Circular No. 11/2017-Cus
F.No. DGEP/SEZ/51/2009 Part -II
Ministry of Finance
Department of Revenue
Central Board of Excise & Customs
Directorate General of Export Promotion
**********
New Delhi, dated the 31
st
March, 2017
To
All Principal Chief Commissioners/ Chief Commissioners/ Principal
Commissioners of Customs, Central Excise & Service Tax
Sub: Clarification regarding amendment in Special Economic
Zone Rules, 2006 in Rule 47, after sub -rule (4) dated
05.08.2016 – reg.
Madam/ Sir
Representations have been received from field formations requesting
clarification regarding amendments made in the Special Economic Zone
Rules, 2006 by way of inserting a new Rule 47 (5) brought vide Department
of Commerce (DoC) Notification No. GSR 772(E) dated 05.08.2016 wherein
functional operations like Refund, Demand, Adjudication, Review and
Appeal are to be made by jurisdictional Customs and Central Excise
authorities in accordance with the relevant provisions contained in the
Customs Act, 1962 & Central Excise Act, 1994 and the Finance Act, 1994.
2. Doubts have been raised regarding operationalization of these
functions, appropriate authority and time limitation in respect of these
functional operations, especially refund claims filed prior to the date of
coming into effect of the said notification, i.e. 05.08.2016. It has been
further asked to clarify as to who would be the appropriate authority, the
Development Commissioner or the jurisdictional Customs Authority to raise
demand of duty, if need arises, in respect of un-utilized capital goods/raw
materials by a unit in case it exits/ opts out of the SEZ.
3. Matter has been examined by the Board. The following clarification is
accordingly issued in this regard.
3.1 With regard to whether these functi onal operations of refund,
demand, adjudication etc. are to be handled prospectively or retrospectively,
it is a settled law that unless, otherwise expressed specifically for
retrospective application in the notification itself, all notifications are
applicable prospectively only. Therefore, all new cases of refund, demand,
adjudication, review and appeal are to be made by the concerned
jurisdictional authorities of Customs, Central Excise and Service Tax under
the provisions of the respective Acts. Also, with the coming into effect of the
GST laws in the near future, apart from jurisdictional Customs
Commissionerates, the jurisdictional GST Commissionerates will be
responsible in respect of these functional operations with effect from the day
GST is rolled out.
3.2 The standard operating procedures in respect of these functional
operations would be as provided in the table below:
Sl.No. Functional
Operation
Standard Operating Procedure (SOP)
1 Refund i. 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.
ii. 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.
iii. 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).
iv. DC/ AC (Policy/ Technical) will issue a Speaking
Order while sanctioning such refund claims.
2 Demand 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.
3 Adjudication All pending demands shall be adjudicated by the
appropriate authority as prescribed under the
Customs, Central Excise, Service Tax or GST laws
and the rules made there under including demands
issued prior to 05.08.2016 because the act of
adjudication is prospective in nature.
4 Review &
Appeal
Same as provided under the Customs , Central
Excise, Service Tax or the GST laws and rules made
there under. In case, a demand gets confirmed, the
realization there of must be initiated by the
jurisdictional Customs/ Central Excise / Service
Tax/ GST authority. However, the office of the
Development Commissioner will assist the Customs
authority in such realization as they have the BLUT
(Bond cum Letter of Undertaking) signed by the
unit/ developer and they are administratively under
their jurisdiction.
3.3 The question now arises as to how the old cases of refund pending as
on the date of the coming into effect of this notification will be sanctioned/
entertained by the Customs, Central Excise or Service Tax or Central GST
authorities. The gap in the law was that there was no provision of giving
refund in SEZ law. That provision has now been extended by way of
amending SEZ Rules by inserting new Rule 47 (5) empowering officers of
Customs to issue refund claims. Therefore, refund cases of past, which are
otherwise in order, both on account of limitation and merit (even though
filed in the office of the Development Commissioner) should be issued by
Customs officers.
3.4 The issue of interest on delayed payment of refund may arise in some
cases. However, in such cases, the date on which such refund claims are
received by jurisdictional Customs, Central Excise or Service Tax or Central
GST field formations would be relevant for our officers for the purpose of
interest rather than the period for which it was lying with SEZ authorities,
for which DOC will take necessary action as deem fit by them, if need arises.
3.5 The second issue relates to appropriate authority to demand duty in
case a unit opts out of the SEZ scheme. As per Rule 74 of SEZ Rules, 2006,
such exit shall be subjected to payment of applicable duties on the imported
or indigenous capital goods, raw materials, components, consumables,
spares and finished goods in stock. The proviso to the said Rule states that
if the unit has not achieved positive net foreign exchange, the exit shall be
subjected to penal action under the provisions of Foreign Trade
(Development and Regulation) Act, 1992. Therefore, the Development
Commissioner under the said Act may impose penalty on unit for not
achieving positive net foreign exchange. However, in respect of duty benefits
already taken on the unutilized capital goods/ raw materials for carrying out
authorized operations, demand, adjudication and appeal thereof shall be
made by the jurisdictional Customs, Central Excise & Service Tax authority
under Rule 47(5) of the SEZ Rules, 2006 as being brought out by
notification GSR 772(E) dated 05.08.2016 following procedure given in point
no. (i) and (ii) against ‘Demand’ in the table above.
4. Difficulty, if any, in the implementation of this circular may be
brought to the notice of the Board. Hindi version will follow.
Sd/-
(Saroj Kumar Behera)
Joint Director
