Withdrawal of self procured empty chemical barrels out of SEZ project, chennai

[harish kumar k]

Our organisation took a work order to execute development works in an SEZ Project. As part of execution, we are procuring Concrete Chemicals directly from Vendor partly from their Chennai Godown and 60% from their Bangalore works upon payment of Excise Duty, VAT etc. Empty barrels are returnable to Vendor in all these transactions.The said chemical was used as Plasticizer in concrete production for execution of activities as per Work order issued by client.

Now we have to withdraw empty barrels and approached Client for permission. Customs AO insisting that we have to pay Duty on the cost of Empty barrels while taking out from SEZ premises.

Please clarify the applicability of levy of Duty on Empty Barrels as we have not availed any SEZ benefits on Raw Material.

[Mahir S]

First of all , it is not clear as to how materials are procured on payment of excise duty, as you being a Developer in SEZ.

[harish kumar k]

L&T Modular Fabrication Facilities is an SEZ unit of L&T Ship Building had awarded contract to our organisation for "Development works - Jetty Construction" which involves Civil works, Piling etc. We have set up a Batching Plant for concrete production. and procured

CEMENT,REINFORCEMENT STEEL, M S PLATES were provided by L&T Modular Fabrication Facilities with SEZ Benefits.

Rest of CONSUMABLES, SAND, STONE AGGREGATE, ADMIXTURE (CONCRETE ADDITIVE CHEMICAL IN PLASTIC BARRELS) were procured directly by contractor undertaken work order for construction of development of Jetty I.e. our organisation.

Now, after completion of Concrete production for civil works, we need to handover Empty Chemical barrels to Chemical supplier.

A O Customs stationed at L&T Modular Fabrication Facilities insists that the empty barrels cannot be taken out without payment of duty.

Our contention is that We, "the Contractor" had procured the chemical upon payment of applicable Excise & Sales Tax fully. We have not availed any SEZ Benefits in this transaction. Empty Barrels are just a packing for the Chemical and are not part of contents specified in Invoice. Invoice is valued for Chemical only. Value of Empty Barrels not mentioned in the Invoice at all.

Please advise. Shall we remove empty barrels out of SEZ premises for returning to Chemical Supplier? Do this transaction attract any Duty payments to office of AO, SEZ?

[Mahir S]

Sir ,

Sorry for delayed reply as I am out of station. Regarding your query -

1) Duty on employment barrels is sought based on noti no 6/2105 CE NT.

2) It is a settled law since long back that no duty is payable on such empty barrels, scrap etc. in view of SC judgement in West Coast Industrial Gases. So no duty is payable in your case.

3) However in your case , you need to convince that such empty barrels are removed without any consideration,

AI Summary

Duty on empty barrels exempt if returned without consideration; prove returnable packing and no separate valuation to avoid levy. Empty chemical barrels used as returnable packing for procured admixtures and invoiced only as chemical (with no separate value for barrels) are not dutiable on removal from an SEZ provided the exporter/contractor demonstrates the barrels are returned without consideration; documentary proof of returnable packing and absence of separate valuation is required to establish the excise exemption.