The commerce ministry has allowed supply of Scomet (Special Chemicals, Organisms, Materials, Equipment and Technologies) items from the Domestic Tariff Areas (DTAs) to Special Economic Zones without a licence. However, a licence is required for export of specified items either from SEZs or from DTAs to a place outside India.
Scomet norms are specified in Appendix-3 of the Export Policy. These items are capable of dual use — industrial and military. The risk that these items may fall into the hands of terrorists, non-state actors or even states that are considered irresponsible have to be evaluated before granting licences to export the items.
India’s national security or foreign policy goals, its obligations under international treaties and objectives of global non-proliferation of these items are also considerations. Some of the items are prohibited for exports and others are allowed for exports subject to stringent conditions.
End-use of the Scomet items, credentials of end-users, credibility of end-users and declaration of end-use, integrity of chain of transmission of the items from supplier to end-user, export control measures instituted by the recipient state and its capabilities and objectives of programmes relating to weapons and their delivery are some of the factors considered by an inter-ministerial working group before grant of licence to export these items. Rigid disciplines, including on-site verification, are prescribed to ensure end-use for the stated purpose.
SEZs are deemed to be foreign territories and any supplies from DTAs to SEZs are considered exports. The provisions in the Foreign Trade Policy (FTP) and SEZ Act, 2005, made no distinction between supply of Scomet items from DTA to SEZ and physical exports of these items. The latest notification (numbered 93 dated January 6, 2012) makes it explicit that no licence will be required for supply of Scomet items from DTA to SEZ and a licence will continue to be required for export of Scomet items outside the country, both from SEZs and DTAs (including EOUs).
The list of Scomet items was last revised through notification no 38 dated March 31, 2011. The list contains even entries such as chemical and biomaterial manufacturing and handling equipment and facilities — this can cover a wide range of equipment. It is mandatory for all companies and their subsidiaries registered in India and business entities operating in India and involved in the manufacture, processing and use of Scomet items to obtain government permission before entering into any arrangement that involves an obligation to facilitate or undertake site visits, on-site verification or access to records and documentation by foreign governments or foreign third parties, either acting directly or through an Indian party or parties.
Meantime, the Central Board of Excise and Customs (CBEC) took into consideration the fact that several states recognise cost accountants for the purpose of a VAT audit and it would be hardship to trades already using statutory auditors and cost accountants to get the required certificate from chartered accountants for grant of refund of four per cent CVD. So, the CBEC issued a customs circular allowing statutory auditors or cost accountants to also certify that the four per cent CVD was not passed on by importers to any other person, for the purpose of claim of refund from customs.