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Ministry of Finance
Department of Revenue
Central Board of Excise &
Customs
Directorate General of Export Promotion
Circular No.
11/2017-Cus
New Delhi, dated the 31st 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 functional 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:
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Sl.No.
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Functional Operation
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Standard Operating Procedure (SOP)
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1
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Refund
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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.
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2
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Demand
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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.
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3
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Adjudication
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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.
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4
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Review & Appeal
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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.
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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
[F.No.
DGEP/SEZ/51/2009 Part-II]
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