Circular No.  55 /2004-Customs
14th October, 2004

F.No.305/185`/2003-FTT (Pt)
Government of India
Ministry of Finance
Department of Revenue
Central Board of Excise & Customs

   Sub:-    Debonding by EOU/EHTP/STP Units.

I am directed to invite your attention to Board’s Circular No. 8/2004-Customs, dated 28-1-2004 on the above subject. whereunder it has been provided that EOUs  against whom any show cause notice for demand of duty is pending may be allowed to be debonded on furnishing  undertaking on  stamp paper along with Bank Guarantee of 10% of the amount involved. .

2.    Clarification has been sought as to whether 10% Bank Guarantee is to be insisted upon in the case of those show cause notices involving an issue which has already been decided against the revenue and department has preferred appeal against such decision. The issue has been considered in the Board. If the decision of the  Tribunal is in  favour of the assessee, strictly speaking, no duty is payable, notwithstanding the fact that Department has preferred appeal, [for example Favourite Industries v Commissioner of Central Excise, Surat-I, 2003 (156)) ELT 802 (Tri-Mumbai) where the issue was whether goods supplied by an EOU is to be considered as goods supplied by a manufacturer in India – Appeal filed by Department before the Apex Court in CA No.D 24920/03]. Further, as the ratio-decidendi of the case has not attained finality because of appeal preferred by the department, Show Cause Notices on these issues are pending for adjudication even for other EOUs.  Therefore, in all such cases where the Department has lost in  the CESTAT and has preferred appeal to Apex Court,  the amount involved in SCN issued on the same issue either in respect of the said unit or any other unit, will not be taken into consideration for computing 10% Bank Guarantee amount of such demand

3.  The EOU/EHTP/STP units are required to execute  B-17 Bond  at the time  of commencement of the unit. The units are also required either to furnish surety or security  along with the B-17 bond.  In cases where security has been furnished in form of Bank Guarantee along with the bond and the assessee requests   to adjust 10% of duty  as required to be furnished in terms of Circular 8/2004-Cus out of  the said Bank Guarantee, such requests of the unit may be considered. However, before acceding to such request it may please be ensured that the Bank Guarantee is valid.

4. Clarification has  also  been sought as to whether  part duty deposited earlier  by the assessee during the course of investigation can be adjusted towards  10% duty required  to be paid at the time of debonding in terms of Circular 8/2004. The matter has been considered. The intention of the Circular 8/2004- Cus is to take 10% bank guarantee of the duty demanded at  the time of debonding. Therefore, the duty  paid  earlier during the course of investigation can not be used to adjust the  10% guarantee required at the time of debonding.  However, while calculating 10% of the amount involved in terms of the Circular No. 8/2004-Cus dated 28.01.2004, the deposited amount against the Show Cause Notice would be deducted from the total demand and the Bank Guarantee amount would be 10% of such deducted amount. For example, if an EOU has a demand notice of Rs. 100/ and he has deposited Rs. 10/ then the Bank Guarantee amount would be 10% of (100-10) i.e Rs 9/..

5.The Circular was placed on the website of the CBEC and also it was advertised in the newspaper. The views/comments received have been considered.

6.  Wide publicity may please be given to the above said instruction by way of issuance of Public Notice.

7. Hindi version follows.

Ranjit Kumar
Sr. Technical Officer (FTT)
Telephone No 23093859

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