Sales tax rules apply in SEZ

CHATROOM

We applied and received the pre-export DFIA License, and cleared the goods by debiting the duty amount to the DFIA. Now, please clarify if it is necessary to manufacture the garment with the same imported fabric?". If so, and we have not exported the resultant product manufactured with imported material then what is the corrective action? Can we amend the shipping bill from Pre Export to Post Export DFIA Application or DEPB Application?

As per condition no. (vii) of the exemption notification no. 40/2006-Cus. dated 1.5.2006 relating to imports under the duty free import authorisation, the exempt materials shall not be disposed of or utilised in any manner, except for utilisation in discharge of export obligation, before export obligation under the said authorisation has been discharged in full. Therefore, unless the export obligation is fully discharged, the materials imported under DFIA cannot be utilised for any other purpose.

If you have fulfilled the export obligation against the DFIA, by using the materials that are not imported under the DFIA in question, then you may submit necessary documents to the authorities who issued the DFIA and obtain the export obligation discharge certificate and on that basis, you may get your bond released from the customs. In this connection, you may take note of condition no. (v) of the said exemption notification.

The customs may permit conversion of shipping bills as per CBEC Circular no. 4/2004-Cus. dated 16.01.2004. It says, "as regards permitting conversion of shipping bills from one export promotion scheme to another is concerned, it is clarified that such conversion should only be allowed where the benefit of an export promotion scheme claimed by the exporter has been denied by DGFT/MOC or customs due to any dispute."

We are exporting readymade garments, wherein on getting approval as 100% EOU but not bonded can we continue to avail DEPB/DBK benefit on our export and shall be eligible for deduction under Section 10B Income Tax Act ?

Bond condition is not specified in Section 10B of the Income Tax Act. Even under the Foreign Trade Policy, the excise/customs procedures have been mentioned only in the context of duty free procurement etc.

You may, however, refer to DGFT Policy Circular no. 6(Re-98)/98-99 dated 20.05.1998, which clarifies that the exports effected by EOUs / EPZ units, whether directly or through third party are not entitled for DEPB benefits / discharge of export obligation under advance licence. It says that if any such instances have come to the notice of Regional Licensing Authorities, then, the enforcement proceedings must be initiated immediately. In the case of third party exports, as per Paragraph 3.54 of the Exim Policy, 1997-2002, the shipping bills must indicate the names of both the manufacturers and the third party. It is clarified that while indicating the name of the manufacturer in such cases, the status of the unit i.e 100% Export Oriented Unit or Unit in the Export Processing Zone also must be clearly indicated.

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