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Minutes of Meeting of Approval Committee, NSEZdated 15/02/2012 Pagelof7

Minutes ofthe Meetin&: of the Approval Committee ofNoida SEZ held on 15/02/2012at 11.30AM in the Conference Hall ofNSEZ. Noida.

The meeting of the Approval Committee, NSEZ, was chaired by Shri c.P.S. Bakshi,Development Commissioner, Noida SEZ. The following Members of the ApprovalCommittee were present in the Meeting:

1. Shri B.K.Dixit, Joint Commissioner (Income Tax), Noida2. Shri R.K.Joshi, Dy. DC,NSEZ, (in lieu of representative of Department of Commerce)3. Shri Amit Kumar, Astt. Director General of Foreign Trade, New Delhi.4. Shri N. K. Singh, Manager, 0/0. GM, D.LC., Sector-20, Noida, Dist: G.B. Nagar

(Representative of Principal Secretary, Industries, Govt. of U.P., Lucknow).

Besides, Shri Sharad Srivastav, Dy. Commissioner of Customs, Shri R.K. Goyat,Appraiser(Customs), NSEZ, and Shri M.N.Sukole, Astt. DC,NSEZ,also attended the Meeting.

GIST OF THE MEETING:

Ratification of Minutes of last Meetin&: of the Approval Committee:

The Approval Committee ratified the minutes of the Meeting held on 10/01/2012.

Decisions on Proposals

1. Application of M/s. Navrang International for setting up a unit in NSEZ for

trading activities.

Report from 0/0. Additional Commissioner (Customs) on verification of track-

record of promoter was awaited. The matter was deferred to the next Meeting of the

Committee for decision.

2. Application of M/s Shirpur Gold Refinery Ltd. for setting up a unit in NSEZ formanufacture and exports of Jewellery.

As none of the directors appeared before the Committee, the consideration of the

proposal was deferred to the next meeting of the Approval Committee.

3. Application of M/s. Icreon Communications Pvt. Ltd. for setting up a unit in

NSEZ for software and IT/IT Enabled Services.

The Committee considered the project-proposal. The representative directors Shri

Himanshu Sareen and Dr. Santosh Sareen explained that though their activity would be

Minutes of Meeting of Approval Committee, NSEZdated 15/02/2012 of7

IT/ITES, they had planned to enter into entirely new domains with this proposed unit and

therefore they applied for fresh LOA. Further, as regards space, they would not apply for

SDF and they would make arrangement by way of transfer of plot/building with the

approval of office of the DC. Keeping in view the expertise/ background of the promoters,

projected export potential and prospects of employment generation, the Committee

approved the proposal.

4. M/s. Neptune Industrial Corporation - Request for inclusion of additional item

in LOA.

The Committee took up the matter for consideration. During discussions, the

representative of the UP Pollution Control Board pointed out that the unit had not taken

NOC from the Board, which is a serious violation of relevant statutes. The Committee

decided to refer the matter to UPPCB for verification as to whether the existing unit had

been compliant to the regulations relating to pollution as per laws applicable. On receipt of

report form UPPCB, the proposal of inclusion of trading would be considered further. The

Committee also directed the representative to pay rental dues and submit APR for the year

2010-11 immediately failing which appropriate action would be initiated.

5. M/s. Kundan Rice Mills Ltd. - inclusion of additional items in the LOA.

The representative informed the Committee that during current year, they made

export to the tune of Rs. 1200 crore and they had orders for gold medallions and they need

urgent approval so that they could fulfill their commitment. Regarding the case filed by

DRI, the representative explained that it was a case regarding valuation of certain chemical

(EVA&DCP) used in footwear manufacturing and such cases could not be considered as

barring for any benefits under the Government. He also stated that the case had been

dropped by High Court. He also informed that the seizure of documents by income tax

authorities was a routine case and his application could not be barred on this account. The

Committee, after due deliberations, approved the proposal of inclusion of manufacturing

gold medallions (with production capacity of 200Kg/day) and manufacturing of gold/silver


jewellery studded with diamond(production capacity 50 Kg/day) in the LOA. However, no

separate approval for trading of diamonds alone was allowed.

6. M/s. Shriram Overseas - Monitoring of performance and amendment of items

mentioned as authorized operations in the LOA.

The Committee discussed the proposal of inclusion of 'studded' jewellery in the LOA.

The Committee opined that if studded jewellery had been allowed to other units, there

could not be any objection to the proposal. Moreover, the promoters had mentioned the

word 'studded' in the Project Report at the time of initial application. After due

deliberations, the Committee approved the proposal. The Committee also ratified the one

time permission dt. 24/01/12 granted by DC (l/c) for clearance of import consignment of

'cut & polished diamonds' by the unit for manufacture and export of studded jewellery.

7. M/s. Sara Trans Industries - inclusion of additional items in LOA.

The Committee considered the proposal of inclusion of trading in Caps, T-Shirts, Shirts,

Ties, Pens, Mugs, Crockery, Clocks, Mikes, Speakers, Amps (amplifiers), T. Tables

(turntables), Cables, Watches, Leather goods, Leather garments, key chains, badges, label

pins, stationery products, blankets, musical instruments, spares, parts & accessories, and

carpets, in the LOA of M/s. Sara Trans Industries. The Committee found that the track

record of the Company is excellent and the plea for having multiple items in one shipment

to retain the customers, reduce the freight & landing cost of products and to have a

competitive edge on their Chinese counterparts was reasonable. In view this, the

Committee approved the proposal.

8. M/s. Magnum Aviation Pvt. Ltd. - Inclusion of warehousing activities in LOA

and monitoring of performance.

On request of the Unit to defer the matter for the next meeting, as they had no senior

person available to appear for the meeting, the Committee deferred the matter to the

next meeting. In the meantime, variation in signature of CA in the APRs submitted

earlier and in the APR submitted after corrections, would be clarified from the CA.

Besides, a Board Resolution in favour of authorised signatory of unit would be obtained.


9. M/s. Kohinoor International - case of mis-declaration and continuance of

sharing permission of the three sister concern units.

The Committee discussed the matter of mis-declaration and it was decided that the

competent adjudicating authority (Approval Committee or DC) had to wait till finalisation

of matter by Customs Adjudicating officer or appellate authorities in Customs. The

Committee viewed that it would be premature to act on customs report immediately and

decided to wait for Show Cause Notice to be issued under the Customs Act by the

competent Customs authorities. SCNunder the FT(D&R) Act on the case of mis-declaration

would be issued after issue of SCNby the Customs authorities.

As regards sharing permission, the Committee decided to extend sharing permission

for three months, i.e., upto 15.05.2012, within which time the units should either exit or

obtain sharing permissions for any place other than Plot No 27 and 38 and shift their

operations from the plots with the approval of the NSEZauthorities.

10.M/s. Vishwaas - Monitoring of performance.

This time too, no representative appeared before the Committee. The Committee

was informed that, as regards the pending rental dues, the Estate Officer would take

appropriate action for recovery. The Committee viewed that there were adequate reasons

to believe that the proprietor had shown his non-seriousness, which was well exhibited by

the fact that APRs for the years 2009-10 and 2010-11 were not submitted by him despite

reminders. Even discrepancies were observed by either Customs Wing or jewellery

Appraisers of JJE, every time when Bill of Entry was filed by this unit. The Proprietor had

not made any progress as per the Approval Committee's instructions, given on 10.06.2010,

regarding procuring of necessary apparatus for testing impurities of gold/other jewellery.

Moreover, the proprietor had not bothered to clear rental dues. In view of this, the

Committee decided to issue Show Cause Notice under SEZAct and Rules and other relevant

statutes, seeking explanation as to why LOAshould not be cancelled and empowered the

DC, NSEZ to issue the SCNs and take further necessary action in the matter as per

applicable provisions. The Development Commissioner may also seek explanation as to

why penalty should not be imposed under the FT(D&R) Act, 1992, if NFE earnings of the

unit are negative.

L


11.M/s. Anagram Systems - Monitoring of performance.

As representative of the unit, Shri Raghubeer Sharma, brother of proprietor,

informed that they had been facing stiff competition from Chinese companies, which was

the reason why they could not use the allotted space for their own manufacturing activities.

It was also noted by the Committee that the space was being utilised by some other LOA-

holder and not being wasted. However, the Committee informed the representative that it

would not be logical for the competent authority to allow continuance of sharing

permission, if the original allottee would not show reasonable export performance.

Therefore, the representative was advised to either make efforts to increase exports and

utilisation of space for its own purposes or request for transfer of the building to a

potential exporter, to avoid future inconvenience. The Committee also directed the

representative to pay rental dues and submit APR for the year 2010-11 immediately failing

which appropriate action would be initiated.

12.M/s. Ess Ess Traders - Monitoring of performance.

The Committee decided to direct the proprietor to submit APRs within 7 days,

failing which SCNseeking explanation as to why LOAshould not be cancelled due to failure

to comply with conditions of Bond-cum-Lll'I', would be issued.

13.M/s. India Export Today - Grant of Personal Hearing and adjudication of SCN.

The Proprietor of the unit - Shri Rajiv Saxena appeared before the Committee. The

proprietor informed that his unit was lying non-functional since last 3 years. He seemed to

be unaware of submission of APRs and requirement of achievement of positive NFE.

However, he assured to submit APRs within 10 days. He also informed that he would not do

future business from his unit in NSEZ. The Committee was also informed that appropriate

action under the Public Premises (Eviction of Unauthorised Occupants) Act had already

been initiated by the Zone administration. In view of the above, the Committee decided to

cancel LOAof the Unit under section 16 of the SEZAct, 2005 for persistent contravention of

its obligation of submission of APRs. The Committee empowered the Development

Commissioner, Noida SEZ to issue Order-in-Original. DC may also impose penalty if NFE

Minutes of Meeting of Approval Committee, NSEZdated 15/02/2012 Page6of7

earnings were negative, under rule 25 of the SEZ Rules, 2006. The Committee guided the

promoter to meet DC(Customs) as regards his grievance regarding drawback case.

14. Review of Trading in precious metals (Gold).

The representative of M/s. Kundan Rice Mills Ltd., (which traded precious

metal(gold) of approximately Rs. 1200 Crore in the current financial year), apprised the

Committee that when calculated in US $ term and in INR as per prevailing exchange rate,

t e unit's transactions were ~J but when calculated in terms of Customs notified

rate of import and export, the same transaction seemed to be loss-making and NFE

appeared negative. He contended that this was due to the fact that Customs' notified import

rate (of dollar to Rupee) is fixed much higher than actual export rate (bank rate) by about

80 paise per dollar. Whereas bank's buying and selling rate differs by 1 or 2 paise per

dollar.

The Committee was informed that as per Rule 53 of the SEZ Rules, for Positive NFE

in INR, FOBvalue of exports in INR should be more than CIF value of imports in INR.As per

practice, FOB and CIF values are determined at the exchange rate prevailing at the time of

assessment which is as per Section 14 of the Customs Act, 1962, as determined by the

CBEC,through notification every month.

The Committee was also informed that as per clarification of the DOC,NFE is to be

calculated in rupee terms only. In case a unit is NFE negative and the unit claims that it is

due to foreign exchange fluctuation, the Approval Committee may consider such cases

provided that the unit gets the computations certified by the Authorised Bank, on case to

case basis.

In view of the above, there appears to contradiction between methods of

determination of FOB and CIF values. As per prevailing Customs Act and SEZ Act/Rules,

the values are essentially calculated taking exchange rate notified by the CBEC,whereas

Instruction No. 41 issued by the Department of Commerce, refers to NFE in terms of

computations to be certified by the Authorised Bank in case the NFE is negative due to

exchange rate fluctuations.


In view of this, in terms of section 13 (5) and proviso thereunder, the Approval

Committee decided to refer the matter to the Department of Commerce. Since this is an All

India phenomenon, it would be proper that the Ministry amend the Rules in case

Instruction No. 41 is to be used for calculating the NFE. Trading units dealing in precious

metals would always have the problem in view of difference in actual exchange rate and

customs rate. Moreover, it was observed that NFE is to be made positive over a period of 5

years. In case of M/s. Kundan Rice Mills Ltd., the current 5 year Block is upto 10.03.2013

and in case of M/s. M.D. Overseas, another major trading unit in precious metals, the

current 5 year Block is upto 14.05.2014.

It was also decided that the units be told to certify the computations from the

authorised banks. Till the time, clarifiction is received from the Ministry, trading activities

of all units dealing in Precious Metals shall be continued and not stopped.

15.Ratification of clarification issued in respect of Default list for

refund/exemption of Service Tax.

The Committee deliberated on the matter and ratified the clarification issued by the

0/0. DC,NSEZ in this matter. The Committee has also observed that all the Units should be

made aware of the clarification.

16.Approval of Services:

The Committee approved the services as applied by M/s Kundan Rice Mills Ltd.,

M/s Hanung Toys & Textiles Ltd. (Unit-Il), M/s. iGate Global Solutions Ltd., M/s. Intercraft

Engg. Pvt. Ltd., M/s. NOVOTechnologies Pvt. Ltd.. The Committee further directed the ADC

(Project), NSEZto convey the same as per Notification No. 17/2011-ST dt. 01/03/2011.

The Meeting ended with vote of thanks to the Chair.

(R.~i4.>:•.•ment Commissioner Development Commissioner

*****

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