The notification dated October 15, 2026, covers cases where a DTA buyer fails to take delivery because of changes in fashion, market conditions or default in conditions of the sale agreement. The goods must return within thirty days of clearance. The DTA buyer who paid or bore the duty can claim refund under Section 27 of the Customs Act, 1962. The goods must be identified to the satisfaction of the specified officer and evidence furnished that the DTA buyer has not availed any benefits, including input tax credit (ITC). The SEZ unit must furnish that evidence and maintain a separate auditable inventory of returned goods. The amendment permits SEZ units to resell returned goods in their original condition to the same or another DTA buyer, on payment of applicable duties as a fresh sale. The repair facility is retained.
Previously, Rule 49(2) allowed return of goods supplied by SEZ units only for repairs. It contained no express provision for refund on failed deliveries. The new provision addresses a practical difficulty faced by domestic buyers and SEZ suppliers. However, thirty days from clearance is a short period for resolving a failed delivery and arranging return. There is no express provision for extending the deadline. More importantly, the wording covers a buyer who fails to take delivery, leaving doubt about goods rejected after delivery. The explanation below S.No.15 of Annexure-I to notification 52/2003-Cus dated March 31, 2003, relating to export-oriented units (EOUs) clarifies that failure of the foreign buyer to take delivery includes rejection of goods by that buyer. A similar explanation should be inserted now to cover rejection by DTA buyers. The requirement that no benefits should have been availed also leaves unclear whether ITC initially taken but subsequently reversed will suffice. This too needs clarification.
The amendment operates prospectively. Earlier, DTA buyers filed drawback bills of export under Section 74 of the Customs Act when returning identifiable, duty-paid goods to SEZ units. Customs disputed some claims because the definition of export under the Customs Act and the 1995 Re-export Drawback Rules did not include DTA supplies to SEZs. CBIC Instruction No.06/2026-Customs, dated April 27, 2026, recognised SEZ clearances into DTA as imports for Section 74 drawback purposes. However, it did not expressly address whether sending goods from DTA to SEZ qualifies as export for that section. This issue affects both returns of goods procured from SEZs and supplies of goods originally imported from abroad. The controversy persists despite Section 2(m)(ii) of the SEZ Act, 2005, recognising DTA supplies to SEZ units for authorised operations as exports, and Section 51 giving that Act overriding effect where other laws are inconsistent.
The government should allow more time for returns, empower authorities to extend the deadline, and provide refund of duty for goods returned for any reason, with safeguards. It should clarify that Section 74 drawback is available on duty-paid imported goods sent to SEZs. Prospective relief should be accompanied by resolution of past disputes on the same issue.
