CBIC Clarifies Section 74 Duty Drawback for SEZ to DTA Clearances

For Indian manufacturers and exporters operating complex supply chains, navigating the intersection of Special Economic Zone (SEZ) regulations and the Customs Act can often lead to trapped working capital.

One of the most persistent bottlenecks has been the rejection of Duty Drawback claims under Section 74 of the Customs Act, 1962, specifically when goods are procured from an SEZ into the Domestic Tariff Area (DTA) and subsequently re-exported.

To resolve these widespread jurisdictional disputes, the CBIC has officially issued Instruction No. 06/2026-Customs (dated 27th April 2026). This crucial directive establishes uniform processing guidelines across all field formations, bringing immense relief to domestic units.

Here is a technical breakdown of why these claims were previously blocked, the legal rationale behind the CBIC’s clarification, and how businesses can leverage this update.

The Core Problem: Divergent Field Practices

The issue, prominently highlighted in Audit Para 5.8 of the Audit Report 33 of 2025, stemmed from differing interpretations by customs field formations.

Under Section 74, a business is entitled to a drawback (refund) of customs duties paid if they re-export imported goods, provided the goods are easily identifiable. However, when DTA units purchased goods from an SEZ, paid the applicable customs duties, and later re-exported those exact goods, many customs officers were denying the drawback claims.

The officers argued that bringing goods from an SEZ into a DTA was a “domestic transaction” rather than an “import,” thereby failing the core condition of Section 74.

The CBIC’s Legal Clarification: SEZ as Foreign Territory

Instruction No. 06/2026 puts an end to this misinterpretation by harmonizing the SEZ Act of 2005 with the Customs Act. The Board clarified the following key legal pillars:

• Section 30 of the SEZ Act: When goods are removed from an SEZ into a DTA, they attract standard Customs duties (including anti-dumping and countervailing duties) exactly as if they were arriving from a foreign country.
• The Definition of “Import”: For the purposes of trade operations and duty applicability, an SEZ is treated as a foreign territory within India. Therefore, the movement of goods from an SEZ to a DTA legally constitutes an “import.”
• Fulfillment of Section 74: Because the SEZ-to-DTA transaction is an import, and customs duty is paid at the time of clearance, the goods fully satisfy the “imported into India” requirement.

The Final Ruling: Goods cleared into the DTA from an SEZ unit upon payment of applicable duties, and subsequently re-exported, must be treated as imported goods and are fully eligible for drawback disbursement under Section 74.

Strategic Implications for Domestic Supply Chains

This structural shift provides immediate regulatory predictability for domestic industries. By treating SEZ-to-DTA clearances as imports for drawback purposes, the government is ensuring that the tax burden does not stick to goods meant for global markets.

For businesses, this means:

1. Restored Working Capital: You can confidently factor Duty Drawback into your landed cost and pricing strategies when sourcing from SEZs for international re-export.
2. Standardized Assessments: The directive specifically rejects the divergent practices of individual field formations, meaning your claims will now face uniform, predictable processing at the port.
3. Audit Protection: The clarification shields exporters from future departmental audit objections regarding these specific supply chain models.

Also Read: CBIC Notifies Duty Relief: Concessional Duty for SEZ to DTA Clearances