The finance ministry has issued the much-awaited circular on implementation of the SEZ Act 2005 and SEZ Rules 2006.

The circular instructs customs and excise officials to abide by the new set of rules and declare the SEZ rules earlier framed by the revenue department void.

This would bring to an end months of confusion wherein a number of customs and excise officials dealing with SEZ units refused to abide by the new simplified SEZ rules. They claimed that they had not received any instructions from the finance ministry on a change in rules.

Official sources said the finance ministrys circular on implementation of the SEZ Act would simplify things since Section 51 of the Act clearly lays down that while dealing with SEZs, if there is any inconsistency among various existing Acts, the provisions of the SEZ Act will prevail.

"With the recognition of this provision by the finance ministry, the daily bickering between SEZ units and officials of the customs and excise departments would come to an end," an official said. According to export promotion councils for EoUs and SEZs director general LB Singhal, the circular is a positive development as it would enable the smooth implementation of the simplified SEZ rules.

The contradictions between the old and new rules would also be smoothened out. Citing an example, Mr Singhal said that the new SEZ rules had done away with provisions like the need to obtain a domestic procurement certificate by SEZ units wanting to buy from the domestic market.

"This measure had, however, not been implemented as the customs and excise officials would insist that they would act on them only when they got an official intimation from the finance ministry," Mr Singhal said.

The finance ministry circular particularly mentions Rule 30 of the SEZ Act relating to procurement of goods by SEZs from the DTA and states that such transactions should be treated as exports and the earlier notification on the issue should be considered redundant.