TaxTMI 
TaxTMI 
TaxTMI 
2025 (12) TMI 895
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....t it has its registered office in the Domestic Tariff Area (DTA) and is the owner and operator of India's largest land drilling rigs fleets, empowering oil & gas discovery and production enhancement. The Applicant submitted that it is the only privately held Indian company to have assets and expertise of specialised services for well services too. 2.2 The Applicant submitted that they have imported and stored certain rig related equipment in an FTWZ Unit in India, operated by Sarveshwar Logistics Services Private Limited (hereinafter referred to as "FTWZ Unit"). The said FTWZ Unit is not the Applicant's own Unit, and the Applicant has entered into an understanding with the FTWZ Unit for availing warehousing services. 2.3 The Applicant submitted that the equipment was imported into India in 2024 by the Applicant and the same was stored in the FTWZ Unit. Bill of Entry for import into FTWZ Unit (i.e., a Z-Type BOE) was filed. The goods so stored in SEZ have never been cleared to DTA. Some of the goods have been imported have already been imported into the FTWZ Unit. Some goods required for construction of the rig are yet to be imported. 2.4 The Applicant submitted tha....
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....e SEZ Act. As per the FAQ document published on ICEGATE pertaining to SEZ Filings, it is clarified that a "Z- type" BOE is used as akin to an in-bond BOE for import without payment of duties. At the time of removal of goods from SEZ to the DTA, by virtue of Section 30 of the SEZ Act, all applicable duties shall be discharged, as if the goods are being imported into India from outside India. The provisions of Section 30 of the SEZ Act is to be read with Rules 47 and 48 of the SEZ Rules, 2006 ("SEZ Rules"), which provide in effect that: a) As per Rule 48(1), a Bill of Entry for Home Consumption shall be filed. b) As per Rule 48(2) and Rule 47(4) of the SEZ Rules, the valuation and assessment of in case of removal to the DTA shall be as per the Customs Act and rules made thereunder. 3.3 The applicant submitted that in view of the above treatment of clearances from SEZ to the DTA akin to import of goods into SEZ from a place outside India, with such normal assessment procedures, the importer seeking to remove goods from DTA would file a BOE for Home Consumption to facilitate removal of goods from SEZ to the DTA, under the claim of any exemption notifications applic....
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.... for such transactions to be held by FTWZ Units is that they shall receive consideration in Foreign Currency. It may be noted that prior to the above instruction specifically providing express clarity on the issue, Instruction No. 49 was issued clarifying that FTWZ can undertake FTWZ - DTA as well as DTA - FTWZ transactions. Relevant portion is extracted: "Clarifications on FTWZ issues Instruction No. 49 Dated 12-3-2010 A meeting was held under the chairmanship of Additional Secretary (SEZ) to discuss issues relating to Free Trade Warehousing Zones(FTWZ). Based on the decisions taken in the meeting, the following guidelines are laid down in respect of FTWZ : ... v) Trading and Warehousing units located within FTWZ can carry out DTA to FTWZ and FTWZ to DTA transactions. .. ." 3.8 The applicant submitted that perusal of all the legal provisions above makes it clear that: a) An FTWZ Unit is expressly authorized to store goods on behalf of a DTA Supplier for dispatch as and when required; b) At the time of removing goods from SEZ to the DTA, the importer would file BOE, under the claim of applicable exemption notificatio....
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....rm and for such sum, as may be specified by the Commissioner of Customs, bind himself to comply with the conditions herein, as if he were the importer of the goods. Provided further that in case of goods supplied by an SEZ Unit to DTA under. a transaction covered by item 1(b) or 5(f) of Schedule II of the Central Goods and Services Tax Act, 2017, where SEZ Unit is liable to pay integrated tax on such transaction under the Integrated Goods and Services Tax Act, 2017, the lessee shall bind himself only with conditions (ii), (iii) and (iv) above. Explanation. - In case of goods supplied by an SEZ Unit (lessor) to DTA under a transaction covered by item 1(b) or 5(f) of Schedule II of the Central Goods and Services Act, 2017, - a) the "Commissioner of Customs" or the "Commissioner of Customs of the port of importation", wherever they appear, shall mean "the Specified Officer" as defined in Special Economic Zone Rules, 2006; (b) "Re-export" in item (iii) shall mean returning the goods to the lessor 3.11 The applicant submitted that perusal of the emphasized portion in the above extract makes it clear that the benefit of the Notification is available subje....
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....being paid on the lease rentals, the IGST on import of the goods is being exempted. In this context the fulfilment of Condition 102 must be examined. Condition 102 requires the importer to execute a bond undertaking the following: a) That the Importer pays GST on lease services on reverse charge basis. (This condition does not apply qua supplies from SEZ Unit to DTA). b) That the goods must be re-exported within 3 months of the expiry of the lease; c) Not to sell/part with the goods. d) To pay duty, in case of a violation. 3.16 The Applicant submitted that all the aforementioned requirements will be fulfilled in the present case, and thus, benefit of the exemption should be available. 3.17 The benefit of exemption is available irrespective of whether GST is paid by importer or exporter - The applicant submitted that as mentioned above, the purpose of the present exemption is that as the movement of the goods is necessitated on account of a service, and appropriate GST is being discharged on the service rendered, levy of IGST as goods also will amount to double duty payment. General principle of GST law (Section 9 of CGST Act) is that the su....
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....rovisions in tax statutes, ultimately concluded as follows : "66. To sum up, we answer the reference holding as under : 66.1 Exemption notification should be interpreted strictly; the burden of proving applicability would be on the assessee to show that his case comes within the parameters of the exemption clause or exemption notification. 66.2 When there is ambiguity in exemption notification which is subject to strict interpretation, the benefit of such ambiguity cannot be claimed by the subject/assessee and it must be interpreted in favour of the Revenue. 66.3 The ratio in Sun Export case [Sun Export Corpn. v. Collector of Customs, (1997) 6 SCC 564] is not correct and all the decisions which took similar view as in Sun Export case stand overruled. " 23. It may be noticed that the 5-Judge Bench judgment did not refer to the line of authority which made a distinction between exemption provisions generally and exemption provisions which have a beneficial purpose. We cannot agree with Shri Gupta's contention that sub- silentio the line of judgments qua beneficial exemptions has been done away with by this 5- Judge Bench. It is well se....
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....lated for the present transaction is in line with the purpose for which FTWZs are set up, i.e., to provide storage and warehousing operations for dispatch as and when required. 3.22 The applicant submitted that if the same equipment were brought into India on lease from outside India, the benefit would be available. However, the purpose of the benefit must not be defeated by adopting an interpretation prejudicial to entities making use of FTWZs for warehousing and storage of goods. 3.23 The applicant submitted that from the clarifications highlighted above regarding operation of FTWZ Units, it becomes clear that the benefit contemplated by S. No. 557B must not be defeated by adopting an interpretation that would render the exemption otiose simply because the FTWZ Unit is not the person making the supply, especially since FTWZs are envisaged to be places for warehousing, storage etc. for dispatch when required. Further, these FTWZ Units are specifically allowed to hold goods on behalf of DTA Suppliers and undertake FTWZ - DTA Transactions. Thus, the benefit should be granted to the Applicant. 3.24 Alternatively, 'SEZ Unit' must be interpreted widely to include all s....
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....aid on such import. No one appeared for the hearing from the departments side. 6. Additional Submissions 6.1 The applicant vide its letter dated 23.09.2025 submitted a copy of Bill of Entry 9863760 dated 03.05.2025 vide which the import has been cleared after extending the benefit of SI. No. 557B of Notification No. 50/2017-Cus. 7. Discussions and Findings 7.1 I have considered all the materials placed before me in respect of applicability of notification Notification No. 50/2017-Customs dated 30.06.2017 Sr. No. 557B on supply of equipment on lease for use in manufacture of rig, from SEZ to DTA. I have gone through the submissions made by the applicant during the personal hearing and additional submissions made by the applicant as well. Therefore, I proceed to pronounce a ruling on the basis of information available on record as well as existing legal framework. 7.2 The applicant has sought advance ruling in respect of the following questions: a. Whether benefit of S1. No 557B of Notification 50/2017-Cus. dated 30.06.2017, is available to goods supplied on lease by the Applicant to lessors in DTA? b. Will benefit of S. No. 557B of Notificat....
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.... transactions covered by item 1(b) or 5(f) of Schedule II of the Central Goods and Services Tax Act, 2017, subject to satisfying Condition 102. Before proceeding further, it is essential to understand what type of transactions are covered by item 1(b) or 5(f) of Schedule II of the Central Goods and Services Tax Act, 2017. The relevant excerpts are as under: "SCHEDULE II [See Section 7] ACTIVITIES OR TRANSACTIONS TO BE TREATED AS SUPPLY OF GOODS OR SUPPLY OF SERVICES 1. Transfer ... (b) any transfer of right in goods or of undivided share in goods without the transfer of title thereof, is a supply of services; 5. Supply of services ... (f) transfer of the right to use any goods for any purpose (whether or not for a specified period) for cash, deferred payment or other valuable consideration. " 7.7 From the above I gather that item 1(b) or 5(f) of Schedule II of the Central Goods and Services Tax Act, 2017 are related to transfer or supply of services where title of the goods remains with the owner only. In the instant matter, the import from FTWZ (Free Trade Warehousing Zone) to DTA (Domestic Tariff ....
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....entral Goods and Services Tax Act, 2017, where SEZ Unit is liable to pay integrated tax on such transaction under the Integrated Goods and Services Tax Act, 2017, the lessee shall bind himself only with conditions (ii), (iii) and (iv) above. Explanation. - In case of goods supplied by an SEZ Unit (lessor) to DTA under a transaction covered by item 1(b) or 5(f) of Schedule II of the Central Goods and Services Act, 2017, - (a) the "Commissioner of Customs" or the "Commissioner of Customs of the port of importation", wherever they appear, shall mean "the Specified Officer" as defined in Special Economic Zone Rules, 2006; (b) "Re-export" in item (iii) shall mean returning the goods to the lessor. 7.9 In essence, Condition No. 102 requires the importer to execute a bond with the Customs authorities, undertaking (i) to pay IGST on the lease service covered by such transaction; (ii) not to sell or part with the goods without prior permission of the Commissioner of Customs; (iii) to re-export or return the goods to the lessor within three months of expiry of the lease period; and (iv) to pay, on demand, the IGST exempted if any of....