L.B. Singhal
Director General

CBEC Circular No. 11/2004-Cus dated February 5, 2004 regarding DEPB benefit in respect of supplies made by DTA units to SEZ Units

As you are aware, Department of Revenue has issued Circular No. 11/2004-Cus dated 5-2-2004 stating that since Chapter X A has not become operational so far, the benefit of DEPB does not become legally available in respect of supplies made by DTA units to SEZ units. This Circular has clarified that this benefit of DEPB Scheme, in respect of supplies made by DTA units to SEZ units, can only be allowed on and from a future date when Chapter XA is brought into operation. In case benefits of DEPB Scheme was extended in the past then recovery action should be initiated immediately.

This is a very disturbing Circular which has affected large number of SEZ units in the country. We are strongly of the opinion that this Circular is not correct because in the EXIM Policy announced on 31-3-2003, in Paragraph 7.1(b) of the EXIM Policy, it was clearly stated that goods and services going into the SEZ area shall be treated as exports. Paragraph 7.9(a) also mentioned clearly that such supplies shall be entitled for DEPB. For making these provisions operative, Department of Revenue had also issued Circular No. 25/2003 on 1-4-2003. This Circular had also stated that “Henceforth” supplies from DTA to SEZ shall be eligible for DEPB. In view of this position we have taken following action:-

-I had a meeting with Shri Jayant Dasgupta, Joint Secretary (JS), Ministry of Commerce & Industry and Shri Ashok Kumar Meena, Deputy Secretary (DS), Ministry of Commerce & Industry, on 9-2-04 in his office and informed him about this disturbing Circular and the anguish caused to all the SEZ units. The Joint Secretary fully appreciated the magnitude of the Circular and assured that the matter would be taken up with the Ministry of Finance immediately.

-On 9-2-2004 at 3.30 p.m. JS, myself and DS, had a meeting with Shri A. K. Singh, Chairman, CBEC in his office and explained the situation to him. Mr. Singh has also assured that he will get this issue examined immediately.

-JS, myself and DS, had a meeting with Shri Arun Jaitley, Honourable Minister for Commerce & Industry on 9-2-2004 at 6.30 p.m., in the Chamber of Honourable Commerce & Industry Minister. This position was fully explained to him and he has also assured that he will take up this issue with the Finance Minister.