New Delhi: The customs department may lose its jurisdiction over the Vallarpadam special economic zone (V-SEZ) and the entry of the directorate of revenue intelligence (DRI) will be restricted after the Prime Minister’s Office (PMO) intervened to resolve a dispute between the ministries of commerce and finance on authority over it.
The decision may set a precedent for other SEZs. The customs department and the DRI are part of the Central Board of Excise and Customs, which functions under the ministry of finance. SEZs come under the purview of the ministry of commerce. The PMO decision will take SEZs further out of regulatory reach. Such zones already enjoy significant autonomy. A PMO spokesperson said the “matter is sub judice and facts are being ascertained”, but declined to provide more details. The case dates back to 2011, when the promoter of the zone moved the Kerala high court seeking the removal of the customs officials from the zone.
The documents reviewed by Mint show that finance secretary R.S. Gujral considered V-SEZ to be in violation of the
SEZ Act. They also show that he tried to bring the matter before the cabinet committee on economic affairs, which had created V-SEZ by bestowing SEZ status on the International Container Transshipment Terminal (ICTT) developed by DP World.
A finance ministry official, who did not want to be named, said his ministry was asked to depute customs officials who would work under the current administration of V-SEZ.
“The meeting of various stakeholders in PMO decided that DRI will be issued passes by the development commissioner (of the zone) for entry,” added a government official, who did not want to be named.
The finance ministry official claimed that the decision could apply to all SEZs. “You cannot have one rule for Vallarpadam,” he said. He raised the possibility of irregularities and warned that the ability of agencies to detect “fraud will be seriously undermined”.
ICTT will soon start handling all container cargo currently passing through the Rajiv Gandhi terminal in Cochin port in keeping with an agreement between Cochin Port Trust and India Gateway Terminal Pvt. Ltd, a subsidiary of DP World. When that happens, the customs department will no longer have jurisdiction over the container cargo.
DP World did not respond to an email sent last Tuesday and could not be reached on the phone. Its CEO didn’t respond to a text message seeking comment.
The turf warIn November, the DRI and the Central Bureau of Investigation were denied entry into V-SEZ by its development commissioner when they were attempting to intercept the alleged smuggling of red sanders wood, cultivated across India and used as a colouring agent. The felling of the tree is controlled by the forest department. This revived a year-long turf war between the commerce and finance ministries over the jurisdiction of the customs department.
Commerce secretary Rahul Khullar wrote to Gujral on 3 January expressing concern over the “dual jurisdiction and the presence of regular customs authorities in an institutionalized manner within the SEZ”. He suggested that port guidelines be revised and SEZ officials be allowed to discharge the functions of customs officials as well. The finance ministry responded saying that these guidelines had no “provision indicating that any activity, other than the assessment and clearance of SEZ cargo, is to be done by the SEZ officers as per the provisions of the SEZ Act/rules”. Gujral said in a letter on 24 January to Khullar that “restricting the law enforcing agencies posed a grave security threat”.
The PMO intervened to resolve the issue.
“The issues have been resolved by PMO and the decision taken supersedes all other issues,” said Khullar.
Questionable approval?In the course of the spat between the ministries, the finance ministry also claimed V-SEZ didn’t conform to rules on SEZs.
ICTT was inaugurated by Prime Minister Manmohan Singh in February 2011. It was accorded SEZ status in 2006. Gujral wrote in his letter to Khullar that “the approval of the cabinet committee was accorded for the project before the enactment of the SEZ Act, 2005. It had to be ensured that the project being developed...is in accordance with the provisions of the existing SEZ law and whether the fact of non-conformity of this SEZ with SEZ laws was ever brought to the notice of the cabinet committee”.
The finance ministry’s position is that V-SEZ isn’t an SEZ. “Even under the erstwhile SEZ provisions, the port was treated as infrastructure,” the finance ministry contended, according to the documents cited above. “In terms of these guidelines, it was also laid down under the criteria for approval of SEZ that at least 25% area of the SEZ shall be used for developing industrial area for setting up of units. Thus, this SEZ was not even eligible for approval in terms of conditions prescribed earlier also.”
Khullar brushed aside questions raised by the finance secretary about the non-conformity of V-SEZ with the SEZ Act. “SEZs fall within the jurisdiction of the commerce ministry,” he said.
Source : livemint.com