In CAAR/Delhi/Baker Hughes/01/2023 -AAR- AAR (Delhi) denies M/s Baker Hughes Singapore exemption on re-import of equipment from Special Economic Zone (SEZ)/Free Trade Warehousing Zone to Domestic Tariff Area
Member Anil Kumar Sapra [28-06-2023]

Read Order: In Re: Baker Hughes Singapore Pte

Chahat Varma

New Delhi, July 20, 2023: The Delhi bench of the Authority for Advance Rulings has recently ruled that M/s Baker Hughes Singapore Pte (applicant) was not eligible for customs duty, IGST, and compensation cess exemption on the reimport of equipment from Special Economic Zone (SEZ)/Free Trade Warehousing Zone (FTWZ) into the Domestic Tariff Area (DTA) under Notification No. 45/2017-Cus. The ruling stated that the transfer of goods from FTWZ to DTA did not meet the criteria of 'import' or 're-import' as per the Special Economic Zones Act, 2005 (SEZ Act). As a result, the notification was deemed inapplicable, and no exemptions from duties and taxes were granted.

In the present matter, the applicant had sought an advance ruling on their eligibility to claim exemptions for customs duty, IGST, and compensation cess on the reimport of equipment from SEZ/FTWZ to DTA. They explained that they imported equipment for oil and gas exploration projects at a concessional customs duty rate. Once a contract was completed, the equipment was exported to a Logistics Service Provider in SEZ/FTWZ. If the same equipment was needed for other contracts in India, the applicant intended to reimport it from SEZ/FTWZ to DTA.

The bench of Anil Kumar Sapra acknowledged that according to the applicant's case, the goods were first imported into a DTA and subsequently transferred to or warehoused in a FTWZ. This initial importation was considered an export under the SEZ Act. However, the bench held that the transfer of goods from FTWZ to DTA or DTA to FTWZ did not qualify as import or re-import under the provisions of the SEZ Act or the Customs Act, 1962. Therefore, such transfers were not covered under section 7 of the SEZ Act, 2005.

Furthermore, the bench highlighted that units in FTWZ were permitted to hold goods for dispatch and engage in trading activities without processing, labelling, packing, or repacking, as per Sub-rule (5) of Rule 18 of the Special Economic Zone Rules, 2006 (SEZ Rules). In this case, the goods were imported from FTWZ for a specific contract purpose, claiming exemption from duties at the time of import. Consequently, the transferred goods from FTWZ to DTA cannot be considered re-imported goods, making Notification No. 45/2017-Cus inapplicable.

In conclusion, the bench determined that the terms ‘import’ and ‘procure’ held distinct meanings under the SEZ Act, 2005, and the SEZ Rules, 2006. The transfer of goods from a unit or developer in SEZ to DTA did not fall within the definition of import, and therefore cannot be categorized as re-import.