Section 25 in The Special Economic Zones (Customs Procedures) Regulations, 2003
25. Sub-contracting of production or production process in domestic tariff area or abroad by the zone unit.
(1)The zone unit shall be permitted to take goods including inputs, semi-finished or semi-processed goods to the job-worker's premises into domestic tariff area without payment of duty for further processing of the goods or to carry out a production, subject to the following conditions, namely:-(i)the zone unit shall file an application containing the name and address of the job-worker, Central Excise registration number of the job-worker, if registered with the Central Excise Department, processing capacity of the job-worker, details of the processes to be carried out by the job-worker, justification for processing of goods outside the bonded premises and any other relevant information before the proper officer for further processing of the goods or to carry out production;(ii)the proper officer may, after examining the application and after satisfying himself about the bonafide requirement of the zone unit, grant permission for job-work and such permission shall normally be valid for a period of one-year. However considering the sensitive nature of the commodities to be sent out for job-work and past record of the zone unit, such permission may be less than said period of one year;Provided that in case of zone unit engaged in manufacture and export of gem and jewellery, no cut and polished diamonds, precious stones and semi-precious stones shall be allowed to be taken out of the zone;(iii)while considering the application of the zone unit, the entire processing activity in relation to the manufacture of the export products by the said units may be studied, and the proper officer may ensure that there is no attempt to parcel out the [entire] [Substituted word "substantial" by Notification No. G.S.R. 306(E) dated 11.5.2004 (w.e.f. 22.7.2003)] manufacturing operations outside the bonded premises;(iv)in respect of activities permitted to be carried out on job-work basis outside the premises of the zone unit, identity of finished products received after job work shall be established with the raw materials or components or partially processed goods sent out to ensure that the finished products are manufactured out of raw materials imported or procured duty free by the units or admitted under claim of duty drawback or duty entitlement passbook scheme credit into the zone unit and there is no substitution or diversion of such goods in the domestic tariff area:Provided that in case of zone unit engaged in manufacture and export of gem and jewellery, there shall be no requirement of taking out the samples or retaining the same if such goods have been appraised by jewellery appraiser at the time of both taking out of such goods from the zone or receiving back of goods in the zone after completion of job-work:Provided further that where the precious metal in bullion form, having marking regarding fineness, purity, make, serial number, is being taking out of the zone for the purpose of job-work, appraisement by jewellery appraiser shall not be mandatory;(v)the zone unit sending out goods for job work in domestic tariff area shall be required to give an intimation to the proper officer and a sample of the goods being sent out for job work shall be drawn and retained in the office of the proper officer in the zone;(vi)on receipt of the goods in the zone unit after job work, the Customs officers of the zone shall establish the identity of the goods so returned with reference to the sample retained by him at the time of removal and a sample of the processed goods so returned to the zone shall be retained for the purpose of record for a period of six months and both the samples shall be returned to the zone unit after obtaining an acknowledgement from the zone unit;(vii)the zone unit sending out imported or domestically procured raw materials, components, etc. as it is, i.e without any processing in the unit for job work in the domestic tariff area, shall furnish bank guarantee to cover the duty forgone on such duty free materials being taken out to the proper officer:[Provided that no such bank guarantee shall be required in case of status holder unit having an unblemished track record or a unit which has not come to the adverse notice of Customs authorities at least for a period of last two years;] [Substituted by Notification No. G.S.R. 306(E) dated 11.5.2004 (w.e.f. 22.7.2003)](viii)the zone unit removing semi processed goods for job work in domestic tariff area shall furnish bank guarantee equivalent to fifty per cent of the duty payable on the goods being taken out for job work:Provided that no fresh or additional bank guarantee shall be insisted upon if the zone unit has furnished a bank guarantee as security along with bond in Form-I, and the same is sufficient to cover the duty payable on such goods being taken out:[Provided further that the no bank guarantee shall be furnished by the status holder zone units having unblemished track record or a unit which has not come to the adverse notice of Customs authorities at least for a period of last two years;] [Substituted by Notification No. G.S.R. 306(E) dated 11.5.2004 (w.e.f. 22.7.2003)](ix)in all cases of job work in domestic tariff area, the goods sent out for job work shall be required to be returned to the zone unit within a period of ninety days or such period as may be extended by the proper officer for reasons to be recorded in writing for granting such extension, from the date of removal and in case of failure to receipt of goods within the said period, action shall be taken by the proper officer to recover duty, such as, encashment of the bank guarantee given at the time of removal of goods into domestic tariff area for job work;(x)the proper officer shall carry out the checks expeditiously to verify the premises of the job worker, processing capacity of the job worker, existence of facility for carrying out the declared process in the job worker's premises within a period of one month from the date of granting permission for job work by either visiting the premises of the job worker by himself or the officer authorised by him in this behalf or by letters or fax or E-Mail to the concerned Range officer having jurisdiction over job worker's premises and getting report in writing;(2)The zone unit shall be allowed to sub-contract production in domestic tariff area subject to the following conditions, namely:-(i)the proper officer shall satisfy himself regarding the bonafide necessity of such sub-contracting of production in domestic tariff area and shall not allow such permission in routine manner to the zone unit;(ii)while giving permission for subcontracting of production in domestic tariff area or in other export oriented undertaking or software technology park unit or electronic hardware technology park unit or zone unit, the proper officer may verify the past antecedents of the zone unit as well as job-working units, and in case of any misuse of serious nature noticed by him in the past or due to any other reasons, where it is satisfied that there is no justification for such permission or there are high chances of abuse of such facility, such permission may be denied with the approval of Commissioner of Customs having jurisdiction over the zone;(iii)[ the facility of sub-contracting of production shall be allowed subject to the condition that the product is also being manufactured by the zone in the zone;] [Substituted by Notification No. G.S.R. 306(E) dated 11.5.2004 (w.e.f. 22.7.2003)](iv)in case of zone unit engaged in manufacture and export of gem and jewellery, no cut and polished diamonds, precious stones and semi-precious stones shall be allowed to be taken out of the zone;(v)other conditions as stipulated in sub-regulation (1) except clause (viii), shall apply mutatis mutandis in case of sub-contracting of production in domestic tariff area.(3)[ Subject to permission of the proper officer, the zone unit shall be allowed to remove moulds, jigs, tool, fixtures, tackles, instruments, hangers, patterns and drawings to the job-workers premises in the domestic tariff area without payment of duty and shall be allowed to keep such moulds, tools, fixtures, tackles instruments, hangers, patterns and drawings in the job-worker's premises till the sub-contracting arrangement with job worker is in existence, subject to the following conditions, namely :-(i)the zone unit shall produce to the proper officer a verification report quarterly obtained from the jurisdictional Superintendent of Central Excise having jurisdiction over the of job-worker's unit to the effect that such moulds, jigs, tools, fixtures, tackles, instruments, hangers, patterns and drawings are lying in the job-worker' s premises and are being used for production of goods for export on account of zone unit;(ii)the zone unit shall bring back such goods to the unit immediately on expiry of such job-work contract; and(iii)such moulds, jigs, tools, fixtures, tackles, instruments, hangers, patterns and drawings shall be returned to the zone unit within a period of one year from the date of such removal where the job-worker's unit is 1I10t registered with Central Excise Department.](4)The zone unit shall be allowed to sub-contract part of the production process abroad, that is outside India following the provisions of Export and Import Policy in this regard, and after such processing abroad, the goods shall either be returned to the zone unit for carrying out further processing or may be sold to buyers in that country or any third country:Provided that the scrap or waste or remnants generated at the sub-contractors premises abroad may either be returned to the zone unit; or may be disposed of abroad itself:Provided further that in case of sale of goods processed abroad or scarp, waste or remnants arising during the processing of goods abroad, directly from the job-workers premises abroad, the unit shall take permission from the Reserve Bank of India.(5)The proper officer may permit the zone unit to export the finished goods directly from the job-worker's premises subject to the following conditions, namely:-(i)the job-worker, who is registered with the Central Excise Department;(ii)export of finished goods from the job-worker's premises shall not be allowed through third party;(iii)sample of goods exported from the job-workers premises shall be sent to the proper officer in the zone for establishing the identity of the goods exported with the sample drawn at the time of taking out of the goods to the job-worker;(iv)in case of such exports, the shipping bill for duty free goods shall be processed at the port of export as in the case of normal export and shipping bill shall be filed in the name of the zone unit;(v)the goods for such export shall be removed from the job-worker's premises under bond.(6)[ The waste or scrap or remnants generated during such processes at the job-worker's premises shall either be returned to the zone unit or shall be cleared on payment of duty as if the said waste or scrap or remnants have been cleared by the zone unit or may, where the job worker is a Central Excise Registrant, be destroyed at the job worker's premises and such destruction shall be carried out under supervision of a central excise officer having jurisdiction over the job worker's unit and proof of such destruction duly certified by such Central Excise officer shall be submitted to the officer of the customs who is in charge of the zone.] [Substituted by Notification No. G.S.R. 306(E) dated 11.5.2004 (w.e.f. 22.7.2003)](7)The zone unit engaged in trading shall not be allowed the facility of sub-contracting of production or production process in domestic tariff area.
