Ftp 6, 8 and 9

Chapter 6-Export Oriented Units

Legal Framework

Foreign Trade Policy and
Handbook of Procedures Vol.I
[Chapter 6]
From ‘Approval’ to ‘Exit’ provisions

Central Excise Act, 1944
Customs Act, 1962
and
Duty free imports under
Central Excise Rules, 2002.
Section 25
DTA Sales [Section 3 of CE Act, 1944]
of the Customs Act, 1962
Local Procurement [Section 5A of
Warehousing Provisions
CE Act, 1944]

About EOU
The EOU Scheme is introduced in 1981

To facilitate the Units which intend to export a
majority of their production

To generate Foreign Exchange

To increase employment and boost exports of the
country

The Development Commissioner of the SEZ is the
governing & monitoring Authority for EOU units

Eligibility
Units undertaking to export their entire production/
services (except permissible sales in the DTA), can be
set up under Export Oriented Unit (EOU) Scheme.

Electronic Hardware Technology Parks (EHTPs),
Software Technology Parks (STPs) or Bio-Technology
Parks (BTPs) are also covered under EOU scheme. These
are product specific units availing the same benefits as
EOUs.

Purpose
Units can be set up for any of the following purposes:
– manufacture of goods

– repair

– re-making

– reconditioning

– re-engineering

– rendering of services
NOTE:
Trading to the extent of 5% of FOB value is permitted subject to
the prime condition that such goods should be related to
manufactured goods.

Investment Criteria
Projects having a minimum investment of Rs.1 crore
in plant and machinery can only be considered for
establishment as EOU.

Minimum Investment criteria is not applicable to
existing EOU units and units in EHTP/STP/BTP and
following sector:
– Handicrafts
– Agriculture
– Floriculture
– Aquaculture
– Animal Husbandry

Investment Criteria
– Information Technology
– Services
– Brass Hardware and
– Handmade jewellery

Board of Approval (BoA) can however, allow
establishment of EOUs with a lower investment
criteria.

Administrative Control

Unit Approval Committee

Jurisdictional Development Commissioner

The provisions of the Customs and Central Excise Law in
respect of the EOUs are administered by the
Commissioners of Customs and Central Excise, who are
under the control of Central Board of Excise & Customs
[CBEC].

Benefits

Reimbursement/
Exemptions Others
Refund

Exemptions

Industrial Direct Tax Indirect Tax State Taxes
Licensing for
§ As per Section § Customs duty § VAT
manufacture
10B on import of
of items
inputs and CGs, § Stamp Duty
reserved for
§Extended for etc.
SSI sector
the Financial [Subject to
year 2010-11 § Excise Duty on provisions in
goods procured the state laws]
[CBDT Cir. No. 1 from DTA
Dtd. 06.01.2005-
for converted
units]

Reimbursement/
Refund

Refund of CST Drawback by way
and of Brand Rate in
Interest @ 6% on case EOU works
delayed refunds as Job-worker
for DTA exporter

Other

CENVAT Export 100% of 100% FDI Exports made
Credit proceeds can export investment by EOUs would
Facility be realized earning permitted also get
within 12 can be through benefits under
Months retained Automatic FMS & FPS
in EEFC Route Schemes
account provided direct
tax benefits are
not availed.

Formalities for
setting up of EOU

Formalities for setting up of EOU

Preparation of a detailed project report and
Locational clearances.

Making application for Letter of Intent (LOI) /
Letter of Permission (LOP) to
Development Commissioner (DC).

Acceptance of LOP/LOI when granted.

Execution of Legal Undertaking and attestation
of capital goods / inputs and obtaining Green Card.

Making application for declaration of a place (unit)
as warehousing station under Section 9 of
Customs Act, 1962 (if required), in case the location
is not covered under various notifications
issued by customs for warehousing purpose.

Application for setting up of private bonded warehouse
for EOU purpose with customs / excise authorities as
the case may be. (Warehousing licence under Sections 58
(for issue of warehouse licence) and
65 (for manufacture in bond) of Customs Act, 1962.

Execution of B-17 bond supported by
security or Bank Guarantee (BG).

Registration with the customs authorities
at the port of import.

Step-1A: Preparation of a detailed project
report
Preparation for Project Report: Project report should
normally consist of:

– Introduction and importance of items for which the
unit is to be established.
– Promoter’s profile including that of the Directors
and various divisions of promoting company.
– Export promotion efforts undertaken by the
company/ promoters
– Potential of the item/items for export
– Advantage of new unit over existing units

Step-1A: Preparation of a detailed project
report
– Land location
– Building, Plant & Machinery
– Power & Water Supply
– Process of Manufacture
– Raw material, requirement and sources
– Indian & World Scene
– Projections for five years
– Manpower Requirements
– Marketing Potential and Selling Arrangements
– Cost of project and means of finance
– Financial Forecasts
– Summary and Conclusions

Step-1B: Locational clearances

Locational Clearance is required either from Industrial
Development Corporation of the concerned State or from Local
Gram Panchayat. If the EOU unit is being set up in urban area, the
location should be in an Industrial Area/Estate designated/Set up
prior to issuance of Ntfn No. 477 (E) Dtd. 25.07.1991 for clearance
under automatic route; otherwise the case would be refer to Board
of Approval, New Delhi.

If the item of manufacture is subject to Pollution then NOC from
Pollution Control Board.

The locations which are beyond 25 kms from the periphery of
standard urban area limit of city having population above 1
million, according to 1991 Census, are acceptable for setting up of
EOU.

Step-2: Making application for LOI / LOP to
DC
Application in Appendix 14-I-A is to be made to the
Concerned Development Commissioner in three copies
alongwith following documents:
– Demand Draft/Pay Order for Rs.5,000/- drawn in favour of the
Pay & Accounts Officer, Ministry of Commerce & Industry,
Department of Commerce, payable at the Central Bank of
India, Udyog Bhavan, New Delhi.
– Project Report
– Self certified copy of PAN
– Self certified copy of Ground Plan
– Copy of IEC [if available]
– Copy of RCMC [if available]
– Copy of SSI Registration or IEM issued by SIA, Ministry of
Commerce and Industry, New Delhi, as the case may be.

DC
– Copy of Memorandum and Articles of Association in case of
company.
– Copy of Manufacturing Process Flow Chart.
– List of Machineries to be imported.
– List of Raw Materials and Components to be imported.
– List of Spares and Consumables to be imported.
– List of Machinery and equipment, consumables, packing
materials to be indigenously procured without payment of
Central Excise Duty.
– Chartered Accountant Certificate for last three years exports,
if any.

DC
– Affidavit in duplicate on Rs. 50/- Stamp Paper duly notarised.
– Directors Residential Proof/Passport/Ration Card/Driving
Licence/Voter identity card, or any other proof.
– Self Certified copy of Central Excise Registration Certificate.
– Copy of Board Resolution / Authority letter.
– Proof of Premises - Possession/Allotment Letter/Sales deed/
Lease Agreement, etc.
– Copy of Passport of the Applicant.
– Income Tax Return & all Directors/Promoters for last three
years.
– Digital Certificate.

DC
– Loan sanction copy of External Commercial Borrowing, if any.
– Details of sources of finance – Indian and foreign.
– Memorandum of Understanding (MoU) [executed/signed copy
of MOU for export tie-up, if any].
– Copy of NOC issued by the Component Authority for setting up
a unit (EOU) [MIDC/Gram Panchayat] . (If any)
– List of Directors with their residential address, telephone nos.
and e-mail address on Letter Head.
– E-mail ID of company.
– Website details.

Step-3: Acceptance of LOP/LOI when granted

Acceptance of LOP/LOI needs to be conveyed within 45
days which is a confirmation that principal permission given
by DC is accepted by the applicant for execution.

Before submission of acceptance letter one has to verify
the following:
– Conditions mentioned in LOP/LOI
– Complete/accurate address of the unit
– Description and approved capacity of product to be
manufactured and exported under the EOU unit.
– Value of required imported capital goods for the proposed
project.

Step-4: Execution of Legal Undertaking and attestation
of Capital Goods/inputs and obtaining Green Card

The approved EOU unit executes a legal undertaking
[LUT] with the DC concerned as per the format given
in Appendix- 14-I-F of HBPv1. [on Rs. 150 Stamp
Paper, duly notarized]

LUT binds EOU to fulfill the conditions of LOP/LOI. If
EOU fails to abide by such conditions, it will be liable
to pay penalty under the provisions of Foreign Trade
(Development and Regulation) Act, 1992 and/or under
any other Law for the time being in force.


At the time of execution of LUT, a list of exemption material as
per Annexure I to Appendix 14-I-F has to be submitted to DC. The
list contains description of
– Plant, Machinery and Equipment to be imported.
– Raw Materials, Components and Consumables to be imported.
– Plant, Machinery and Equipment and Raw Material,
Components and Consumables to be indigenously produced
and purchased without payment of Central excise Duties.

This list should be attested by the DC to enable the unit
clearance of imported items as well as local procurement of
items.

Following Documents are to be submitted:
– Application in Appendix 14-IF on stamp paper of Rs. 150/-
– Self certified copy of LOP/LOI issued by Development
Commissioner or Designated Officer.


– Copy of IEC, if any
– List of Directors with their residential address, telephone nos.
and e-mail address on Letter Head.
– Copy of Board Resolution.
– List of Machineries to be imported (on ledger paper – 3
copies).
– List of Raw Materials and Components to be imported (on
ledger paper – 3 copies).
– List of Spares and Consumables to be imported (on ledger
paper – 3 copies).
– List of Machinery and equipment, consumables, packing
materials to be indigenously procured without payment of
Central Excise Duty (on ledger paper – 3 copies).
– Copy of Ground Plan.


Other conditions of the LUT are as under:

– The export obligation [EO] on the unit under EOU scheme shall
be in addition to any other EO which is imposed under
different schemes such as Advance Authorisation or EPCG
Authorisation.

– The unit under implementation will submit quarterly progress
report to the concerned DC.

– The unit will intimate date of commencement of production
for exports within one month to the DC.


The unit shall, after the commencement of production, submit
quarterly progress report [QPR] to the DC within 30 days of the
close of the quarter.

The unit shall submit annual progress report [APR] to the DC within
90 days of the close of financial year [April-March].

The unit shall not dispose its production into DTA except in terms
of FTP and/or when specifically allowed by the competent
authority.

The unit shall be bound by the decisions, if any, to changes in the
provisions of the EOU scheme.

The unit shall maintain e-mail address and have an operational
website.


The unit has to intimate any change in its address, telephone
numbers, e-mail addresses, website, Bank address and
passport nos. of concerned directors/partners etc. within a
fortnight of the change.

The unit shall comply with the conditions stipulated under
the relevant Customs and Excise duty exemption
notifications.

Green card is issued automatically alongwith
acceptance of LUT.

Step-5: Making application for declaration of a place
(unit) as warehousing station under Section 9 of Customs
Act, 1962
It is required under the Customs Act, 1962 [CA, 1962] that a place
is declared as a warehousing station under Section 9 of the
Customs Act, before a private warehouse is licensed.

The power vests with the Commissioner of Customs.

Following Documents are to be submitted for Making Application
for Declaration of a Place (Unit) as Warehousing Station Under
Section 9 Of Customs Act, 1962.
– Copy of project report.
– Copy of industrial licence, if any.
– Copy of LOP/LOI issued by DC.
– Copy of exemption material list duly attested by DC.
– Copy of Green Card.
– Copy of Ground Plan.
– Copy of manufacturing process flowchart.

Step-6: Application for setting up of PBWH for EOU purpose with
customs / excise authorities [WHg Lic. u/Sec.58 (for issue of WH
Lic.) and Sec.65 (for manufacture in bond) of CA, 1962.]

Since EOUs operate under bond, a licence for setting up
private bonded warehouse is required which empowers the
EOU to warehouse and manufacture the goods in bond.

For this purpose, an application has to be made to the
Dy./Asst. Commissioner of Customs / Excise as the case
may be depending on location.

Public Notice No. 115/99 dtd. 18.08.99 issued by
Commissioner of Customs, Pune prescribes documents for
such application, which are listed as under:

customs / excise authorities [WHg Lic. u/Sec.58 (for issue of WH
Lic.) and Sec.65 (for manufacture in bond) of CA, 1962.]

– A Copy of the Notification or the Notification No. wherein the
place has been declared as a warehousing station under
section 9 of the customs act, 1962.
– Copies of permission from the ministry of industries, allowing
the facilities of 100% EOU to the applicant.
– Purchase/Sale deed of the land.
– 7/12 abstract of land records issued by local revenue
authorities.
– Allotment letter from M.I.D.C., if the factory is proposed to
be in the industrial area. In other cases, N.O.C from local
Grampanchayat.
– N.O.C. from Pollution Control Board.

customs / excise authorities [WHg Lic. u/Sec.58 (for issue of WH Lic.)
and Sec.65 (for manufacture in bond) of CA, 1962.]

– Ground plan duly verified by the jurisdictional range
superintendent.
– Stage-wise manufacturing process flow chart along with
imported and indigenous raw material required.
– An undertaking from the applicant, to the effect that they
will bear the cost of establishment charges and other charges
of the staff posted there.
– List of imported machinery and indigenous machinery for
setting up the 100% EOU.
– List of Imported/Indigenous raw materials to be used in the
manufacture.
– Copy of LUT, Green card and list of exempted material.

Step-7: Execution of B-17 bond supported by
security or Bank Guarantee (BG):

A single all-purpose Bond is required to be furnished by EOU
in lieu of the different bonds.

The said Bond can be executed with either surety or
security as per Notification No. 6/98-CE(NT) dated
02.03.1998 as amended.

This bond is called B-17 bond and covers liabilities both
under Customs and Central Excise Acts.


Calculation of Bond amount and Bank Guarantee. Rs. in Lakhs
Description of Assessable Rate of Amount of Bond value*
goods value duty duty
A. Capital Goods
Imported 100 24.42% 24.42 6.11
Indigenous 100 8.24% 8.24 2.06
B. Raw Material
**
Imported 25** 24.42% 6.11 1.53
Indigenous 5** 8.24% 0.41 0.10

Total A+B 39.18 9.8

**Duty on raw materials to be held in stock for three months only.


Calculation of Bond amount and Bank Guarantee.

Hence, Bond amount would be Rs. 9.8 lakhs and BG would be
Rs. 0.49 lakhs.

* Bond amount calculated @25% of duty saved amount

Plus Bank Guarantee 5% of Bond amount.

Step-8: Registration with the customs
authorities at the port of import.
Since goods imported by EOU are without payment of
duty, the movement of such goods is under bond from
port to the location of the EOU.

To ensure that goods are not diverted otherwise,
customs authorities at the port require maintenance of
certain records to monitor exemption granted to EOUs.

The EOUs are, therefore required to register
themselves with the customs authorities at the port by
following the procedure stipulated under Standing
Order No. 7722/2002 dtd. 25.07.2002.

Basic Concepts related
to EOU Scheme

LOP / LOI
LOP/LOI is granted by the Development Commissioner [DC]

LOP/LOI list the conditions of approval.

The initial validity of LOP/LOI is 3 years from the issue date during
which time the unit should commence commercial production. This
validity can be extended for a further period of 3 years. Request
for extension beyond 6 years would considered by Board of
Approval.

After commencement of production, LOP becomes valid for 5
years.

LOP/LOI is construed as an authorisation for all purposes.

LUT

LUT is executed with the DC to ensure positive NFE &
to abide by any of the terms and conditions of the
LOP/LOI/IL

Failure to a fulfill the criteria of positive NFE shall
render the unit liable to penal action under the
provisions of the Foreign Trade (Development &
Regulation) Act, 1992 and may result in cancellation or
revocation of LOP/LOI/IL

NFE (Net Foreign Exchange Earnings)

The unit shall be a positive net Foreign exchange
earner.

Net Foreign Exchange Earnings =
Foreign Exchange Inflow less Foreign Exchange
Outflow

Shall be calculated cumulatively in blocks of five
years, starting from the commencement of
production.

The performance of EOU/ EHTP/ STP/ BTP units shall
be monitored by the DC/Unit Approval Committee.

What is Foreign Exchange Inflow?
(For NFE)
Physical Exports of goods

Export of Services

Other supplies in DTA
– Supplies to holders of advance authorisation/ advance
authorisation for annual requirement/ DFIA/ EPCG scheme
– Supplies to other EOU/EHTP/STP//BTP/SEZ units
– Supplies made to bonded warehouses set up under the policy
and/ or under section 65 of the customs act and warehouses
in Free Trade and Warehouse SEZ, where payment is received
in foreign exchange, etc.

What is Foreign Exchange outflow?
(For NFE)

Import of Inputs / Capital Goods

Any other payment in Foreign Exchange like:
• Interest payment
• Payment to foreign technicians
• Payment of Royalty / technical know-how fees
• Repatriation of Dividend
• Commission on exports
• Foreign travel

Imports

Local Procurement

Operations
of EOU Exports

DTA Sales

Sub-contracting

Inter-Unit Transfer

Export through others

Other Sale of unutilised
Activities materials

Refund of CST

Re-import / Re-export

Import/Local Procurement under EOU Scheme

EOU unit may import and/or procure from DTA/bonded
warehouses in DTA / international exhibition held in
India without payment of duty all types of goods,
including capital goods, required for its activities,
provided they are not prohibited items of import in
the ITC (HS).

Import of goods free of cost or on loan / lease from
clients is also permitted.

Export under EOU scheme

What can be Exported under EOU Scheme:
– EOUs can export all kinds of goods and services except items
that are prohibited in ITC (HS). Export of Special Chemicals,
Organisms, Materials, Equipment and Technologies (SCOMET)
shall be subject to fulfillment of the conditions indicated in
ITC(HS).

– Procurement and supply of export promotion material like
brochure / literature, pamphlets, hoardings, catalogues,
posters etc. upto a maximum value limit of 1.5% of FOB value
of previous years exports shall also be allowed.


– EOU units can export to Russian Federation in INR against
repayment of State Credit / Escrow Rupee Account of buyer
subject to RBI clearance.

– Procurement and export of spares/components upto 5% of FOB
value of exports can also be exported to same
consignee/buyer, subject to the condition that it shall not be
counted for NFE and direct tax benefits.


There are certain relaxations for the EOUs in respect of their
export activities, as follows:

– State trading regime does not apply.

– It is permitted to send capital goods abroad for repair and
return and any foreign exchange payment for this is allowed.

– The export proceeds can be realized within 12 months of
export. The time limit can be extended by RBI.

– Items of manufacture for export specified in Letter of
Permission (LoP) / Letter of Intent (LoI) alone can be taken
into account for calculation of NFE.

Sale of Finished goods in DTA

Units may sell goods upto 50% of FOB value of exports
Conditions:
– Permission from Development commissioner
– Based on yearly/half yearly/quarterly exports
– Upon fulfillment of positive NFE and on payment of
concessional duties
– Permission will be granted for its products similar to the goods
which are exported or expected to be exported from the units


Maximum sale of a single product can be to the extent of 90% of
its export value. However, within overall ceiling of 50%.

May sell finished products in the DTA under intimation to the
Development Commissioner against payment of full duties
provided they have achieved the positive NFE.

In case of new EOUs, advance DTA sale will be allowed based on
its estimated exports for the first year.

An amount equal to Anti Dumping duty under section 9A of the
Customs Tariff Act, 1975 leviable at the time of import, shall be
payable on the goods used for the purpose of manufacture or
processing of the goods cleared into DTA from the unit.


Subject to import restriction on inputs upto 3% of FOB
value of exports of the previous year, EOU in
textiles/granite sector can make DTA sale on payment of
excise duty alone.

Sale of Rejects in DTA

May sell rejects in DTA unless specifically prohibited in
the LOP
– On prior intimation to customs/excise authority

– On payment of duties as applicable

– Sale of rejects upto 5% of FOB value of exports shall not
be subject to achievement of NFE

Sale of scrap in DTA

Scrap/ waste/ remnants arising out of production process or in
connection therewith may be sold in the DTA:

As per the Standard Input-Output norms notified under the Duty
Exemption Scheme. Wherever norms are not available they
should be got approved first from DC and subsequently from
Norms Committee.

On payment of concessional duties as applicable [as per CE Ntfn
No. 23/2003-CE Dtd. 31.03.2003]

Within the overall ceiling of 50% of FOB value of exports

Scrap can also be destroyed with the permission of Customs
/Excise authorities

Entitlement for DTA units supplying to EOUs

Supplies from the DTA to EOU/EHTP/STP/BTP units will
be regarded as "deemed exports” and will get the
following benefits
• Advance Authorisation/DFIA
or
Deemed Export Drawback

• Terminal Excise duty refund

Supplies from the DTA to EOU/EHTP/STP/BTP units will
be counted for discharge of export obligation, if any,
on the supplier

Sub-Contracting
EOU units may sub-contract production process to DTA through job
work which may also involve change of form or nature of goods.

Annual permission from the Customs authorities is to be obtained.

Goods sent for Jobwork are to be returned to the unit within 90
days.

Subcontracting of both production and production processes may
also be undertaken without any limit through other
EOU/EHTP/STP/SEZ/BTP units on the basis of records maintained
in the units.

Subcontracting of part of production process abroad may also be
permitted with the approval of the Development Commissioner.

Sub-Contracting (take-up job work)

EOU units may take up job-work for export on behalf of
DTA exporter

– On the basis of annual permission from the Customs authorities

– The goods are exported directly from EOU

– And export documents shall be filed jointly in the name of DTA
and EOU

– The DTA exporter will be entitled for refund of duty paid on
the inputs by way of All Industry Rate of Drawback/ Brand Rate
of duty drawback

Sub-Contracting

EOU/EHTP/STP/BTP units may take up job-work for
export on behalf of foreign supplier provided that no
DTA clearance shall be allowed

Scrap/waste/remnants generated through job work
– May either be cleared from the job worker’s premises on
payment of applicable duty on transaction value or;
– Destroyed in the presence of Customs/ Excise authorities or;
– Returned to the unit

Export through Others
An EOU unit may export goods manufactured through another
exporter or other EOU/EHTP/STP/SEZ unit subject to following
conditions:

– Goods shall be produced in EOU.
– Export orders so procured shall be executed within parameters
of EOU scheme and goods shall be directly transferred from
unit to port of shipment.

Sale of Un-utilised Material

Un-utilised material / Obsolete or Surplus Capital goods
can be disposed of as under:

– Transferred to another EOU unit

– Disposed off in the DTA with the approval of the
Customs authorities on payment of applicable duties

– Exported

– Benefit of depreciation, as applicable, will be
available in case of disposal in DTA only when the
unit has achieved positive NFE taking into
consideration the depreciation allowed.

Sale of Un-utilised Material
– No duty shall be payable in case of destruction within
unit after intimation to Customs authorities or destroyed
outside with permission of Customs authorities.

– Disposal of used packing material will be allowed on
payment of duty on transaction value.

Refund of CST
EOUs are entitled to reimbursement of Central
Sales Tax (CST) paid by them on purchases made
from the DTA, for production of goods and services
on the specified terms and conditions.

The disbursing authority for the claim of
reimbursement is Development Commissioner.

Re-import/Re-export and Sales
Return/Purchase Returns by EOUs

Goods
Procured
Re-import Goods sold Re-export
from DTA
of goods in DTA are of goods
and to be
exported Returned imported
Returned to
back
DTA unit

Replacement/ Repair
Of Goods procured or sold
The general provisions of the Policy relating to export
of replacement/repair of goods would also apply
equally to EOU units

Cases not covered by these provisions shall be
considered on merits by the Development Commissioner

Exit from EOU Scheme
Guidelines for Exit of EOU scheme is given under
Appendix 14 –I-L:

Following points are to be taken into consideration
during Exit from EOU Scheme:

r With approval of DC, an EOU may opt out of scheme, subject to
payment of Excise and Customs duties.
r If unit has not achieved positive NFE, it shall be liable to
penalty at the time of exit.

Fast Track Clearance
Status Holder EOUs eligible for the Fast Track Clearance
Procedure

Benefits:

– No examination of import cargo at port
– Imports through pre-authenticated procurement certificate
– DG set can be procured under intimation to DC & Excise
– No DTA sales permission required
– No Bank Guarantee required
– Removal of capital goods and parts thereof for repairs under prior
intimation to AC/DC of Customs/Excise.
– Time bound disposal of applications.

Obligation of EOU
Achieve Positive NFE cumulatively for a block period of five years

Fulfill the terms & conditions of the LOP & LUT

Quarterly performance report (QPR) to be submitted within 1 month
from the end of every quarter

Annual Performance report certified by CA to be submitted within 3
months from the end of the financial year (i.e., on or before 30th
June every year)

The procedure for bonding as per Customs and Central Excise Rules
to be followed

Commercial Registers are to be maintained

Proper accounts books to be kept as required under the respective
laws under which it is registered as an entity

When EOU is most beneficial?

Raw materials/components are mainly imported

New capital goods or second hand capital goods are to be
imported/purchased and installed

Where the orientation of the company is towards export and not
towards DTA sale as under the new policy DTA sale permission is
limited to 50% of physical exports in value terms and therefore in
order to enjoy the benefits of DTA the company must export
physically.

IT benefits for Conversion of DTA into EOU (as per CBDT Circular
No. 1 Dtd. 06.01.2005) are to be considered.

When hassle free operations are desired. (Since there is no need of
applying for licences like Advance Licence etc.)

Major Changes effected in New FTP 2009-
14
CENVAT Credit facility for the component of SAD and
Education Cess on DTA sale by EOU.

EOUs have been allowed to sell products manufactured
by them in DTA upto a limit of 90% instead of existing
75%, without changing the criteria of ‘similar goods’,
within the overall entitlement of 50% for DTA sale.

During this period of downturn, Board of Approvals
(BOA) to consider, extension of block period by one
year for calculation of Net Foreign Exchange earning of
EOUs.

Deemed Exports
This is a special facility provided for supplies of
indigenous products which can be consumed ultimately
in the production of goods to be exported. The
conditions are that supplied goods as it is do not leave
the country but get consumed in the process of
manufacture, payment for which is received in Indian
Rupees or in foreign exchange.

The categories eligible for deemed exports benefits are
given in Para 8.2 of Foreign Trade Policy which are
listed here below:

Deemed Exports

Supplies to
Supplies to Marine
Supplies to
Authorisation Freight
EOUS/ Supplies to Supplies to
Holder Containers by
EHTPs/ Projects Fertilizer
[Adv. Autho. 100% EOUs
STPs/ Plant
/AAL/ (Domestic
BTPs
DFIA/EPCG] Freight
Containers
Manufacturers)

Deemed Export Benefits

Adv. Authon/
Adv. Authon Deemed Refund of TED/
for Annual OR Exports + Exemption
Requirement/ Drawback from TED
DFIA.

Important Provisions
As far as (a) and (b) are concerned, these are mutually exclusive
because if exemption from duty is claimed, refund cannot be
claimed.

Hence, deemed exporter will either claim Advance Authorisation
for Intermediate supply / Advance Authorisation for deemed
exports / DFIA or deemed exports duty drawback.

Deemed exports duty drawback can be claimed on the basis of All
Industry rate or on the basis of Brand rate following the
procedure for fixation of brand rate.

The deemed exports duty drawback is refunded by DGFT.

As far as claiming of refund of Terminal Excise Duty (TED) is
concerned, the same principle applies.

Terminal Excise Duty need not be paid by the deemed exports
supplier if the supplies are given to EOU units under exemption
notification no. 22 dtd. 31.03.2003 (which is commonly known as
CT-3 procedure) or when supplies are made to Advance Licence
holder under excise notification no. 44 dtd. 26.06.2001.

In all other cases, deemed export suppliers have to pay Terminal
Excise duty and claim refund, except when supplies are made
against international competitive bidding.

If the recipient units take CENVAT credit of terminal excise duty,
then also the Govt. will not grant refund.

In case of deemed exports duty drawback as well as
refund of terminal excise duty, both are to be claimed
from licensing authorities alone.

Deemed exports, per se, are monitored by DGFT and
Excise and not by Customs.

In case of EOU, Refund of Terminal Excise Duty and
Duty Drawback must be claimed from the concerned
Development Commissioner.

Chapter 9 – Definitions
[Foreign Trade Policy]

Chapter 9 – Definitions
Accessory
Actual User
Capital Goods
Component
Consumables
Consumer Goods
Drawback
Group Company
Manufacture
Raw Material
Service Providers

Chapter 9 – Miscellaneous Matters
[Handbook of Procedures]

Para 9.1 – Change in Name and Constitution
An IEC holder must get the change in name / address /
constitution incorporated within 90 days of such
change. Provided, however, RA issuing IE Code may,
condone delay on payment of penalty of Rs. 1000/-.

Change in constitution, aforesaid, does not include
change in directors of Public Limited Company.


Para 9.3 - Applications Received After Expiry of
Prescribed Date of Receipt
Wherever any application is received after expiry of last date for
submission of such application, the application can be considered
after imposing a late cut in the following manner:

Application received after the expiry of last
1. 2%
date but within six months from the last date
2. Application received after six months from the 5%
prescribed date of submission but not later than
one year from the prescribed date
3. Application received after twelve months from 10%
the prescribed date of submission but not later
than two years from the prescribed date

Para 9.7 – Consumption Register

– Importers are required to maintain a register as in Appendix-23
(for 3 years period) of items imported under an Authorisation
and separately for items imported with actual user condition
and its consumption.

– In respect of particular schemes such register shall be
maintained for specified period.

Para 9.11 - Time Bound disposal of applications
The time limit for disposal of application by Regional
Authority is prescribed in this para.

Para 9.11 A - Date of Shipment/ Dispatch In respect
of Imports
Date of shipment/dispatch for the purposes of imports
will be reckoned as under:-

Mode of
Date of Shipment / Dispatch
Transportation
(i) By Sea The date affixed on the Bill of Lading
(ii) By Air Date of relevant Airway Bill provided this
represents date on which goods left last
airport in the country from which the import is
effected.
(iii) From land-locked Date of dispatch of goods by rail, road or other
countries recognised mode of transport to consignee in
India through consignment basis.
(iv) By Post Parcel Date stamp of office of dispatch on the packet
or dispatch note
(v) By Registered Date affixed on Courier Receipt / Waybill
Courier Service
(vi) Multimodal Date of handing over goods to first carrier in a
transport combined transport Bill of Lading.

Para 9.12 - Date of Shipment/ Dispatch in respect of Exports
Date of shipment/despatch for the purposes of exports will be
reckoned as under:-
Mode of
Date of Shipment / Dispatch
Transportation
(i) By Sea For bulk cargo, date of Bill of Lading or date of mate
receipt, whichever is later.

a) For containerised cargo, date of “Onboard Bill of
Lading”, or “Received for Shipment Bill of Lading”,
where the L/C provides for such Bill of Lading. For
exports by containers from Inland Container Depot (ICD),
date of Bill of Lading issued by shipping agents at the
time of loading of export goods in ICD after customs
clearance.

b) For Lash barges, date of Bill of Lading evidencing
loading of export goods on board.


Date mentioned by appropriate Officer of Customs
on Shipping Bill, evidencing loading or handing over
(ii) By Air of goods to air cargo complex, which are not
international airports, or by way of rotation of flight
number and date.
(iii) By Post Date stamped on postal receipt.
Parcel
(iv) By Rail Date of RR (Railway Receipt).
(v) By Date affixed on Courier Receipt/ Waybill.
Registered
Courier Service
(vi) By Road Date on which goods crossed Indian border as
certified by Land Customs Authorities.

Thought for the Day…

“The Master Key to Success is to set
Goals higher than yourself and then
to achieve them.”

Sudhakar Kasture

Exim Institute
[A Division of Helpline Impex Pvt. Ltd.]

Mumbai - Head Off. Pune - Branch Off.
A-203, Everest Chambers, EPI Centre, Opp. Indsearch,
Next to Star TV Office, Law College Road, Pune 411004.
Near Marol Naka, Andheri-Kurla Road, Tel: 020-65246159
Andheri (East), Mumbai – 400 059. Fax: 020-25465195
Tel: 022-28507615/28507329/65769126 Email:
Fax: 022-28506419 eximpune@helplineimpex.co.in
E-mail: exim@helplineimpex.co.in

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