(b) They shall come into force on such date as the Central Government may, by notification in the Official Gazette, appoint.

2. Definitions.
In these rules, unless the context otherwise requires,-

(a) "Authorised Operations" means manufacture, production, processing, assembling, trading, repair,, re-making, reconditioning and re-engineering of goods, production of services, and export of such goods and services.

(b) "Customs Transit Area" earns an area within an SEZ designated by the Commissioner of Customs where customs clearance formalities for goods entering or exiting an SEZ shall be carried out.

(c) " Non-processing Area" means an area of the Special Economic Zone excluding Processing Area and Customs Transit Area.

(d) "Processing Area" means an area in the Special Economic Zone designated by the Commissioner of Customs, where alone an SEZ unit shall be allowed to be set up to carry out the authorised operations.

(e) "SEZ" means a Special Economic Zone specified by the Central Government under Section 76 A of the Customs Act, 1962.

(f) "SEZ unit' means a unit set up in the SEZ under the Export and Import Policy in force.

3. Establishment of SEZ.
(i) An SEZ shall have clearly demarcated Customs Transit Area and Processing Area. Such areas shall be distinctly separated from the Non-processing Area.

(ii) The Processing Area in the SEZ shall be fully secured by a boundary wall with specified entry and exit points.

(iii) No unauthorized persons shall be allowed to enter the Processing Area.

4. Admission of goods.
(i) Goods for personal use of or consumption by officials, workers, staff or owners of the SEZ units shall not be admitted into the SEZ without payment of duty.

(ii) Motor vehicles, laptop/notebook computers'. fire arms or any other goods as may be specified by the Board may be allowed into an SEZ temporarily without payment of duty subject to such conditions as may be specified by the Commissioner of Customs.

(iii) Hazardous goods may be admitted into specially the commissioners of Customs may specify designated areas or installations subject to such safeguards as.

(iv) The Board may, by notification in the Official Gazette, deny admission of any goods or class of goods into an SEZ on grounds of public morality, public security, public hygiene or health, or for veterinary or phyto-sanitary considerations.

5. Movement of goods into / out of SEZ.
Entry and exit of goods, to and from an SEZ, shall be only through the Customs Transit Area.

6. Authorized operations.

(i) An SEZ unit located in the Processing Area of an SEZ shall be allowed to carry out only such authorised operations as allowed by the competent authority under the Export and Import Policy in force.

(ii) Two or more SEZ units shall not be allowed to operate from the same premises.

7. Utilization of goods.

(i) Goods admitted into the Processing Area shall be used by an SEZ unit for carrying out authorised operations only.

(ii) In case of utilization of goods for any other purposes or in case of failure of the unit to duly account for the goods, the same shall be chargeable to duty as if the goods have been removed for home consumption.

8. Abatement of duties of customs in special cases.

(i) In case of removal of used capital goods from an SEZ to the Domestic Tariff Area, the duty shall be levied on the depreciated value applying the rate of depreciation as fixed by the Board. The depreciation shall be allowed for the period from the date of commencement of commercial production of the unit or 'where such goods have been received after such commencement, from the date such goods have come into use for commercial production to the date of payment of duty.

(ii) In case of removal of used packing material such as cardboard boxes, polyethylene bags of a kind unsuitable for repeated use from an SEZ to the Domestic Tariff Area, the same shall be allowed clearance without payment of duty.

(iii) In case of goods removed from an SEZ unit on payment of duty to the Domestic Tariff Area and brought back to the same unit for purpose of repair within a period of one month, the same shall be allowed to be removed after such repair without payment of duty.

9. Temporary removal of goods to the Domestic Tariff Area without payment of duty.

Subject to the conditions as may be laid down by the Commissioner of Customs following goods may be allowed to be removed temporarily from an SEZ unit to the Domestic- Tariff Area without payment of duty with the prior permission of the Assistant Commissioner or Deputy Commissioner of Customs, as the case may be.-

(i) Capital goods and parts thereof for repairs and return thereof,

(ii) Goods for display, export promotion, exhibition and return thereof,

(iii) Goods for jobwork, test, repair, refining and calibration and return thereof, and

(iv) Lap top /notebook computers for use of an authorized employee of an SEZ unit.

10. Removal of goods from an SEZ to an Export Oriented Undertaking /Export Processing Zone/Software Technology Park / Electronic Hardware Park /Economic Zone Unit.

Subject to the conditions as may be laid down by the Board and with the prior permission of the Assistant Commissioner or Deputy Commissioner of Customs, as the case may be, goods produced or manufactured in an SEZ may be allowed to be removed from the SEZ to an Export Oriented Undertaking or Export Processing Zone or Software Technology Park or Electronic Hardware Technology Park or SEZ units without payment of duty for the purpose of further processing and export or return thereof.

11. Destruction of goods.

Subject to the condition as may be prescribed by the Board, an SEZ unit shall be allowed to destroy the goods other than Gem & Jewellery items in the presence of proper officer without payment of duty. After such destruction, scrap and remnants, if any, cleared into Domestic Tariff Area, shall be allowed on payment of duty applicable to such scrap and remnants.

12. Maintenance of accounts.
(a) SEZ units shall maintain proper account under the following heads

(i) Inflow of all foreign exchange by way of exports and other receipts.

(ii) Outflow of all foreign exchange on account of imports and on account of dividend, royalty, fees and other payments.

(iii) Utilization of all goods admitted free of duty or received under claim of duty drawback

(iv) Inter unit/inter zone transfers and receipts;

(v) Sale of goods produced, manufactured, processed, packaged and services rendered including waste, scrap and remnants arising out of such production, manufacture, processing or packaging.

(b) Units engaged in both trading and manufacturing activities shall be required to maintain the records specified above separately for trading and manufacturing.
Explanation - For the purpose of calculation of inflow or out flow of foreign exchange, the payments received by the transferee unit in respect of inter-unit transfer of goods, even though in Rupees, shall be considered as inflow of foreign exchange. Similarly, in the case of the recipient unit, such payments shall be considered as outflow of foreign exchange.

13. Submission of Returns
SEZ Units shall furnish quarterly returns to the Commissioner of Customs in a format as prescribed under the Export and Import Policy in force.

14. Recovery of duty on failure to achieve stipulated foreign exchange earning.

In case an SEZ unit fails to achieve the net foreign exchange earning as stipulated in the Export and Import Policy in force, it shall be liable to pay duty on the goods admitted duty free. The duty payable shall be equal in amount to the duty leviable on such goods but for the provision contained in section 76E of Chapter X A of the Customs Act, 1962 and the duty so payable shall bear the same proportion as the unachieved portion of the stipulated net foreign exchange earning bears to the stipulated net foreign exchange earning to be achieved along with interest at the rate of 15% per annum on the said duty from the date of admission of the said goods till payment of such duty.

15. Duration of stay.

(i) Goods admitted to the Processing Area of SEZ shall be utilized in the manner specified in rule 7 or exported within a period of five years from the date of admission of such goods failing which the SEZ unit shall be required to pay duty along with interest at the rate of 15 % per annum on the duty amount from the date of admission of such goods till the date of payment of such duty. In such cases, it shall be deemed that such goods have been removed from the SEZ on the date of expiry of said five year period.

(ii) Goods produced or manufactured in the unit shall be required to be exported within a period of five years from the date of production or manufacture of such goods failing which the SEZ unit shall be required to pay duty along with interest at the rate of 15% per annum on the said duty from the date of production or packaging of such goods as if the goods have been removed from the SEZ on the date of expiry of said five year period.

16. Transfer of ownership.

Goods admitted into or manufactured in the Processing Area may be transferred to other SEZ units in the Zone for the purpose of carrying out authorised operations by the recipient SEZ unit subject to the condition that both the supplying and receiving SEZ units maintain proper account of such goods.

17. Security.

An SEZ unit shall execute a bond along with such surety or security as specified by the Board.

18. Joint Monitoring.

The performance of SEZ units shall be jointly monitored by the Commissioner of Customs and the Development Commissioner.

19. Closure of SEZ.

In case of closure of an SEZ, goods admitted into such SEZ duty free and lying unutilised as well as goods produced or manufactured in the SEZ shall be exported or removed for home consumption on payment of applicable duties within a period of three months from such closure:

Provided that in case of used capital goods, the duty on the depreciated value shall be leviable applying the rate of depreciation as fixed by the Board. The depreciation shall be allowed for the period from the -date of commencement of commercial production of the unit or where such goods have been received after such commencement, from the date such goods have come into use for commercial production to the date of payment of duty.

20. Closure of SEZ unit.

In case of closure of an SEZ unit, goods admitted into such SEZ unit duty free and lying un-utilised, as well as goods produced or manufactured in the SEZ unit shall be exported or removed for home consumption on payment of applicable duties within a period of three months from such closure:

Provided that in case of used capital goods, the duty on the depreciated value shall be leviable applying the rate of depreciation as fixed by the Board. The depreciation shall be allowed for the period from the date of commencement of commercial production of the umt or where such goods have been received after such commencement, from the date such goods have come mto use for commercial production to the date of payment of duty.