Transfer of Goods/Equipment from SEZ/FTWZ to DTA is Not Re-Import: Customs AAR [Read Order]

In a recent decision the New Delhi Bench of the Customs Authority for Advance Ruling ( AAR), ruled that the activity of bringing goods from a Unit or Developer in Special Economic Zone (SEZ)/Free Trade Warehousing Zone (FTWZ) to Domestic Tariff Area (DTA) is not covered under the definition of the term, import under the Special Economic Zones (SEZ) Act, 2005, therefore such transfer from Special Economic Zone (SEZ) to Domestic Tariff Area (DTA) cannot be termed as re-import.

In the application for advance ruling, the applicant, Baker Hughes Oilfield Services India, stated that, they are providing mining services or support services to mining to oil & gas exploration and production companies across India such as Oil and Natural Gas Corporation and Cairn India.

In pursuance to providing the mining services or support services to mining, they will be importing equipment(s) required for providing such services; the equipment being used for oil and gas exploration projects will be imported from outside India at a concessional rate of customs duty under SI. No. 404 of the Notification No. 50/ 2017 – Customs dated 30.06.2017 on the basis of the essentiality certificate from the respective customer.

However, where they foresee that the same equipment will be required for other contracts in India, the applicant will export the equipment to a Logistics Service Provider (LSP) located in a SEZ/ FTWZ and it is pertinent to note that the applicant will not avail any kind of duty incentives or benefits when this equipment is being sent from DTA to SEZ/FTWZ.

The applicant contended that when the equipment will be sent from DTA to FTWZ with the LSP which is not a transaction of supply and no drawback or any other exports incentive is being availed against the same, hence, a further clearance of these equipment in the same form into the DTA should be considered as re-import of equipment from FTWZ to DTA and must be entitled for the exemption from customs duties, IGST and compensation cess as provided in the Notification No. 45/2017-Cus. dated 30.06.2017.

The Commissioner of Customs stated that the cited circular has to be read along with the definition of’Supply’ as per the provisions of GST laws and the applicant has not brought the facts relating to the nature of transactions with the contractors/units in FTWZ. Thus, any reliance on the Circular cannot be considered; moreover, holding of goods by FTWZ units, temporarily cannot be equated with the compliance of condition of export for the purpose of re-export in terms of Customs notification and then re-import to DTA.

A Single Member Bench comprising Anamika Singh, Secretary observed that “The 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’.  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.”

To Read the full text of the Order CLICK HERE

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