An overseas party places an order on a Domestic Tariff Area (DTA) unit for delivering raw materials to a Special Economic Zone (SEZ) unit. The SEZ unit manufactures finished products out of such raw materials and effects exports from the SEZ, with export documents containing names of both DTA and SEZ units, and remits money towards the cost of such raw materials to the DTA unit and manufacturing charges to the SEZ unit. Can such money received by the SEZ unit in foreign exchange form part of export turnover for Section 10AA purposes? As per explanation 1 (i) to Section 10AA of the Income Tax Act, 1961, “export turnover” means the consideration in respect of export by the undertaking, being the unit of articles or things or services received in, or brought into, India by the assessee but does not include freight, telecommunication charges or insurance attributable to the delivery of the articles or things outside India or expenses, if any, incurred in foreign exchange in rendering of services (including computer software) outside India.
Therefore, in my opinion, the consideration for services of ‘job-work’ rendered by the SEZ unit (referred by you as manufacturing charges) can form part of the export turnover of the SEZ for the purpose of the said Section 10AA. Our foreign buyers bought goods from us during their visit to our factory and paid immediately in freely convertible foreign currency. We deposited the same with our bankers the very next day and obtained a foreign inward remittance certificate (FIRC). The buyers want to take it as tourist baggage when they leave the country. Can duty drawback be claimed on such exports? So long as there is a clear link between the goods purchased in India and their export on an appropriate shipping bill filed under Section 50 of the Customs Act, 1962, prescribed for the DBK Scheme, even if the buyer is a tourist visa holder, and the foreign exchange was declared by him on arrival to the Customs on a Currency Declaration Form, and the same was duly encashed with an authorised dealer, then such goods will have to be treated as exports from India. So, you may file the shipping bill in your own name (not the name of foreign tourist), showing the visiting tourist or any third party as consignee.
You may have obtained a copy of the currency declaration form that the tourist filed while entering the country. Please submit that to the Customs along with your FIRC along with copy of contract/order, if you have any. In this connection, you may refer to the CBEC Customs Circular no.36/98 dated 20.05.1998 and 61/98 dated 25.08.1998 for other conditions and safeguards stipulated. We refer to the guidelines for availing of input combination for pharmaceutical products manufactured through non-infringing process issued through DGFT Policy Circular 19/2010 dated 14.02.2011. Please clarify what is meant by non-infringing process. It means manufacture of a non-patented product through a process that is different from a patented process.
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