Sub : i) Ministry of Finance Notification No. 45/2005-Customs dated 16thMay, 2005 exempting goods sold from SEZs to DTA from 4% additional duty of Customs

ii) DGFT Notification No. 2 (RE-2005/(2004-2009) dated 13-5-2005 preventing sale of pepper & pepper products in the DTA

i) It may be recalled that Ministry of Finance had imposed an additional duty of customs @4% under Sub-section (5) of Section 3 of Customs Tariff Act, 1975. The additional duty of customs was imposed on ITA-I items. However, Ministry of Finance had issued Notification No. 8/2005-Central Excise dated 1-3-2005 and Notification No. 9/2005-Central Excise dated 1-3-2005, exempting goods sold from EOUs and SEZ units respectively to DTA from this levy of 4% additional duty of customs.

However, SEZ units were not provided exemption from this 4% duty by the field formations on the grounds that Notification No. 9/2005-CX has been issued under Central Excise Act. Field formations of the Customs authorities had taken the view that since SEZ units are “deemed foreign territory”, they are operating under the Customs Act. Hence the notification is to be issued under the Customs Act, 1962. Accordingly EPCES had taken up this issue with Member (Customs) and Tax Research Unit, Ministry of Finance.

Now Ministry of Finance has issued Notification No. 45/2005-Customs dated 16-5-2005 wherein goods produced or manufactured in a Special Economic Zone and brought to any other place in India have been exempted from the 4% of additional duty of customs. This notification has been issued under Sub-section (1) of Section 25 of the Customs Act, 1962. A copy of this Notification is enclosed alongwith.

ii) DGFT has issued Notification No. 2 (RE-2005)/(2004-2009) dated 13th May, 2005 wherein Paragraph 6.8(a) and Paragraph 6.8(h) of the Foreign Trade Policy has been amended. As per amendments carried out under Paragraph 6.8(a), no DTA sale on concessional rate of duty shall be permissible in respect of “pepper and pepper products”. Paragraph 6.8(h) has also been amended to read as follows:-

“EOU / EHTP / STP/ BTP units may sell finished products except pepper and pepper products, which are freely importable under the Policy in the DTA under intimation to the Development Commissioner against payment of full duties provided they have achieved the positive NFE.”

A copy of the notification is enclosed alongwith.

GOVERNMENT OF INDIA
MINISTRY OF FINANCE
(DEPARTMENT OF REVENUE)

New Delhi, dated the 16th May, 2005

26 Vaisakha, 1927 (Saka)

NOTIFICATION
No. 45/ 2005-CUSTOMS

G.S.R. (E).- In exercise of the powers conferred by sub-section (1) of section 25 of the Customs Act, 1962 (52 of 1962), the Central Government, being satisfied that it is necessary in the public interest so to do, hereby exempts all goods produced or manufactured in a special economic zone and brought to any other place in India in accordance with the provisions of the Foreign Trade Policy 2004-2009, from the whole of the additional duty of customs leviable thereon under sub-section (5) of section 3 of the Customs Tariff Act, 1975 (51 of 1975):

Provided that no such exemption shall be applicable if such goods, when sold in domestic tariff area, are exempted by the State Government from payment of sales tax or value added tax.

Explanation.- For the purposes of this notification, “special economic zone” means the special economic zones notified by the Government of India, under section 76A of the Customs Act, 1962 (52 of 1962).

[F.No. 354 /40 / 2005-TRU]

(V. Sivasubramanian)

Deputy Secretary to the Government of India

GOVERNMENT OF INDIA
MINISTRY OF COMMERCE & INDUSTRY
DEPARTMENT OF COMMERCE
NOTIFICATION NO. 2 (RE-2005)/(2004-2009)
NEW DELHI, DATED THE 13th May,2005

S.O.(E) In exercise of powers conferred by Section 5 of the Foreign Trade (Development & Regulation) Act, 1992 (No.22 of 1992) read with Paragraph 1.3 of the Foreign Trade Policy, 2004-2009 as amended from time to time, the Central Government hereby makes the following amendments :

1. Sub-Paragraph 6.8 (a) shall be amended to read as follows :

“Units, other than gems and jewellery units, may sell goods upto 50% of FOB value of exports subject to fulfillment of positive NFE on payment of concessional duties. Within the entitlement of DTA sale, the unit may sell in DTA its products similar to the goods, which are exported or expected to be exported from the units. No DTA sale at concessional duty shall be permissible in respect of motor cars, alcoholic liquors, books, tea (except instant tea), pepper& pepper products, refrigeration unit / compacting / micronisation / pulverization / granulation / conversion of monohydrate form of chemical to anhydrous form or vice-versa and such other items as may be notified from time to time.

Sales made to a unit in SEZ shall also be taken into account for the purpose of arriving at FOB value of export by EOU provided payment for such sales are made from EEFC Account. Sale to DTA would also be subject to mandatory requirement of registration of pharmaceutical products (including bulk drugs).”

2. Sub-Paragraph 6.8 (h) shall be amended to read as follows :

“EOU / EHTP / STP/ BTP units may sell finished products except pepper and pepper products, which are freely importable under the Policy in the DTA under intimation to the Development Commissioner against payment of full duties provided they have achieved the positive NFE.

This issues in public interest.

( K.T. Chacko)
Director General of Foreign Trade
Ex-officio Addl. Secretary to the Govt. of India

(Issued from F.No.01/92/180/20/AM06/PC-II)