
of the details of goods as well the movement thereof.
(e) The said Challan is presented before the Appraiser/Supdt. (IN duty) who
completes online processing on SEZ online. Thus, the movement of goods into
Zone is finally allowed by the gate PO (Job-work);
(f) Waste, scrap or remnants etc. are also returned to SEZ unit or cleared from job-
worker’s premises on payment duty/taxes, as applicable.

34
6.3. TEMPORARY REMOVALS – As per legal provisions laid down under Rule 50 &
51 of SEZ Rules, there are three type of categories where goods can be removed to
DTA or Abroad without payment of duty/taxes;

(a) capital goods and parts thereof for repairs and return thereof;
(b) goods for display, export promotion, exhibition and return thereof;
(c) goods for job work, test, repair, refining and calibration and return thereof;
(d) laptop or notebook computers or video projection systems for use by authorized
employees of a Unit or Developer;
(e) any other goods with the prior approval of the Authorized Officer.

6.4. Goods may be transferred to DTA or abroad for repair or replacement or testing
or calibration, quality testing and research and development purposes may be sent
under intimation to the Specified Officer. A format of such Intimation has been
prescribed by the Specified Officer vide Public Notice No. 06/2018-Cus dated
05.04.2018.

6.5. Goods for quality testing or research and development purposes, to any
recognized laboratory or institution, without payment of duty on giving an undertaking
to the Authorized Officer for the return of such goods.

6.6. Procedure for temporary removals in Domestic Tariff Area :- In accordance

with the provisions of Rule 51,

(i) Goods are to be removed on the cover of serially-numbered pre-

authenticated challans, authenticated by the Managing Director or owner or
working partner or the Company Secretary or by any person duly authorized
in this behalf by the Company or owner or working partner. Before making
use of pre-authenticated serial numbered challans, the serial numbers of the
same shall be intimated to authorized officer.

35
(ii) However, under SEZ Online system, there is a provision to file the Challan
online which generates an automatic serial number. Accordingly, the
procedure of pre-authentication of challans & its intimation, is not being
followed at NSEZ.

(iii) NSEZ Customs has also prescribed a challan for the purpose of self-removal
under Rule 50(2) wherein all required particulars & purpose of goods for
sending outside are to be clearly spelt out. (Ref. : Public Notice No,
06/2018-Cus dated 05.04.2018)

(iv) The unit may alternatively generate the Online Challan. In any case, the Unit
presents the Challan alongwith the goods before the Gate PO for removal of
goods out of the Zone.

(v) The PO verifies identification marks, namely, make and model and serial
number and specification of the goods w.r.t. the details in Challan.

(vi) The necessary entry is made in the register maintained for this purpose and
O/c is allowed. In case of System generated Challan, O/c is also allowed on
SEZ online.

(vii) When goods are received back within the stipulated period of 120 days, the
same are presented before Gate PO along with a copy of the Challan for
necessary verification.

(viii) If goods are found to be as per unit’s original declaration, PO at Gate allows
inward entry. In case of system generated Challan, the entry is allowed on
SEZ Online. This completes the transaction.

(ix) If goods are not returned with in stipulated time (as per register maintained for
this purpose at SEZ Gate), the duty/taxes are to be paid by the unit.

36
RELEVANT PROVISIONS :-

Rule 41 & 42 (JOB-WORK)

Rule 50 & 51 (Temporary Removals)
IMPORTANT INSTRUCTIONS/CLARIFICATIONS :
(i) On Sub-contracting

S. Subject No. & date

No.
1. Permission for sub-contracting by a SEZ unit Instruction No.78/2013
to a DTA unit (Specially deals with sob- dated 21.10.2013.
contracting permission for larger
manufacturer for a longer period)

(ii) On Temporary Removal

S. Subject No. & date

No.
1. Format of Intimation under Rule 50(2) Public Notice No.
06/2018-Cus dtd.
05.04.2018.

37
 CHAPTER-7

GEMS & JEWELLERY UNITS - SPECIAL PROVISIONS

7.1. Regulatory Mechanism for Gems and Jewellery Units in SEZ :-

(A) Instruction No.D.12/4/2013-SEZ dated 31.12.2013 :- Ministry of Commerce (DoC)

vide Instruction No.D.12/4/2013-SEZ dated 31.12.2013 has issued guidelines on the
subject. As per these guidelines/instructions:-

(a) No Unit is allowed to carry on Trading in the following items :-

Gold
Silver
Platinum
Other precious metals
Diamonds
Other precious and semi precious stones

(b) Random checks of consignment of G&J Import and Export are to be carried out
including in the case of G&J items being sent out for job work.

(c) Provisions of SEZ Rules such as Rule 27(10) may be exercised in cases where
there is ample justification so as to ensure proper conformity with norms including
value addition norms prescribed in this regard.

(d) In case of High Risk Items (Gold, Diamonds, Jewellery Imports etc) being exported
to high risk destinations, the items may be examined by identifying certain
percentage of random checks by adopting the Risk Management Assessment norms
of Customs.

38
(e) Infrastructure for testing of purity of gold, silver and other precious metals as well as
for diamonds, other precious and semi precious stones etc are necessary to check
purity of G&J items entering or leaving the SEZ. Accordingly, the SEZs with G&J
Units are required to be equipped with Gold purity testing machines as well as other
equipment necessary to ensure proper appraisal.

(B) Instruction No.D.12/4/2013-SEZ dated 25.04.2013 :- Ministry of Commerce(DoC),

Govt. of India vide Instruction No.D.12/4/2013-SEZ dated 25.04.2013 has laid down the
following :-

(i) No DTA transactions will be permitted for SEZ Units transacting in gold;

(ii) No trading activities in gold including mere manufacturing of gold medallions will be
allowed for SEZ Units transacting in gold;

(C). Instruction No. 88 dated 16.08.2017 :- Ministry of Commerce, Govt. of India vide
Instruction No. 88 dated 16.08.2017 has restricted export of gold jewellery, including
partly processed jewellery, whether plain or studded and articles gold jewellery up to a
maximum limit of 22 carats.

(D) Instruction No. 51 dated 25.03.2010 :- In case of import of gold jewellery including
broken jewellery etc. for remaking, re-melting, repairing etc. by SEZ Units, the
procedure laid down in Instruction no. 51 is to be followed.Maintenance of separate
records and separate storage of such goods is required under the laid down procedure.

(E) NSEZ Circular No. 10/33/2009-Proj/7272 dated 12.07.2013 :- As per decision

taken in the meeting of Development Commissioners with the Addl. Secretary, MoC&I,
GOI held on 1stMay 2013, the following value addition norms are prescribed for the SEZ
Units engaged in manufacturing involving gold :-

39
Sl. No. Item of Export Minimum value addition
1 Plain gold jewellery and articles and
3% *
ornaments like mangalsutra containing
gold and black beads/imitation stones,
except in studded form of jewellery
2 All types of studded gold jewellery and
5% *
articles thereof

* Revised value addition as per para 4.61 of HBP is 3.5% for plain jewellery 6%/7% for
studded jewellery (6% for those studded with colour gem stones and 7% for those
studded with diamonds.

(F) Clarification dated 18.06.2014 issued by Deptt. of Commerce :- W.r.t.

theInstruction No.D.12/4/2013-SEZ dated 31.12.2013, DoC vide letter dated 18.06.214
has clarified that -

"restriction in trading activity for gold, silver, platinum, other precious metals.
diamonds and other precious and semi-precious stones shall not apply to inter-unit
transfer between Gems & jewellerv Units within the same Special Economic Zone".

(G) Minutes of Meeting of Development Commissioners held on 16.10.2017 in

DoC:-

In the meeting of the Development Commissioners held on 16.10.2017, it was

inter-alia decided that:-

(a) The advanced Fischer XAN 110 Assaying Machine installed at NSEZ will be
operated by the representative of GJEPC (Gems & Jewellery Export Promotion
Council).
(b) In the Operating Procedure adopted for Gold Testing through the arrangement
with GJEPC, the examination norms for all consignments of Plain Jewellery
intended to be exported to sensitive destinations like UAE, Singapore,
Hong Kong etc. shall be 100%.

40
 (c) The variation in cartage declared by the exporter shall be within the permissible
error limit of the machine.

Further every jewellery export consignment is required to be passed

through X-Ray machine installed at CWC.

7.2.Examination Orders issued by the Specified Officer :- In accordance with the

Instruction No.D.12/4/2013-SEZ dated 31.12.2013 issued by the Ministry, the Specified
Officer / Deputy Commissioner of Customs from time to time issues directions / orders
for specific examination norms / procedures in case of export of gold jewellery etc. The
Jewellery Appraiser is also required to follow such orders/ directions. In case of high
value parcels imported by Gems and Jewellery Units, there shall generally be no
examination of goods unless so directed by the Specified Officer or the Development
Commissioner. Examination may become necessary on the basis of a prior intelligence.
Such intelligence may be developed on the basis of various factors i.e. nature of high
value goods, value of such goods, port of import, antecedents of the Unit, past offences
booked against the Unit, inputs received from any reliable source etc.
[Rule 29(3), 27(10) & 27(11)]

7.2.1. Order dated 03.02.2017 of Deputy Commissioner (Customs), NSEZ, Noida :-

As per this Order, the following examinations norms in respect of export consignments
of Jewellery have been prescribed :-

Type of Jewellery Examination norms

All types Weight- 100% examination
Purity- Random check (on Karatometer)

7.3. Role of Nominated Agencies :- Rule 27(6) of SEZ Rules provides that apartfrom
normal import on outright purchase basis, a Gems & Jewellery unit may also source on
outright purchase basis or loan basis, gold or silver or platinum through the
Nominated Agencies. Accordingly, no direct import of aforesaid goods by a G&J Unit is
allowed. [Ref. : Trade Notice No. 1/2017 dated 23rd August 2017
issued by DC (Cus), NSEZ r/w Rule 27(6)]
41
7.4. Import and Export of Rough Diamonds:- No importand export of rough diamonds
shall be permitted under SEZ scheme unless the shipment parcel is accompanied by
Kimberley Process Certificate issued by the Development Commissioner.
[Rule 27(6)]

7.5. Exit of Gems & Jewellery Unit :-In the event of a gems and jewellery unit ceasing
its operation, gold and other precious metals, alloys, gem and other materials available
for manufacture of jewellery shall be handed over to an agency nominated by the
Central Government at a price to be determined by that agency.
[sub-rule 3 of Rule 74 refers]

7.6. RELEVANT PROVISIONS :

Rule 27,29, 45, 46 & 74 of SEZ Rules,2006

Instructions issued by DoC :-

Trade Notice No. 1/2017 dated

23.08.2017 issued by DC (Cus), Import of Gold on loan basis u/r 27(6) of SEZ Rules
NSEZ

Instruction No. D.12/4/2013-SEZ

Regarding Gems & Jewellery Units
dated 25.04.2013

Minutes of Meeting of DC’s Regarding Installation of Assaying Machine and

conference held on 16.10.2017 Operating Procedure for Gold Testing through GJEPC

Instruction no. D.12/4/2013-SEZ

dated 31.12.2013 Regarding Gems & Jewellery Units

Restriction of Gold content upto maximum limit of 22

Instruction No. 88 dated 16.08.2017 Carats for export of Gold jewellery, including partly
processed jewellery, whether plain or studded and articles

Letter dated 18.06.2014 issued by Clarification regarding Instruction No.D.12/4/2013-SEZ

42
Deptt. of Commerce dated 31.12.2013

Clarification on whether import, re-melt, re-make and

Instruction No. 37 dated 07.09.2009 export of imported finished jewellery is an authorized
activity in SEZ

NSEZ Circular No. 10/33/2009-

Proj/7272 dated 12.07.2013 Value addition norms for Jewellery

Order dated 03.02.2017 of DC(Cus),

NSEZ Examination norms- Jewellery

43
 CHAPTER 8

SECTOR SPECIFIC PROVISIONS

8.1. The SEZs are of mainly three types i.e.Sector Specific SEZ, Multi Product SEZ or
FTWZ (Free Trade & Warehousing Zone). The sector specific SEZs may be set up in
the area of IT/ITES, Biotechnology, Gems & Jewellery, Pharmaceuticals, Textile and
Handicrafts, Agriculture/Horticulture/Pisciculture etc. The DGFT (Directorate General of
Foreign Trade) and DoC (Department of Commerce) have issued specific instructions in
respect of various sectors some of which are enumerated below.

8.1.1. Recycling of Plastic Waste:-

Though as per Rule 18(4) of SEZ Rules,2006, no new Unit may be set up in SEZ
for Recycling of plastic scrap or waste, the following Instructions apply to the functioning
of existing Units engaged in recycling of plastic waste in SEZs:-

1 DGFT Notification 32/2015-20 dated Amendment in Import Policy

14th September 2022 Condition under Chapter 39 of ITC
(HS), 2022 Schedule - I (Import
Policy)
2 Letter F. No. K-43014(16)/9/2020- Policy for Used/Worn Clothing and
SEZ dated 27th May, 2021, the Plastic recycling units in SEZs/EOIs
Department of Commerce (DoC)

3 DGFT Notification No 26/2015 Amendment in Import Policy

dated 24th October, 2019 Condition under Chapter 39 of ITC
(HS), 2022 Schedule - I (Import
Policy)
4 Letter F. No. D- 12/20/2015-SEZ Policy on Units in SEZs carrying on
dated 13th February 2018, the recycling of plastic scrap or waste in
Department of Commerce (DoC) SEZs (Requirement to export not less
than 35% of total annual turnover)

5 Letter F. No. C.6/10/ 2009-SEZ Policy on Units in SEZs carrying on

dated 17.09.2013 issued by DoC recycling of plastic scrap or waste

44
 6 Instruction No.69/2010 dated Guidelines to regulate functioning
04.11.2010 issued by DoC. plastics/Used clothing units in SEZs

7 Instruction No.74/2010 dated Amendment to the Instruction No. 69

31.12.2010 issued by DoC. containing guidelines to regulate
functioning of plastics/Used clothing
units in SEZs
8 Instruction No.48/2010 dated Employment of washing process in the
10.03.2010 issued by DoC. manufacture of agglomerates etc. from
imported plastic waste and scrap

8.1.1.1In the latest development, the DoC vide letter F. No. D-12/20/2015-SEZ
dated 13th February 2018 has brought an important change in the DoC’s letter F. No.
C.6/10/2009-SEZ dated 17.09.2013 by replacing para 3(x) thereof as follows:-

“To ensure that plastic reprocessing units in SEZ fulfill their export
obligations, in addition to meeting their NFE obligation, all such units would
be required to export not less than 35% of the total annual turnover.”

8.1.1.2. Further, the ITC(Import Policy) notified by the DGFT lays down the following
conditions for import of plastic waste and scrap by the Plastic Recycling Units in
SEZ :-

Para D of Policy Conditions of Chapter 39 of ITC(Import Policy) :-

“Import of plastic wastes and scrap by l00% EOUs and units in the SEZ:- While
imports of plastic wastes and scrap by l00% EOUs and units in the SEZ shall
continue to be governed by the provisions of Chapter 6 of the Foreign Trade
Policy/SEZ Act & Rules, the parameters for import of plastic wastes/scrap as
specified hereinabove shall however be kept in view by the Board of Approval
concerned while approving such units under the Scheme.”

8.1.1.3. The relevant conditions of import of Plastic Waste and Scrap laid down
under the Import Policy are reproduced below :-

45
 The specifications and guidelines of import of Plastic Wastes/Scrap are as
follows:

A. Specifications:
(i) Plastic scrap/waste shall constitute those fractions of plastics generated
by various plastic processing operations or those fractions generated in the
production process of plastics in a plant, which have not been put to any
usewhatsoever and as such can be termed as virgin or new material which can
be recycled into viable commercial products using standard plastic processing
techniques but without involving any process of cleaning, whereby effluents are
generated.
(ii) Such virgin/new Plastic scrap/waste shall be permitted for import in
compressed form, films in cut condition, cut tape soft waste and flakes, powders,
pieces of irregular shape (not exceeding the size of 3" x 3").
(ii) Any other category of plastic scrap/wastes which are not covered by the
description/definition as given in sub-paras (i) and (ii) above shall not ordinarily
be permitted.

B. Conditions for import:

(i) Applications for import licences would be granted by DGFT in

consultation with Department of Chemicals & Petrochemicals and
Ministry of Environment & Forests.
(ii) The plastic scrap/wastes conforming to the prescribed specifications
would be permitted only to the actual users who have the required facility
for recycling such crap/waste and who are duly registered with the
competent State/Central authority and also possess clear pollution
clearance certificate from the concerned State Pollution Board where the
unit is located, as well as a capacity assessment certificate.
(iii) Each consignment of plastic scrap/wastes imported shall be accompanied
with a certificate from the factory in which it was generated to the effect
46
 that it conforms to the prescribed specifications. ITC (HS), 2012
SCHEDULE 1 – IMPORT POLICY Section VII Chapter-39 346
(iv) The importer of the plastic scrap/waste shall also be required to furnish a
declaration to the Customs authorities at the time of clearance of goods,
certifying that the plastic scrap/wastes imported by him and for which
clearance is being sought, strictly conforms to the prescribed

47
 specifications and that it is free from any kind of toxic/non-toxic
contamination and has not been put to any previous use, whatsoever.
(v) Before the clearance of the plastic waste/scrap, all imported consignments
of such plastic crap/waste shall be subjected to scrutiny and testing of
samples. Customs authorities shall for this purpose draw a sample and
send the same to the nearest laboratory/Office of the Central Institute of
Plastic Engineering & Technology (CIPET) with a view to having the same
analysed and verified that such imported consignments are in conformity
with the prescribed specifications. Plastic Testing Facilities of CIPET are
listed at Para 3 above.
(vi) In case of misdeclaration regarding the material being free from any
toxic/hazardous substances by the importer, action as per laws of Ministry
of Environment and Forests applicable under the Environment (Protection)
Act, for committing offences leading to damage of environment and
increase in pollution in the country, as modified and in force from time to
time, would be taken by the competent authority. For any other
misdeclaration, laws formulated by the Directorate General of Foreign
Trade, in force from time to time, would also apply and action as per
Foreign Trade (Development and Regulation) Act, 1992 shall be initiated
by the competent authority

8.1.2. Steel Sector-

Vide Instruction No. 87 dated 20th December, 2016, the DoC has issued the
following clarification :-
“In pursuance of Ministry of Steel D.O. letter No. ((1)/2014/-TW (Vol I) dated
01.03.2016 regarding import of non-prime mills left over, scrap and spurious CRGO
material, the Units in SEZs shall import only prime CRGO Steel for the goods to be cleared
to DTA and all the conditions specified in the Steel Products (Quality Control) Second Order
dated 12.03.2012 of Ministry of Steel should be complied with in respect of such goods
cleared to DTA”.

48
 8.1.4. Power Generation in SEZ :-

8.1.3. IT & ITESSector :-

There are a number of SEZs functioning in the Information

Technology/Information Technology Enabled Services (IT/ITES) sector under private
ownership in the jurisdiction of Development Commissioner, NSEZ. The Units in such
SEZs normally import or procure Capital Goods for setting up their facility and
undertake export of Software or IT enabled services. Normally DTA sales are not
involved. The following Instructions / communication issued by the DoC are unique to
SEZ Units in the IT/ITES sector-

1 Instruction No. 110/2022 Guidelines providing standard operating procedure

dated 12.08.2022 issued for Work From Home (WFH) permission for
by DoC implementation of Rule 43A of The Special
Economic Zones (Third Amendment) Rules 2022
2 Instruction No. 85/2016 Allowing of authorized employees of IT/ITES units in
dated 04.08.2016 issued SEZ to Work from Home or Place outside the SEZ
by DoC unit
3 Instruction No.70/2010 Clarification on various Policy and operational issues
dated 09.11.2010 issued relating to IT SEZs
by DoC.
4 Instruction No. 58/2010 Allowing of authorized employees of IT/ITES units in
dated 21.05.2010 issued SEZto work from Home
by DoC
5 Instruction No. 55/2010 Allowing of authorized employees of IT/ITES units in
dated 05.05.2010 issued SEZ to work from Home
by DoC
6 Instruction No. 52/2010 Clarification on broad- banding in IT/ITES Sector
dated 20.04.2010 issued SEZ
by DoC
7 Instruction No. 13/2009 Clarification on Lease of space on shift basis in
dated 03.06.2009 issued IT/ITES SEZ & Disaster Management/ Recovery
by DoC Centre

49
 The first guidelines for power generation, transmission and distribution in SEZs
were issued by the DoC on 27th February 2009. These provided for guidelines in
respect of the following modes of power generation:-

(a) Power plant set up by Developer / Co-Developer

(b) A power generation Unit Set up within the SEZ
(c) A single power plant in SEZ

These guidelines also covered issues relating to ‘Determination of Tariff’, ‘Creation

of separate entities for generation, distribution and transmission of power’, ‘DTA
clearance of power or clearance from processing area to non-processing area and
duties thereon’ and ‘Distribution license’. Guidelines dated 16 th February 2016 have
been prescribed by the DoC (SEZ Division). The various guidelines on the subject are
tabulated below:-

1 Letter NoK-43014(16)/8/2020-SEZ Guidelines for power generation,

dated 07th June 2021 issued by transmission and distribution in SEZs
DoC(SEZ Division)
2 Letter No. P.6/3/2006- SEZ(Vol.III) Guidelines for power generation,
dated 16th February 2016 issued by transmission and distribution in SEZs
DoC(SEZ Division)
2A. Letter No. P.6/3/2006- SEZ dated 6th Guidelines for power generationin
April 2015 issued by DoC(SEZ SEZs
Division)
3 Letter No. P.6/3/2006- SEZ dated 6th Guidelines for power generation in
April 2015 issued by DoC(SEZ SEZs
Division)
4 Letter No. P.6/3/2006- SEZ dated Guidelines for power generation in
21stMarch 2012 issued by DoC(SEZ SEZs
Division)
5 Instruction No. 75 dated 7th February Clarification on Rule 47(3) of SEZ
2011 issued by DoC(SEZ Division) Rules,2006- Duty for sale of power
from SEZ to DTA
Letter No. P.6/3/2006- SEZ.1 dated Guidelines for Power Generation,
27th February 2009 issued by DoC(SEZ Transmission and Distribution in
Division) SEZs

50
8.1.5. Textile Sector :-

The textile industry is primarily concerned with the design, production and
distribution of yarn, cloth and clothing. Garments are also covered under this sector.
The following Instructions have been issued by the DoC concerning the textile units in
SEZ :-

1 Letter No. D-12/20/2015- Policy to regulate functioning of Worn/Used clothing

SEZ dated 13th February Units in SEZs
2018 issued by
DoC(SEZ Division)
2 Letter No. D.6/35/2012- Policy to regulate functioning of Worn/Used clothing
SEZ dated 30th January Units in SEZs
2014 issued by
DoC(SEZ Division)
3 Letter No. D.6/35/2012- Policy to regulate functioning of Worn/Used clothing
SEZ dated 17th Units in SEZs
September 2013 issued
by DoC(SEZ Division)

8.1.6. Gems & Jewellery Sector :-

The provisions relating to G&J Sector have already been covered under Chapter
7 of this compendium.

8.1.7. Units functioning under Rule 18(5) of SEZ Rules, 2006 :-

There are a few Units in NSEZ which are functioning as Trading Units within the
scope of Rule 18(5) of SEZ Rules, 2006. As per said sub-rule (5) of rule 18 ibid :-

(i) The Units in Free Trade and Warehousing Zone set up in other Special Economic
Zone, 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 re-packing without any processing;

50
(ii) Refrigeration for the purpose of storage and assembly of Completely Knocked Down
or Semi Knocked Down kits shall also be allowed by the Free Trade and Warehousing
units undertaking the said activities:
(iii) These Units may also re-sell or re-invoice or re-export the goods imported by them:
Provided also that all transactions by a Unit in Free Trade and Warehousing Zone shall
only be in convertible foreign currency;

8.1.7.1. The benefits under Rule 18(5) ibid shall also be available to the goods held by
the Unit on account of the foreign buyer, DTA supplier and DTA buyer.
(Ref. : Instruction No. 60 dated 06.07.2010 issued by DoC)

8.1.7.2. The relevant Instructions regarding FTWZ operations issued by the DoC are
listed below :-

1 Instruction No. 80 dated Clarification on FTWZ issues- Amendment to

10th March 2014 issued Instruction No. 71
by DoC(SEZ Division)
2 Instruction No. 76 dated Clarification on FTWZ issues
22nd March 2011 issued
by DoC(SEZ Division)
3 Instruction No. 71 dated
12th November 2010
Clarification on Instruction No. 49 on FTWZ issues
issued by DoC(SEZ
Division)
Instruction No. 60 dated Clarification on holding of Goods by units in FTWZ
6th July 2010 issued by
DoC(SEZ Division)
Instruction No. 49 dated Clarifications on FTWZ issues
12th March 2010 issued
by DoC(SEZ Division)

51
8.1.8. Sandalwood :-

The various instructions issued on the import or export of sandalwood and Red
sanders are given below :-

(a) As per O.M. No. 01/91/171/17/AM06/PC-III/EC/4655 dated 11th July 2017 issued
by DGFT(Export Cell), the SEZ Units cannot import ‘Red Sanders Wood’. Further
the SEZ Units which are not required to obtain licenses for import of
Sandalwood, may be mandated to obtain NOC from MOEF&CC for such import
of desired quantity of Sandalwood/products listed in the restricted category. The
SEZ Units are required to route their application through respective SEZ for grant
of NOC through DGFT, New Delhi. The said O.M. also provides that any
subsequent policy changes like QR, MEP, MIP, CITES clearance, port restriction
etc. on these items will also be applicable to SEZ units, unless specifically
exempted.
(b) Vide Public Notice No. 21/2015-2020 dated 31st August 2017, the DGFT has
notified inter-alia the proforma for submission of application for obtaining the
NOC for import of Sandalwood by SEZ Units.
(c) As per ‘Export Policy of Sandalwood’ issued DGFT vide Notification No. 37/2015-
2020 dated 27th January 2017, the export of ‘Sandalwood in any form, but
excluding finished handicraft products of sandalwood, machine finished
sandalwood products, sandalwood oil’ is prohibited. Further, as per DGFT
Notification No. 15/2015-2020 dated 5th July 2017, export of ‘Sandalwood Oil’
has been put under ‘Restricted’ category.
(d) As per O.M. No. 01/91/171/17/AM06/PC-III/EC/4655 dated 11th July 2017 issued
by DGFT(Export Cell), the SEZ Units which are not required to obtain licenses for
export of Sandalwood, may be mandated to obtain NOC from MOEF&CC for
such export of desired quantity of Sandalwood/products listed in the restricted
category. The SEZ Units are required to route their application through
respective SEZ for grant of NOC through DGFT, New Delhi. The said O.M. also
provides that any subsequent policy changes like QR, MEP, MIP, CITES

52
 clearance, port restriction etc. on these items will also be applicable to SEZ units,
unless specifically exempted.
(e) Vide Public Notice No. 21/2015-2020 dated 31st August 2017, the DGFT has
notified the proforma for submission of application for obtaining the NOC for
export of Red Sanders Wood / Sandalwood from SEZ.

8.1.9. Gutkha& Pan Masala- Central / State Govt. Regulations :-

(a) The Food Safety and Standards (Prohibition and Restrictions on Sales)
Regulation, 2011 dated 1st August, 2011 (and clause 2.3.4 thereof) is a central
legislation that prohibits the use of tobacco and nicotine as ingredients in any
food item and inter-alia prohibits the sale of food products such as gutka and
pan-masala (containing tobacco or nicotine). This regulation is applicable to all
States/Union Territories.
(b) The Ministry of Health & Family Welfare vide letter dated 27th August, 2012 had
requested the state governments to examine the issue and pass necessary
orders at state level to implement the provisions of the Act and the Rules framed
thereunder, in the interest of public health.
(c) In pursuance of the above, all States / Union Territories (except Meghalaya and
Lakshadweep) have issued necessary orders / notification to either ban or
enforce ban on the sale of Gutkha and Pan Masala (containing tobacco or
nicotine), under Regulation 2.3.4 and/or Section 30 of the FSS, Act 2006.

It is imperative that the above legislation / provisions / laws passed by various

States should be considered while allowing clearance of the said items.

53
 CHAPTER 9

MISCELLANEOUS PERMISSIONS

9.1. Generally, the Authorized Officer posted at the SEZ is assigned with the function
of monitoring the entry and exit of goods to and fro SEZ in terms of Rule 36 of SEZ
Rules,2006. Various functions viz. assessment of BOE (Import), Shipping Bill, allowing
temporary removals etc. are carried out by the Authorized Officer and do not generally
require countersignature of Specified Officer. However, since DTA removal is governed
by Rule 47 and 48 of SEZ Rules, the assessment and valuation of such goods is to be
done in accordance with Customs Act,1962 and the rules made thereunder.
Accordingly, various provisions relating to second assessment and finalization of
valuation etc. in such cases are the functions within the powers vested with the
Deputy/Asstt. Commissioner of Customs (Specified Officer). Accordingly, BOE(DTA)
and Bill of Export for claiming DBK (where DBK is to be disbursed by the Specified
Officer under Rule 24 of SEZ Rules) may require an approval / countersignature of
Specified Officer. The Appraiser concerned should make a note of such requirements
as may be directed by the Specified Officer in this regard.

9.2. However, SEZ Rules prescribe that in certain cases, Developer or the Unit is
required to seek specific permission from the Specified Officer.These permissions
generally deal with the removal of Capital goods etc. from the SEZ and various other
approvals.

9.3. Various permissions which the Custom Officers (generally the Specified Officer)
have the power to grant under the SEZ Rules are as tabulated below:-

Rule Description
Permission to the Developer to remove goods from the Special
Economic Zone to the Domestic Tariff Area on payment of duty
applicable on such goods.
12(8)

54
 Approval for export or transfer of capital goods and spares by
the Developer (including construction equipment that have
become obsolete or surplus) to another Developer, or Unit
13
Permission for destruction of goods
27(9)
Permission for examination of import/procurement cargo by the
Authorized Officer based on prior intelligence.
27(10)
General permission for frequent of goods entry into and exit from
the Zone (which are not required for carrying out authorized
operations)
33(ii)
Permission for extension of period (to Developer) for utilization
of goods for the authorized operations beyond one year
12(5), 37(1)
Permission for transfer or loan of goods to Units or Developers
in other SEZs or to EOU/EHTP/STP Unit etc. subject to such
conditions as may be imposed.
38(v)
Permission to carry out destruction outside SEZ
39(2)
41(1),
Permission for sub-contracting
42(1)(a)/(c)
Permission to extend the period (beyond the prescribed period)
to bring back the goods sent for sub contracting
41(1)(a)
Permission for removal of moulds or jigs or tools or fixtures or
tackles or instruments or hangers and patterns and drawings to
the premises of sub-contractor(s),
41(1)(h)
Permission to export the finished goods directly from the sub-
contractor’s premises subject to prescribed conditions
42(2)
Annual permission to undertake sub-contracting for export on
behalf of a Domestic Tariff Area exporter, subject to prescribed
conditions
43
Annual permission for Contract Farming
44
Permission to export large quantities of cargo (where it may not
be possible to ship the cargo from the SEZ in one consignment)
in parts
46(1)(e )

55
 Approval of Agency for transfer of goods from the SEZ to the
airport for export through passenger baggage.
46(6)
Permission for sale of surplus power in DTA
47(3)
Approval for donation of computer and computer peripherals,
including printer, plotter, scanner, monitor etc.( imported or
procured from DTA) to the recognized non-commercial
educational institutions or registered charitable hospitals etc.
49(4)(c)
Extension of time period beyond 120 days to bring back the
goods.
51(4)

9.4. Procedure for procurement of goods from DTA:- Rule 27 of SEZ

Rules,2007 inter-alia provides that the SEZ Unit or Developer may procure from DTA
without payment of taxes or cess all types of goods required for authorized operations.
However, availment of exemption and other benefits on such procurements is subject to
various conditions and prohibitions as prescribed under SEZ Rules and in FTP.

9.4.1. Procedure for procurement of goods for authorized operations:-

Rule 30 of SEZ Rules,2006 lays down the procedure for procurement of goods
from DTA. With the introduction of IGST, the ARE1 procedure for various goods has
been done away with. However, the amendment of SEZ Rules,2005 (including Rule 30)
is under consideration of the Commerce Ministry as per recommendations made by the
Committee headed by Dr. L. B. Singhal. Presently, such procurement of goods is
regulated by Rule 89 of CGST Rules,2017, Rule 27 and 30 of SEZ Rules,2006 read
with Section 16 of IGST Act,2017.In accordance with the above provisions, a
mechanism for endorsement of Invoices of goods (as well as of services) has been
devised and a Public Notice No. 03/2018 dated 28.02.2018 has been issued by the
Deputy Commissioner (Customs)-NSEZ in this regard. The said P.N. carries detailed
procedure for endorsement of Invoices (in respect of procurement of services and
goods both).

56
9.4.2. Procedure for procurement of goods for personal use i.e. not meant for
authorized operations:-

Normally, the SEZ Developer / Unit may import or procure gods required for
authorized operations. Further, the proviso to sub-rule (3) of Rule 27 of SEZ Rules,2006
provides that “any goods for the personal use of, or consumptionby officials,
workmen, staff, owners or any other person in relation to aUnit or Developer,
shall not be eligible for exemptions, drawback andconcessions or any other
benefit in accordance with the provisions ofsection 7 or 26”. However, such goods
not required for authorized operations may be brought into SEZ in the following two
ways :-

(a) The goods may be imported on payment of duty by filing the BOE at the
respective port and then the goods after clearance may be presented at the SEZ
gate / brought in as duty paid goods;
(a) The goods may be procured from DTA on payment of IGST, as applicable, and
may be presented at the SEZ gate along with Invoice / transport documents (E-
way Bill) issued by the supplier in terms of Rule 30(11) of SEZ Rules. In this
case, such Invoice / transports document is required to be endorsed to the effect
that no exemptions, drawbacks and concessions have beenavailed on the said
supplies

9.5. Procedure for procurement of Services:-

As per clause (e) of Section 26(1) of SEZ Act,2005, the SEZ Unit / Developer is
inter-alia eligible for exemption from service tax under Chapter-V of the Finance Act,
1994 on taxable services provided to a Developer or Unit to carry on the authorised
operations in a Special Economic Zone. Although with the introduction of GST w.e.f. 1st
July 2017, the Chapter V of Finance Act,1994 is no longer in vogue, and Section 16 of
SEZ Act is yet to be amended, Section 16(1) of IGST Act,2017 inter-alia provides that

57
supply of goods or services or both to a Special Economic Zone developer or a Special
Economic Zone unit shall be “zero rated supply”. Thus, in accordance with Section
16(3) of IGST Act, a registered person (DTA supplier) making zero rated supply shall be
eligible to claim refundunder either of the following options, namely:––

(a) he may supply goods or services or both under bond or Letter of

Undertaking,subject to such conditions, safeguards and procedure as may be
prescribed, withoutpayment of integrated tax and claim refund of unutilised input
tax credit; or
(b) he may supply goods or services or both, subject to such conditions,safeguards
and procedure as may be prescribed, on payment of integrated tax andclaim
refund of such tax paid on goods or services or both supplied, in accordance
with the provisions of section 54 of the Central Goods and Services Tax Actor
the rules made thereunder.

9.5.1. Rule 89 of CGST Rules,2017 lays down that in respect of supplies to a Special
Economic Zone unit or aSpecial Economic Zone developer, the application for refund
under Rule 89 of the said Rules shall be filed by the –

(a) supplier of goods after such goods have been admitted in full in the Special
Economic Zone for authorised operations, as endorsed by the specified officer ofthe
Zone;
(b) supplier of services along with such evidence regarding receipt of services for
authorized operations as endorsed by the specified officer of the Zone:

9.5.2. In accordance with the above provisions, a mechanism for endorsement of

Invoices of services (as well as of goods) has been devised and a Public Notice No.
03/2018 dated 28.02.2018 has been issued by the Deputy Commissioner (Customs)-
NSEZ in this regard. The said P.N. carries detailed procedure for endorsement of
Invoices (in respect of procurement of services and goods both). The DoC vide F. No.
D.12/19/2013-SEZ dated 2nd January 2018 has also issued a Uniform list of Services(66

58
nos.) to be followed in SEZs which is the guiding principle for availment of IGST benefit
on services for use in authorized operations in SEZ.

The DOC subsequently expanded the list to include “Management and Business
Consultant Services” vide Instruction 94 issued vide No D.12/19/2013 - SEZ dated 8th
May, 2019. Such services would be limited to the extent of such value of services
availed of/consumed by the SEZ entity only. further, the unit shall produce evidence to
the effect, to the satisfaction of the authorities concerned, that the said service was
consumed in relation to their authorized operations only.

Since 2019, online utility has been created and made available to the developers/units to
file DTA service procurements in the form of DSPF with facility to upload relevant
documents such as invoices etc. The Authorised Officers can after due verification
approve these forms online.

59
 CHAPTER-10

AUDIT, REFUND, DEMAND & RECOVERY

10.1. Audit in SEZ :-

The Ministry of Commerce & Industry (DoC) vide Notification issued under F.
No. D. 6/40/2012-SEZ dated 5th August 2016 has inserted Rule 79 in SEZ Rules,2006
has made the provisions of audit for indirect taxes in Special Economic Zones.
Therefore, all the authorised operations under Special Economic Zones Act, 2005 and
transactions relating thereto in Special Economic Zones and Units in the Special
Economic Zones shall be audited by the Customs officers from a panel drawn by the
Jurisdictional Development Commissioner in consultation with the Jurisdictional Chief
Commissioner of Customs and Central Excise. The objective and focus of the audit
is to assess the adequacy of regulatory framework, policy implementation, operational
issues and internal controls of SEZs. Fiscal incentives and facilities offered to SEZs
Under the provisions of SEZ Act, several tax incentives and other facilities are offered
to the SEZ Developers and units.
They are:-
10.1.1 Direct Tax Benefits:
I. 100 per cent income tax exemption for Entrepreneurs on export income of SEZ
units under section 10AA of the Income Tax Act for first five years, 50 per cent
for next five years thereafter and 50 per cent of the ploughed back export profit
for next five years,
II. Income Tax exemption for Developers on income derived from the business of
development of the SEZ in a block of 10 years in 15 years under Section
80ͲIAB of the Income Tax Act.
III. Exemption from Minimum Alternate Tax (MAT) under section 115JB of the
Income Tax Act (withdrawn from 1stApril 2012),
IV. Exemption from Dividend Distribution Tax (DDT) under section 115Ͳ0 of the
Income Tax Act(withdrawn from 1stJune 2011),
10.1.2 Indirect Tax Benefits:
I. Duty free import/domestic procurement of goods for development, operation and
maintenance of SEZ units,
II. Exemption from Service Tax (Section 7, 26 and Second Schedule of the SEZ
Act),
III. Exemption from IGST qualifying as Zero Rates Supplies under Section 16 of
IGST Act 2017.
IV. Exemption from Sales Tax, Central Excise Duties for transactions not covered
under GST Acts.
10.1.3 Other Benefits:
I. External commercial borrowing by SEZ units upto US $ 500 million in a year
without any maturity restriction through recognized banking channels,
II. Single window clearance for central and state level approvals, and III.
Exemption from state VAT tax, stamp duty and other levies as extended by the
respective State Governments.
The focus by Customs Audit will be more on the tax incentives availed on
Indirect Tax front.

10.1.4: A Check-List is provided for ease of work and to undertake systematic

Auditing process.

10.2. Refund mechanism:-

All supplies to SEZ Developers, Co-Developers and units of SEZ are treated as
Zero Rated Supplies in terms of Section 16 of the IGST Act 2017. Accordingly, no
supplies effected to these class of buyers either supply of Goods or Supply of
Services need to be on payment of IGST. However, the supplier has the option and
can pay IGST by debiting from his electronic credit ledger, and subsequently claim
such IGST as Cash refund from the jurisdictional Officer of GST. Alternatively, such
supplies can be without payment of IGST also and unutilizable ITC refund can also be
claimed but only by the supplier from the GST authorities in terms of Section 54 of the
CGST Act 2017.

Earlier, prior to introduction of GST it is the responsibility of the recipient SEZ

unit to pay the taxes upfront and claim it as Tax refund subsequently.
Further, there may be instances where an SEZ Unit has paid duty in excess of
the required amount and in such a case, the Unit may file a refund application.
Further, in case of an order by CESTAT or a Court, a refund of the Pre-deposit may
be warranted. CBEC(DGEP) vide Circular No. 11/2017-Cus, dated the 31st March
2017 issued under
F. No. DGEP/SEZ/51/2009 Part-II has provided the mechanism for claiming refund of
such duty as follows:-

(a) The SEZ unit/ Developer shall file the refund application addressed to the
Deputy Commissioner/ Assistant Commissioner of policy or technical, as it may
be called, in the Office of Jurisdictional Commissioner of Customs, Central
Excise, Service Tax or GST as the case may be.
(b) If required, DC/AC (Policy/ Technical or as they may be called in the GST
regime) would seek comments from the office of the concerned Development
Commissioner on admissibility, limitation including aspects of unjust
enrichment of this refund claim under Customs law.

(c) The office of the Development Commissioner must provide comments within a
maximum period of 2 weeks from the date on which such communication is
received from the office of the DC/ AC (Policy/ Technical).
(d) DC/ AC (Policy/ Technical) will issue a Speaking Order while sanctioning such
refund claims.

10.3.1.SEZ unit entitled to claim refund under GST – Madras HC

The Honorable Madras High Court in the case of M/s Platinum Holdings Pvt.
Ltd. Has held that it is a settled position that there can be no insertion of a word or
phrase in a statutory provision or in a Rule which must be read and applied, as
framed and therefore SEZ units are eligible for refund under GST Acts 2017 in terms
of Section 54 of the CGST Act, 2017 read with Section 16 of the IGST Act 2017, Rule
89 of the CGST Rules, 2017, Rule 89(1) of the CGST Rules, 2017. The Honorable
High Court has said that though zero-rated supplies are not subject to the levy of
taxes, the petitioner, in this case has remitted the same as raised in the invoice, albeit
erroneously. Further, the refund provisions under the GST law, providing for a refund,
apply to any person who claims such refund and who makes an application for the
grant of the same. The language of the provision is clear and does not contain or
admit of any restriction in its operation. The statutory scheme for refund admits
applications to be filed by any entity that believes that it is so entitled including the
petitioner SEZ. Thus, it held that the restriction which has been read into the provision
by the Revenue that only supplier is eligible to claim refund is misplaced. Therefore,
the HC allowed the writ and held that the petitioner SEZ unit is entitled to claim refund
of tax paid on purchases.

The same opinion was held and ruled to be correct by the Honorable High Court
of Gujarat, in the case of M/S SE FORGE LIMITED Versus UNION OF INDIA in
R/SPECIAL CIVIL APPLICATION NO. 16056 of 2022 and directed the department to
sanction and refund the amount to the petitioner, accordingly.

10.3. Demand:-

Ministry of Commerce & Industry(DoC) vide Notification issued under F. No. D.

6/40/ 2012-SEZ dated 5th August 2016 has inserted sub-rule (5) in Rule 47 of SEZ
Rules,2006. The said sub-rule (5) inter-alia provides that Demand with regard to
matters relating to authorised operations under Special Economic Zones Act, 2005,
shall be made by the Jurisdictional Customs and Central Excise Authorities in
accordance with the relevant provisions contained in the Customs Act, 1962, the
Central Excise Act, 1944, and the CGST Act, 2017 and the rules made there under or
the notifications issued there under. CBEC (DGEP) vide Circular No. 11/2017-Cus,
dated the 31st March 2017 issued under F. No. DGEP/SEZ/51/2009 Part-II has laid
down the procedure for issuance of ‘Demand’ of Customs duty etc. as follows :-

i. The draft demand/ show cause notice shall be prepared by the Specified
Officer/Authorized Officer in the concerned office of the Development
Commissioner and should be transferred to the DC/AC (Policy or Technical
or as they may be called in the GST regime) in the office of the jurisdictional
Customs/ Central Excise/ Service Tax or GST Commissioner at least 8
weeks before the demand becomes time barred along with all Relied Upon
Documents (RUDs)
ii. DC/ AC (Policy or Technical) will be at liberty to examine all aspects with
respect to the demand, and if necessary, may seek further inputs/
information from the office of the concerned Development Commissioner
before putting up to the appropriate authority based on the monetary limits
prescribed for issuance of the Show Cause Notice from time to time.

iii. Demand for the past period will be issued by the office of the jurisdictional
Commissioner of Customs/ Central Excise/ Service Tax/ GST if it is duly
sponsored by the Specified Officer/ Authorized Officer and the demand
confirms to the time limitation under Customs, Central Excise, Service Tax
or GST laws and procedure prescribed under (i) & (ii) above.

10.4. Recovery of duty:-

Adjudication of ‘Demand’ follows recovery of duties adjudged against the

Unit/Developer. A general principle to be adopted in recovery of duties is that there
shall be no liability to duty on goods lying in the Zone. Only on such goods as are
removed into the Domestic Tariff Area permanently or such goods which are not
accounted for by utilization in the authorized operations, on the presumption that they
have been removed without following proper procedure prescribed in the SEZ Rules,
2006, unless recorded as having been destroyed in accordance with the SEZ Rules,
2006 shall be liable to duty under Section 30 of SEZ Act,2005. A general exception to
the principle of duty leviability arising on removal of goods into the Domestic Tariff
Area is the collection of duty on goods at the time of exit or cancellation of Letter of
Approval; in such cases, duty shall be levied on the goods remaining in the premises
on the assumption that it is not intended for export or movement to a
developer/co-developer or unit in that or any other zone and hence will be removed
into the Domestic Tariff Area at some later stage.

10.4.1. On goods auctioned for any reason by any statutory authority or under any law
for the time being in force, it shall be made clear that goods purchased in auction by
any individual other than a developer/co-developer or unit in that or any other Zone
shall be liable to duty on the auction value separately in terms of Rule 47 and 48 of
SEZ Rules,2006 and the responsibility for payment of such duty shall vest with the
successful bidder (buyer) who shall be required to a file a Bill of Entry for assessment.

10.4.2. In case of electronic waste being appropriated for recovery of duty, th

procedures as provided in the E- Waste (Management) Rules, 2022 which amended E-
Waste (Management) Amendment Rules, 2018 & E-Waste Rules 2016 will have to be followed.

10.4.3. Function w.r.t. recovery of duty shall generally rest with the jurisdictional
Customs and GST Authorities and the Specified Officer shall provide all assistance
for recovery of dues in case the same are recoverable from the SEZ Unit / Developer.

10.4.4. The provisions of Insolvency and Bankruptcy Code 2016 (IBC) shall apply, as
Section 238 of IBC provisions overrides all other laws notwithstanding anything in any
other law, now in force or any document having effect under any such law that is
inconsistent with them. Section 238 is a non-obstante provision. It signifies that a
clause or provision in the Act has the authority to override any other provision or
clause in the Act that conflicts with this or any another legislation. On the other side
also the honorable apex court has ruled in a case between the liquidator of ABG
Shipyard vs the Central Board of Indirect Taxes and Customs that the Insolvency and
Bankruptcy Code 2016 (IBC) would prevail over the Customs Act,1962 to the extent
that once moratorium is imposed on creditor’s recovery action, the customs authority
only has a limited jurisdiction to assess or determine the quantum of customs duty
and other levies.
10.5. Other Relevant Provisions :-

Section 30 of SEZ Act,2005

Rule 47(5) and 79 of SEZ Rules,2006

CBEC (DGEP) Circular No. 11/2017-Cus, dated the 31st March 2017 issued under F. No.
DGEP/SEZ/51/2009 Part-II
 Checklist for Internal Audit as per para 10.1.4: A
Special Economic Zone

Checklist of Special Economic Zone

S.
Particulars
No.
Compliances Notes
Checking of Requirements to be fulfilled by SEZ Units

Requirements before submitting proposal for unit

1
approval

a The Entrepreneur should ascertain space availability

The Unit should not be formed out of splitting

b
/reconstruction of existing business activities.

Shifting of capital assets to the SEZ is subject to

c conditions stated in point 3(vi) under " Direct Tax
Benefits"

2 Requirements of Unit Proposal

Proposal for setting up a unit should be sent to

a Development Commission in Form-F with a crossed
demand draft of Rs. 5000/-.

Project Report highlighting the techno-economic

b
viability of the project.

Checking of tenure of Letter of Approval (LOA) & its other

3
content.

Whether LOA holder sent acceptance of the terms and

4 conditions of LOA to DC withing 45 days from date of
letter of approval.
 Whether the LOA holder executed the Bond-cum-Legal
5 Undertaking in Form H on Rs. 100 non-judicial stamp
paper or not.

Whether the value of Bond is equal to the amount of

effective duties leviable on import and /or procurements
6
of capital goods, inputs and packing material for three
months.
Checking whether in the case of the following kind of
7 operation application has been issued to Development
Commissioner or not.
Including new items of manufacturing or service
a
activities.
Diversification of activities by adding new products or
b
services.
C
Change of name of the implementing agency if the
new agency entrepreneur undertakes to take over the
assets and liabilities of the existing unit.

8 Other Requirements

Whether LOA holder operates both in the SEZ and

a DTA, If yes, whether separate identity should be
maintained with separate books of accounts.

A unit located in private SEZ should furnish copy of its

b lease deed to the DC withing 6 months from date of
LOA.

c Unit should intimate the date of commencement of

production to the DC within 30 days from the date of
commencement of production and production should
be started within one year from date of LOA.

A Unit should remain Net Foreign Exchange positive in

d
terms of Rule-53.

Unit should maintain records of its import-export

e
activities.

f Unit should furnish Annual Performance Returns to DC

 within 90 days of closing of financial year.

Unit engaged in both trading and manufacturing

g activities should maintain separate records for trading
and manufacturing activities.

The Unit must comply with the pollution control

h requirement prescribed by respective State Pollution
Control Boards (PCBs).

Whether Unit is operating only authorized operation

i
as per LOA or not.

Facility & Incentives

Checking Whether 100% income tax exemption on profits
and gains derived from export of goods and services for a
period of five consective years from the date of
1 commencement of production 50% tax exemption of
profits & gain on export for next five years u/s 10AA has
been taken or not. Following conditions should be fulfilled:

Profit eligible for exemption is the profit arised on

a
export turnover.

Unit should not be formed by splitting up or

b
re-construction of business already in existence unit.

Unit should not be formed by transfer of machinery or

c
plant previously used for any purpose.

Whether the unit has availed the option not to pay the
service tax on specified services received and used
a
are wholly consumed in the SEZ instead of claiming
refund after ab initio payments.

Whether the unit has availed the exemption by way of

b
refund of service tax paid on the specified services.

Whether the unit has availed any exemption under GST Act
3.
2017 ?
Whether the unit has procured Goods as Zero Rated
4.
Supplies under Section 16 of IGST Act 2017 and whether
 they have been reconciled and matched with GST Returns
and SEZ Online Portal approvals ?
Whether the unit has procured Services as Zero Rated
Supplies under Section 16 of IGST Act 2017 and whether
5.
they have been reconciled and matched with GST Returns
and SEZ Online Portal approvals ?

6. Whether the unit is availing the benefits of custom duty.

Whether the unit is availing the benefits of non payment of

7.
central excise duty under Rule-19 of Central Excise
Rules,2002.

8.
Whether the unit is availing the benefits of exemption of
CST during the inter-state purchase.

Whether the unit is availing the benefits of exemption from

9
VAT.

Whether the unit / Developer has availed any exemption

10 under Electricity Act of the respective State and if so,
whether they are being used for intended purposes?

**************
 CHAPTER-11

DEBONDING OR EXIT FROM SEZ

11.1. Debonding or Exit of Unit from SEZ

As per Rule 74 of SEZ Rules,2006, the Unit may opt out of Special Economic Zone
with the approval of the Development commissioner. However, such exit shall be
subject to payment of applicable duties on the following goods whether imported or
indigenously procured:-

(i) capital goods,

(ii) raw materials,
(iii) components,
(iv) consumables,
(v) spares and
(vi) finished goods in stock:

11.2. Penalty in case of non-achievement of NFEP

In case the unit has not achieved positive Net Foreign Exchange, penalty may be
imposed under the Foreign Trade (Development and Regulation) Act, 1992.

11.3. Conditions applicable for exit of Unit from SEZ :-

(i) Penalty imposed by the competent authority would be paid and in case an appeal
against an order imposing penalty is pending, exit shall be considered if the unit has
obtained a stay order from competent authority and has furnished a Bank Guarantee for
the penalty adjudicated by the appropriate authority unless the appellate authority
makes a specific order exempting the Unit from this requirement;

64
(ii) In case the Unit has failed to fulfill the terms and conditions of the Letter of Approval
and penal proceedings are to be taken up or are in process, a legal undertaking for
payment of penalties, that may be imposed, shall be executed with the Development
Commissioner;

(iii) The Unit shall continue to be treated a unit till the date of final exit which means the
Unit may continue its operations as per SEZ provisions till final exit.

11.4. Exit of Gems & Jewellery Unit :-

In the event of a gems and jewellery unit ceasing its operation, gold and other
precious metals, alloys, gem and other materials available for manufacture of jewellery
shall be handed over to an agency nominated by the Central Government at a price to
be determined by that agency. [sub-rule 3 of Rule 74 refers]

11.5. Exit under EPCG Scheme

Development Commissioner may permit a Unit, as one time option, to exit from
Special Economic Zone on payment of duty on capital goods under the prevailing
Export Promotion Capital Goods Scheme under the Foreign Trade Policy subject to the
Unit satisfying the eligibility criteria under that Scheme.
[sub-rule 4 of Rule 74 refers]

11.6. Benefit of depreciation on Exit

Depreciation norms for capital goods shall be as given in sub-rule (1) of Rule 49
of SEZ Rules. [sub-rule 5 of Rule 74 refers]

65
11.7. Transfer of Assets by Special Economic Zone Units upon their exit

As per Rule 74A inserted w.e.f. 12th August 2013, a Unit may opt out of Special
Economic Zone by transferring its assets and liabilities to another person by way of
transfer of ownership including sale of Special Economic Zone units subject to the
following conditions:-

(i) the Unit has held a valid Letter of Approval as well as lease of land for not less than a
period of five years on the date of transfer;

(ii) the unit has been operational for a minimum period of two years after the
commencement of production as on the date of transfer ;

(iii) such sale or transfer transactions shall be subject to the approval of the Approval
Committee;

(iv) the transferee fulfils all eligibility criteria applicable to a Unit; and

(v) the applicable duties and liabilities, if any, as calculated under Rule 74, as well as
export obligations of the transferor Unit, if any, shall stand transferred to the transferee
Unit which shall be under obligation to discharge the same on the same terms and
conditions as the transferor Unit.

11.8. Procedure for Exit / Debonding (Custom section):-

(a) Application for exit under Rule 74/74A to be filed with the office of the
Development Commissioner;

(b) On in-principle approval for exit, the details of capital goods, raw materials,
components, consumables, spares and finished goods in stock shall be furnished
to the Specified Officer along with a copy of Stock Register (closing stock) and
duty computation chart in respect of the Custom duties applicable on such stock
of goods in terms of Section 30 of SEZ Act,2005.

66
(c) The Authorized Officer in-charge (Preventive Officer) shall verify the actual stock
w.r.t. the details provided and also the Unit’s stock register as well as the
correctness of the duty computations.

(d) On a confirmation of the duty amount from the Specified Officer, the Unit shall
deposit the duty on the cover of a Challan in an authorized bank and shall furnish
the proof to the office of the Specified Officer.

(e) The Specified Officer after conducting the usual verification of the duty Challan
shall issue an NOC to the Unit for further submission to the office of the
Development Commissioner.

(f) After approval of final exit from the office of the Development Commissioner, the
goods held in stock in the Unit shall attain ‘out of Custom charge’ status.

67