CHAPTER– III PROCEDURE FOR ESTABLISHMENT OF A UNIT
17. Proposal for approval of Unit
(1) A consolidated application seeking permission for setting up of a Unit and other clearances, including those indicated below, shall be made to the Development Commissioner, in Form F, in five copies, with a copy to the Developer:-
(a) Setting up of unit in a Special Economic Zone;
(b) Annual permission for sub-contracting;
(c) Allotment of Importer-Exporter Code number;
(d) Allotment of land/industrial sheds in the Special Economic Zone;
(e) Water connection;
(f) Registration-cum-Membership Certificate;
(g) Small Scale Industries Registration;
(h) Registration with Central Pollution Control Board;
(i) Power connection;
(j) Building approval plan;
(k) Sales tax registration;
(l) Approval from inspectorate of factories;
(m) Pollution control clearance, wherever required;
(n) Any other approval as may be required from the State Government.
(2) The Development Commissioner shall get the proposal scrutinised and get it placed before the Approval Committee for its consideration.
(3) The proposals received under clauses (c) and (e) of sub-section (2) of section 9 shall be placed before the Board by the Development Commissioner for its consideration.
18. Consideration of proposals for setting up of Unit in a Special Economic Zone.
(1) The Approval Committee may approve or approve with modification or reject a proposal placed before it under sub-rule (2) of rule 17, within fifteen days of its receipt: Provided that where the approval is to be granted by the Board in terms of sub-rule
(3) of rule 17, the Board shall approve or approve with modification or reject such proposal within forty-five days of its receipt: Provided further that the Approval Committee or the Board, as the case may be, shall record the reasons, in writing, where it approves a proposal with modifications or where it rejects a proposal and Development Commissioner by order shall communicate such reasons to the person making the proposal.
(2) The Approval Committee shall approve the proposal if it fulfills the following requirements, namely: -
(i) the proposal meets with the positive net foreign exchange earning requirement as provided in rule 53;
(ii) availability of space and other infrastructure support applied for, is confirmed by the Developer in writing, by way of a provisional offer of space; Provided that the Developer shall enter into a lease agreement and give possession of the space in the Special Economic Zone to the entrepreneur only after the issuance of Letter of Approval by the Development Commissioner: Provided further that a copy of the registered lease deed shall be furnished to the Development Commissioner concerned within six months from the issuance of the Letter of Approval;
(iii) the applicant undertakes to fulfill the environmental and pollution control norms, as may be applicable;
(iv) the applicant submits proof of residence, namely, passport or ration card or driving licence or voter identity card or any other proof of the proprietor or the partners of partnership firms or Directors of the Company, as the case may be, to the satisfaction of Development Commissioner;
(v) the applicant submits the Income tax returns, along with annexures, of the Proprietor or Partners, or in the case of a company, audited balance sheet for the last three years.
(3) the proposal shall also fulfill the following sector specific requirements, namely:-
(a) export of high-grade iron ore, that is sixty-four per cent. Fe and above, except iron ore of
(b) no sub-contracting or job work of polyester yarn shall be permitted in Domestic Tariff Area or in Export Oriented Unit or Units in other Special Economic Zone:
Provided that this restriction shall not apply to the Units which intend to send the fabric, made by them out of polyester or texturised yarn, for subcontracting but the third party exports shall not be permitted;
(4) No proposal shall be considered for:-
(a) recycling of plastic scrap or waste:
Provided that extension of Letter of Approval for an existing Unit shall be decided by the Board;
(b) enhancement of the approved import quantum of plastic waste and scrap beyond the average annual import quantum of the unit since its commencement of operation to the existing Units;
(c) reprocessing of garments or used clothing or secondary textiles materials and other recyclable textile materials into clipping or rags or industrial wipers or shoddy wool or yarn or blankets or shawls: Provided that extension of Letter of Approval for an existing Unit shall be decided by the Board;
(d) import of other used goods for recycling: Provided that extension of Letter of Approval for an existing Unit shall be decided by the Board; Provided further that reconditioning, repair and reengineering may be permitted subject to the condition that exports shall have one to one correlation with imports and all the reconditioned or repaired or re-engineered products and scrap or remnants or waste shall be exported and none of these goods shall be allowed to be sold in the Domestic Tariff Area or destroyed;
(e) Export of Special Chemicals, Organisms, Materials, Equipment and Technologies unless it fulfils the conditions indicated in the Import Trade Control (Harmonized System) Classifications of export and import items;
(f) if there is any instance of violation of law or public policy by the promoters, having a bearing on the merits of the proposal.
(g) the use of any plant or machinery previously used for any purpose in Domestic Tariff Area ( vide Notification G.S.R. 470(E) dated
(5) The Units in Free Trade and Warehousing Zones or units in Free Trade and Warehousing Zone set up in other Special Economic Zone, shall be allowed to hold the goods on account of the foreign supplier for dispatches as per the owner’s instructions and shall be allowed for trading with or without labeling, packing or repacking without any processing: Provided that refrigeration for the purpose of storage and assembly of Completely Knocked Down or Semi Knocked Down kits shall also be allowed by the Free Trade and Warehousing units undertaking the said activities: Provided further that these Units may also re-sell or re-invoice or re-export the goods imported by them: Provided also that all transactions by a Unit in Free Trade and Warehousing Zone shall only be in convertible foreign currency;
(6) Units may also be setup for providing services or manufacturing services to Overseas Entities subject to following conditions, namely:-
(a) Capital goods, raw materials including consumables sub-assemblies, components, semi-finished goods shall be supplied by the Overseas Entity free of cost;
(b) Capital goods for setting up such facilities may also be supplied on loan or lease basis, provided the notional value of such capital goods shall be taken into account for calculation of Net Foreign Exchange Earnings under rule 53.
(c) finished goods shall be exported out of the country or transferred to the Customs Bonded Warehouse to be maintained by the Overseas entity; Provided that any supplies of finished goods shall be as per the instructions of the Overseas entity.
(d) the Unit shall receive the consideration for its manufacturing services in convertible foreign exchange directly from the said overseas entity;
(e) in case the said manufacturing facility is used by the Unit for carrying out production on its own account, separate accounts shall be maintained for the manufacturing and service activity.
Explanation: - “Overseas Entity” means a non-resident or a person of foreign origin and includes a company not incorporated in India.
19. Letter of Approval to a Unit.
(1) On approval of a proposal under rule 18 and 19, Development Commissioner shall issue a Letter of Approval in Form G, for setting up of the Unit:
(2) The Letter of Approval shall specify the items of manufacture or particulars of service activity, including trading or warehousing, projected annual export and Net Foreign Exchange Earning for the first five years of operations, limitations, if any on Domestic Tariff Area sale of finished goods, by-products and rejects and other terms and conditions, if any, stipulated by the Board or Approval Committee: Provided that the Approval Committee may also approve proposal for broadbanding, diversification, enhancement of capacity of production, change in the items of manufacture or service activity, if it meets the requirements of rule 18. Provided further that the Approval Committee may also approve change of the entrepreneur of an approved unit, if the incoming entrepreneur undertakes to take over the assets and liabilities of the existing Unit.
(3) An entrepreneur holding Letter of Approval issued under sub-rule (1) shall only be entitled to set up a Unit in processing area of the Special Economic Zone or Free Trade and Warehousing Zone, as the case may be: Provided that a proposal for setting up of a Unit in a Special Economic Zone or Free Trade Warehousing Zone shall be entertained only after the processing area of the Special Economic Zone or Free Trade Warehousing Zone has been demarcated under rule 11.
(4) The Letter of Approval shall be valid for one year within which period the Unit shall commence production or service or trading or Free Trade and Warehousing activity and the Unit shall intimate date of commencement of production or activity to Development Commissioner: Provided that upon a request by the entrepreneur, further extension may be granted by the Development Commissioner for valid reasons to be recorded in writing for a further period not exceeding two years: Provided further that the Development Commissioner may grant further extension of one year subject to the condition that two-thirds of activities including construction, relating to the setting up of the Unit is complete and a chartered engineer’s certificate to this effect is submitted by the entrepreneur.
(5) If the Unit has not commenced production or service activity within the validity period or the extended validity period under sub-rule (4), the Letter of Approval shall be deemed to have been lapsed with effect from the date on which its validity expired.
(6) The Letter of Approval shall be valid for five years from the date of commencement of production or service activity and it shall be construed as a licence for all purposes related to authorized operations, and, after the completion of five years from the date of commencement of production, the Development Commissioner may, at the request of the Unit, extend validity of the Letter of Approval for a further period of five years, at a time.
(7) If an enterprise is operating both as a Domestic Tariff Area unit as well as a Special Economic Zone Unit, it shall have two distinct identities with separate books of accounts, but it shall not be necessary for the Special Economic Zone unit to be a separate legal entity: Provided that foreign companies can also set up manufacturing units as their branch operations in the Special Economic Zones in accordance with the provisions of Foreign Exchange Management (Foreign exchange derivatives contracts) Regulations, 2000.
20. Administrative Control of Special Economic Zones.
Every Special Economic Zone shall be under the administrative control of a Development Commissioner appointed under sub-section (1) of section 11.
21. Offshore Banking Unit.
(1) The application for setting up and operation of Offshore Banking Unit in Special Economic Zone shall be made to the Reserve Bank of India in the Form VI prescribed under Banking Regulation (Companies) Rules, 1949 under section 23 of the Banking Regulation Act, 1949.
(2) The terms and conditions subject to which an Offshore Banking Unit may be set up and operated in a Special Economic Zone shall be as specified in the Notification number FEMA 71/2002-RB dated 7th September, 2002 by the Reserve Bank of India, as amended from time to time.
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