Deemed export treatment for DTA supplies to SEZ units may be supported by invoices and bank realisation certificates.

Supplies by a domestic tariff area unit to a special economic zone unit were treated as deemed exports under the Foreign Trade Policy because the goods did not leave India and the policy's list of specified supplies was not exhaustive. The Special Economic Zones Act and Rules did not displace that policy entitlement, as the Act's export definition and deeming fiction operated only for their limited statutory purpose and did not override the export incentive regime absent inconsistency. On the facts, invoices and bank realisation certificates could evidence discharge of export obligation, and a bill of export was not indispensable.

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Issues: (i) whether supplies made by a domestic tariff area unit to a unit in a special economic zone constituted deemed exports under the foreign trade policy, and whether paragraph 5.13(b) of the handbook of procedures applied; (ii) whether the special economic zones act and rules displaced the entitlement under the foreign trade policy and required a bill of export as the only proof of discharge of export obligation.

Issue (i): whether supplies made by a domestic tariff area unit to a unit in a special economic zone constituted deemed exports under the foreign trade policy, and whether paragraph 5.13(b) of the handbook of procedures applied.

Analysis: Paragraph 8.1 of the foreign trade policy defines deemed exports as transactions in which goods supplied do not leave the country and payment is received in Indian rupees or free foreign exchange. Paragraph 8.2 lists specified categories of supply, but it is not exhaustive. The supply of goods to a unit in a special economic zone remained within India and satisfied the definition in paragraph 8.1. The categories in paragraph 8.2 did not exclude such supplies, and the fact that the supplier was not a contractor or sub-contractor also meant paragraph 8.2 did not operate to exclude the transaction.

Conclusion: The supplies were deemed exports and paragraph 5.13(b) governed the proof of export obligation discharge.

Issue (ii): whether the special economic zones act and rules displaced the entitlement under the foreign trade policy and required a bill of export as the only proof of discharge of export obligation.

Analysis: Section 2(m)(ii) of the special economic zones act defines export only for that Act. Section 51 gives the Act overriding effect, but only where its provisions are inconsistent with other law. Section 53(1) creates a deeming fiction that a special economic zone is outside the customs territory of India only for authorised operations, and that fiction cannot be extended beyond its stated purpose. Rule 23 of the special economic zones rules supports export benefits for supplies from the domestic tariff area, while Rule 30 regulates entry and assessment for SEZ procurement and does not control entitlement under the foreign trade policy. The absence of a bill of export was therefore not ative where supply invoices and bank realisation certificates evidenced actual supplies and receipt of payment.

Conclusion: The special economic zones act and rules did not displace the foreign trade policy entitlement, and a bill of export was not indispensable on the facts found.

Final Conclusion: No ground was made out to reopen the earlier view that the supply transactions qualified for export benefit on the basis of deemed export treatment and supporting invoices and bank realisation certificates.

Ratio Decidendi: A deeming fiction created for a limited statutory purpose cannot be extended to defeat entitlement under a separate export incentive regime, and where the policy definition of deemed exports is satisfied, supporting invoices and bank realisation certificates may suffice in place of a bill of export unless the governing policy expressly makes that document indispensable.

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