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Circular No. 88/95-Cus.
dated 1/ 8 /95
F.No. 305/34/95-FTT
Government of India
Ministry of Finance
Department of Revenue, New Delhi

Subject :  Amendments in the Exim Policy 1992 – 97 relating to EOU / EPZ units – Clarification regarding.

I am directed to draw your attention to the amendments in the Exim policy 1992-97 introduced by the Ministry of Commerce w.e.f. 1.4.1995 in so far as they relate to the EOUE /EPZ schemes. In particular, reference is made to the changes in para 96, 115 and 118 of the exim policy.

2. As may be noted, para 96 of the Exim policy details the facility available to EOU/ EPZ units to source its capital goods from the domestic leasing company on the basis of a firm contract. This is an existing facility. However, the said para has been re- formulated now so as to clearly bring out the fact that in such case, the EOU / EPZ unit and the domestic leasing company will jointly file the import documents to enable the import of the capital goods free of duty. This stipulation is necessary in view of the fact that while the EOU / EPZ unit may be eligible for duty free imports under the respective customs notification, imports by a leasing company for supply to these units do not qualify for the exemption. Hence, it is necessary that if imports are by a leasing company then for the purpose of availing duty concession, the import document namely bill of entry should be jointly filed by the leasing company together with the EOU / EPZ unit concerned and consequently the bond for fulfilment of the conditions of the exemption notification has also to be executed by both the persons. Only in such case customs duty benefit will be available. This aspect is to be particularly ensured by the customs in case any imports are noticed under para 96 of the Exim policy.

3.  In the new Exim Policy, para 115 relating to setting up of private bonded warehouse in EPZs has been amended so as to specifically provide for the facility of sale of warehoused goods in the DTA subject to compliance with the Exim policy for such clearances and on payment of applicable duties. In this regard, it may be noted that in terms of the Customs Act, 1962 any imported goods may be warehoused. Further, clearance from the warehouse are permitted either for export or for home consumption. Thus, in the instant case, the facility of clearances to DTA only illustrates the legal position. However, it is observed that at the time of clearances from the private bonded warehouses two statutory obligations have to be fulfilled. The first is that the clearance shall be allowed subject to compliance with the Exim policy. In other words, if an item is in the negative list of imports then for both warehousing the item as well as for clearances from the warehouse, the  warehouse, the import licence must be necessarily ensured. Where by a PN / order DGFT exempts the requirement of licence for import of Negative list Item for warehousing (for e.g. for stock an sale), then at the time of clearance from warehousing, the import licence should be insisted before granting clearance for DTA. Secondly, the applicable customs duty is to be recovered at the time of clearance from the warehouse. It is, therefore, to be ensured that the private bonded warehouses in the EPZs the warehousing of the goods as well as the clearance to DTA must necessarily comply with the Exim policy as well as the duty must be recovered at the time of ex-bonding. No doubt, in such cases, the customs duty is invariably being recovered. However, in view of the present amendment to the Exim policy, particular care will have to be taken to ensure the clearances to DTA are in accordance with the Exim policy. A reference is also invited to Board’s instruction F.No. 314/ 31/ 94-FTT dated 9.9. 94 in this behalf.

4. By yet another amendment to para 118 of the Exim policy, existing DTA units having an export obligation under the EPCG scheme are permitted to convert into an EOU. Further, on such conversion the export obligations under the EPCG scheme will be made concurrently from the exports by the units as an EOU. In this context, it may be noted that strictly the fulfilment of export obligation is a matter within the competence of the Development Commissioner and does into concern the Customs. However, it is necessary to note this amendment as it must be clearly understood that upon such conversion to an EOU, no refund of customs duty paid by the unit under the EPCG scheme is to be entertained. This is important as under the EOU scheme the capital goods may be imported duty free while under the EPCG scheme certain duty is to be paid. Hence, it must be ensured that in no case is a refund of duty allowed.

5. Provision has also been made in the Exim policy (para 117A) for extending the benefit of EPCG scheme on debonding of existing 100% EOU/ EPZ units. This facility is however available only for availing the EPCG benefit on payment of 15% duty on the capital goods it does not extend the benefit of zero rated EPCG scheme. For other than capital goods, normal duties at the time of debonding would be applicable. The 100% EOU/ EPZ notification have been amended appropriately to implement the provisions of para 117A.6.

(A.K. Raghunathan)
Senior Technical Officer (FTT)

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