2023 (6) TMI 595 - AAR - Customs

Re-import of goods/equipment from a SEZ/FTWZ to DTA - Applicability of serial number 5 of the Notification No. 45/2017-Cus. dated 30.06.2017 - Whether the goods are re-imported? - Whether the re-imported goods have been exported by a hundred percent export-oriented undertaking or a unit in a Free Trade Zone (Special Economic Zone)? HELD THAT - The condition of re-export of the equipment after their import availing exemption under Notification 50/2017-Cus. is a condition built in the contract of the importer with their Contractor and the applicants have themselves admitted that it is not a condition prescribed under Notification No. 50/2017-Cus. However, the applicant has attempted to make a case starting with export of such equipment(s) on which exemption vide Notification No. 50/2017-Cus has been availed. The Notification No. 50/2017-Cus. provides for compliance with conditions prescribed under the notification. Non-fulfilment of such condition(s) will make the importer liable to pay differential duty along with interest, fine, penalty etc., as the case may be. It appears that the applicant has introduced concept of 'export' in relation to such imported equipment(s) in order to link it with Notification No. 45/2017-Cus which is not warranted but un-necessary as the same appears to have been done to confuse the issue for claiming undue exemption from payment of duties/taxes. Further, there is no doubt that for availment of exemption vide Notification No. 45/2017-Cus., goods have to be first exported and such exemption is not applicable to goods which have been warehoused, as in the current case. The use of words, 'imported', 'exported' and 'procured', in the provisions as per section 7 of the Special Economic Zones Act, 2005 will lead to inference that different meanings have been assigned to these words under the Special Economic Zones Act, 2005 and these words are not to be used inter-changeably. Further, as per the instant application, goods shall be first imported in a Domestic Tariff Area which after usage by a Sub-contractor gets transferred/warehoused to/in FTWZ by the importer of the goods i.e the applicant. As such this activity is covered under the term, 'export' as defined under the Special Economic Zones Act, 2005 as under Subsection (m) of section 2 of the Special Economic Zones Act, 2005, meaning of 'export' inter-alia includes supplying goods, or providing services, from the Domestic Tariff Area to a Unit or Developer - this activity of transfer of goods from FTWZ to DTA cannot be termed as import/re-import in terms of the Special Economic Zones Act or Customs Act, 1962, thus not covered under section 7 of the SEZ Act, 2005 and hence no exemption from duties/taxes is admissible. The applicant while quoting CBIC Circular No. 21/2019-Customs has attempted to add another point in their support for claim of exemption vide Notification No 45/2017-Cus. However, it is noted that the concerned Commissioner has rightly mentioned that the Circular has been issued in a different context and the applicant has tried to read it out of context; it is apparent that the clarification vide the said circular has been issued w.r.t. goods which were exported earlier for exhibition purpose or on consignment basis however the applicant does not intend to export the goods either for exhibition or on consignment basis - applicant has drawn attention to rule 48 of the SEZ Rules, 2006, however this rule inter-alia states that where goods procured from DTA by a Unit are supplied back to the DTA, as it is or without substantial processing, such goods shall be treated as re-imported goods and shall be subject to such procedure and conditions as applicable in the case of normal re-import of goods from outside India. Under the SEZ Act, 2005 read with SEZ Rules, 2006, words 'import' and 'procure' have been assigned different meanings. It is also important to note that activity of bringing goods from a Unit or Developer in SEZ to DTA is not covered under the definition of the term, 'import ' under the SEZ Act, 2005, therefore such transfer from SEZ to DTA cannot be termed as 're-import'. Moreover, as per dictionary meaning of the word, 'procure ' is 'to obtain something' but when the goods are being warehoused in FTWZ, these are not procured by a Unit or Developer, therefore when transfer of goods from DTA to FTWZ or FTWZ to DTA is neither covered under the term 'procure' nor 'import', therefore such transfer/supply of goods cannot be treated as 'reimport' for application of procedures and conditions as applicable in the case of normal re-import of goods from outside India. Notification No. 45/2017-Cus is not applicable in the instant case. The facts of the application amply indicate that goods have been exported by units in FTWZ, which again makes the said Notification, inapplicable in view of the second proviso of the Notification. Moreover, there is no condition for 're-export' of goods under the Notification 50/2017-Cus., however a deeming fiction has been created by bringing in 're-export' which appears to have been done to deviate from the issue and the word 'export/re-export' is being un-necessarily equated with warehousing of goods.

Summary

Issues Involved:
1. Applicability of Serial Number 5 of Notification No. 45/2017-Cus. for re-import of goods/equipment from SEZ/FTWZ to DTA.
2. Interpretation of terms "export," "import," and "re-import" under SEZ Act, 2005 and Customs Act, 1962.
3. Relevance of Circular No. 21/2019-Customs in the context of the applicant's claim.

Summary:

Issue 1: Applicability of Serial Number 5 of Notification No. 45/2017-Cus.
The applicant sought a ruling on whether they are eligible to claim exemption from customs duty, IGST, and compensation cess on re-import of equipment from SEZ/FTWZ into DTA under Serial No. 5 of Notification No. 45/2017-Cus. The applicant argued that the intent of Notification No. 45/2017-Cus. is to exempt goods re-imported as such from any customs duty, provided no export incentives were availed initially. The applicant claimed that since the equipment would be re-imported without any substantial processing and without availing any export incentives, they should be eligible for the exemption.

Issue 2: Interpretation of Terms under SEZ Act, 2005 and Customs Act, 1962
The concerned Commissioner of Customs argued that the Notification No. 45/2017-Cus. clearly denies duty exemption for goods exported from a 100% EOU or a unit in FTWZ. The Commissioner stated that the applicant's reliance on Circular No. 21/2019-Customs was misplaced, as it was issued in a different context. The Commissioner emphasized that the goods being warehoused in FTWZ do not qualify as "export" or "re-export" under the SEZ Act, 2005 and Customs Act, 1962.

Issue 3: Relevance of Circular No. 21/2019-Customs
The applicant cited Circular No. 21/2019-Customs to support their claim, arguing that it clarifies that goods sent out of India without availing any export incentives should be entitled to exemption upon re-import. However, the Commissioner pointed out that the Circular was issued for goods exported for exhibition or on consignment basis, which does not apply to the applicant's case.

Judgment:
The Authority for Advance Rulings concluded that Notification No. 45/2017-Cus. is not applicable in the instant case. The goods have been exported by units in FTWZ, making the Notification inapplicable under its second proviso. Additionally, the terms "export," "import," and "re-import" have specific meanings under the SEZ Act, 2005, and the movement of goods from FTWZ to DTA does not qualify as "re-import." The Authority ruled that the applicant's attempt to equate warehousing with "export/re-export" was unwarranted and aimed at claiming undue exemption. Therefore, the applicant is not eligible for the exemptions sought under Notification No. 45/2017-Cus.