Central Excise And Eou

CENTRAL EXCISE AND EOU • • • •

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EOU unit is obliged to export their entire production. They are also obliged to achieve a positive Net Foreign Exchange Earning (NFE). The period to achieve the above is five years from the commencement of production. Earlier, rules specified various records to be maintained in prescribed formats. Now, most of the ‘statutory records’ have been abolished, except a few like records by EOU. Monthly return for excise for companies in form ER-1 should be filed by 10th of following month. SSI units have to file quarterly return in form ER-3. EOU/STP units to file monthly return in form ER-2. EOU units procuring goods from DTA or supplying goods to DTA are required to be registered under central excise law. EOU unit having no inter-linkage with domestic economy through sale or purchase of goods need not register. [There will be hardly such a unit]. Unit in SEZ is not required to be registered under Central Excise. The license granted by the jurisdictional Custom Officer is sufficient. After grant of registration certificate for excise, original copy will be retained by divisional office and duplicate copy will be sent to Range Superintendent for post facto verification. In case of EOU, verification is already done while granting Customs private bonded warehouse. Hence, post facto verification may not be required. EOU/SEZ HAVE TO PAY DUTY EACH TIME BEFORE CLEARANCE – For some unknown and obscure reasons, the facility of monthly payment of excise duty is not available to EOU/SEZ units. They have to pay excise duty every time before clearance of goods, as per clear provisions of rule 17 of Central Excise Rules.

DTA TO EOU • • • • • •

They can procure inputs and capital goods from Indian manufacturer without payment of central excise duty. Supplier to EOU/SEZ is not required to pay excise duty on final products supplied to EOU/SEZ. Subject to prescribed conditions, no Excise duty is payable on the capital goods, raw materials, spares, consumables, etc. procured by the 100% EOU. CT-3 certificate is required to be obtained from the Range Superintendent of Central Excise on the basis of which a 100% EOU can procure duty free indigenous goods. Supplies by Indian manufacturer to EOU/SEZ are treated as ‘deemed exports’ and the supplier is eligible to avail benefits available to ‘deemed exports’. The supplier does not have to reverse Cenvat credit of duty paid on inputs which are used in final products supplied to EOU. He can utilize the Cenvat credit for payment of duty on other final products. [However, refund of Cenvat on inputs is not permissible].

EOU TO DTA • • • • • • • • •

Since export market is often fluctuating and uncertain, these units (except gem and jewellery units) are allowed to sell part of their products in DTA (Domestic Tariff Area) i.e. within India, provided that they achieve positive NFE even after sale within DTA. EOU unit can sale their production in India at the rate applicable on imports of such goods i.e. excise duty is equal to customs duty leviable on imported goods. However, part of their production can be sold within India at lower rate of duty. As per EXIM policy, they will be permitted to sale in domestic market up to 50% of the FOB value of preceding year. Units engaged in agriculture, aquaculture etc. can sell up to 50% of their production in DTA. In respect of their domestic sale, they have to follow Central Excise procedures and file monthly return in form ER-2. The buyer from EOU can avail Cenvat credit of excise duty paid by EOU/SEZ while clearing the goods. In most of the cases, he is entitled to credit of almost full duty paid by EOU/SEZ unit. In case non-excisable goods (e.g. flowers, computer software, data processing) are sold in DTA, the unit only has to pay customs duty equal to duty on inputs and consumables procured duty free, which have gone into production of non-excisable goods cleared into DTA. If the goods sold within India are manufactured by using wholly indigenous raw materials (i.e. without using any imported raw material), the duty payable is equal to normal excise duty payable for similar goods in India. The EOU unit is allowed to clear goods in DTA up to specified percentage. If clearances are above the limit, concessional rate of excise duty is not applicable. The unit will have to pay duty equal to full normal rate of customs duty. If a manufacturer in India procures goods from EOU, he is entitled to avail CENVAT credit of duty paid by EOU while clearing the goods.

Suryabir Singh

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It has been provided that in case of procurement of goods from EOU/EHTP/STP, the buyer will be entitled to avail 50 per cent of CVD. In case of procurement from SEZ unit, the buyer will be entitled to 100 per cent of the CVD.

REFERENCES 1.

Aggarwal, Aradhna, Export processing Zones in India: Analysis of the Export performance, November 2004, ICRIER working paper series. 2. Ahuja, Rajeev, Export Incentives in India within WTO Framework, July 2001, ICRIER Working paper series. 3. Datey, V.S., SEZ, EOU, STP and EHTP Schemes, Customs Law primer, Taxmann India.

Suryabir Singh