TMI BlogExport Oriented Unit SchemeX X X X Extracts X X X X X X X X Extracts X X X X ..... e Handbook of Procedures, Volume-I ( HOP). Under this scheme, the units undertaking to export their entire production of goods are allowed to be set up. These units may be engaged in the manufacture, services, development of software, trading, repair, remaking, reconditioning, re-engineering including making of gold/silver/platinum jewellery and articles thereof, agriculture including agro-processing, aquaculture, animal husbandry, bio-technology, floriculture, horticulture, pisiculture, viticulture, poultry, sericulture and granites. The EOUs can export all products except prohibited items of exports in ITC (HS). 3. Under the EOU scheme, the units are allowed to import or procure locally without payment of duty all types of goods including capital goods, raw materials, components, packing materials, consumables, spares and various other specified categories of equipments including material handling equipments, required for export production or in connection therewith. Even the goods appearing in the restricted list of the EXIM Policy (1997-02) are permitted to be imported. However, the goods prohibited for import are not permitted. In the case of EOUs engaged in agriculture ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... The EOUs basically function under the administrative control of the Development Commissioner of the Export Processing Zones, whose jurisdiction has been notified by the Ministry of Commerce. In all, there are seven Development Commissioners at Mumbai, Gandhidham, Chennai, Cochin, Vizag, Noida and Calcutta, who supervise the functioning of the EOUs and eight Export Processing Zones/Special Economic Zones in the country. The Development Commissioners of the EPZs/SEZs are the Licensing Authorities in respect of units under the EOU Scheme, as per specified territorial jurisdiction as indicated in the Export and Import Policy. 7. 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 work under the control of Central Board of Excise Customs. The work relating to EOUs is handled by the staff of jurisdictional Commissioner of Central Excise. However, in the case of EOUs located in port cities/towns or within the municipal limits of port cities/towns, the work is handled by jurisdictional Commissioner of Customs, Seaport. (Reference Board's Circular Nos. 72/2000-Cus, dated 31-8-2000 an ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... multipurpose bond with surety/ security with jurisdictional Customs/ Central Excise officers. (Reference Board's Circular No. 15/95-Cus, dated 23-2-1995 ) Customs and Central Excise Notifications relating to EOU Scheme: 11. To enable EOUs to import / procure locally their requirement of raw materials, capital goods and office equipment etc. duty free, a number of Customs and Central Excise notifications have been issued by the Ministry of Finance. These notifications specify the different categories of items allowed to be imported / procured duty free as well as the conditions thereof. The notifications are as under: (i) General activity of manufacture, production, packaging of products and service activities for export- Notification Nos. 53/97 Cus dated 3.6.97 and 1/95-CE, dated 4-1-1995. (ii) Software technology products for export- Notification Nos. 140/91 Cus, dated 22.10.91 and 1/95-CE, dated 4-1-1995. (iii) Electronic hardware products for export- Notification Nos. 96/93 Cus, dated 2.3.93 and 1/95-CE, dated 4-1-1995. (iv) Floriculture, Pisciculture etc. for export- Notification Nos. 126/94-Cus dated 3.6.94 and 136/94-CE, dated 23-2-1995. (v) Aquacultu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... k etc. The bond is executed with the jurisdictional Assistant Commissioner of Customs/Central Excise in charge of the unit. The format of the bond is prescribed vide notification No. 6/98-CE ( NT) dated 2-3-1998. The bond covers the activities which include, inter alia, transhipment of import /export goods between port of import/export and units' premises; duty-free import/procurement from the indigenous sources as per relevant notification and warehousing/storage in the unit; movement of duty-free goods for job work and return; temporary clearance for repair and display in exhibitions, testing/approvals etc.; and movement of goods against AR-4, AR-3A and CT-3 etc. and transfer from one warehouse to another. However, it does not cover the differential duty amount against advance DTA sale for which a separate bond is to be executed. The bond is taken for an amount equal to 25% of the duty forgone on the sanctioned requirement of capital goods plus the duty forgone on raw materials required for 3 months. Surety or security equivalent 5% of the bond amount in the form of bank guarantee is required to be given by the EOUs. (Reference Board's Circular Nos. 14/98-Customs, dated 10-3-1 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e-exportation, such goods are required to be either destroyed or cleared into DTA on payment of full customs duty. (Reference Boards Circular 60/99-Cus, dated 10-9-1999 ) Procurement of Goods Indigenously under CT-3 Procedure : 17. The EOUs can procure goods from DTA without payment of Central Excise duty subject to following of the Chapter X procedure of erstwhile Central Excise Rules, 1944 . Such procurement from DTA is against CT-3, which is issued by the Superintendent of Customs/Central Excise in charge of the EOU. Such goods are required to be brought directly from the manufacturer /warehouse into the unit's premises under AR3A and examined by the designated officer. After examination of such goods, one copy of AR-3A is sent by registered post to the jurisdictional Central Excise authorities as a Re-warehousing Certificate in token of receipt of the goods in the unit. To avoid separate permission every time, the EOUs are issued pre-authenticated CT-3 in booklet form and against such pre-authenticated CT-3, the EOUs are allowed to procure capital goods, raw materials, consumables etc. Goods procured from DTA and found to be defective can be returned to the manufactu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ue of exports), waste, scrap, byproducts and services in DTA upto 50% of FOB value of exports at a concessional rate of duty in an amount equal to 50% of Customs duties. Sales beyond 50% attract full duties. It may be noted that the words "FOB value of exports" refers to physical exports only. Therefore, the value of deemed exports made by the unit is not considered while determining the FOB value of exports. However, the sales made to private bonded warehouses set up under paragraph 11.14 or a trading unit set up under paragraph 9.21 of the EXIM Policy are taken into account for the limited purpose of arriving at FOB value of exports by EOU/EPZ units provided payment for such sales are made from EEFC accounts. (Reference: Notification No.2/95-CE, dated 4.1.1995). Goods Manufactured from Indigenous Materials in 100% EOUs 22. A concessional duty has been prescribed for goods sold in DTA which are manufactured entirely out of indigenous materials. In such cases, the duty charged is the effective rate of excise duty which is leviable on like goods manufactured cleared by DTA units. (Reference: notification No.8/97-CE dated 1-3-97). However, if such goods manufactured by a D ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... erials headings 53.07, 53.10, 5702.12, 5703.20, 58.01, 58.02, 58.06 or 6305.10 are fully exempt from payment of duty if manufactured by EOUs and cleared into DTA. Also, cotton waste falling under heading 52.02 are fully exempted if produced or manufactured by EOU and allowed to be sold in India. ( Reference: Notification No. 6/97-CE, dated 1-3-1997) 25. In case of Gems and Jewellery EOUs, the units are allowed to sell upto 10% of FOB value of exportsof the preceding year in DTA subject to fulfillment of NFEP as prescribed under the Export and Import Policy. In case of sale of plain gold jewellery, plain silver jewellery, studded gold jewellery, unsuitable/broken cut and polished diamonds, rough diamonds, precious and semi precious stones or dead stock in DTA, the units areallowed to pay concessional rate of duty. (Reference notification No. 20/97-CE, dated 11-4-1997). 26. In addition to the above, under notification No. 20/98-CE, dated 18-7-1998, certain specified textile items are allowed to pay concessional duty in case of DTA sales of such items by EOUs. ( Reference: notification No. 20/98-CE, dated 18-7-1998 ). Manner of Calculation on Duty of Goods Cleared in Dom ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mples are sealed in the presence of the Customs officer and are handed over to the representative of the courier company authorised by the Commissioner of Customs for presentation to the Customs at the port of export. These sealed samples are not normally examined again before " let export" is given if the seals are found intact and not tampered. The representative of the courier company later hands over the proof ofexport to the jurisdictional Assistant/ Deputy Commissioner. (Reference Board's Circular Nos. 22/98-Cus, dated 27-3-1998 and 52/99-Cus, dated 20-8-1999 ). Clearance of Personal Computers : 32. The EOUs are allowed to remove personal computers not exceeding two in number for installation in their registered/administrative offices located in DTA subject to the following of the procedure prescribed in this regard. (Board's Circular No.41/99-Customs dated 30-6-99 ) Sale of Surplus/ Unutilized Goods : 33. The EOUs are allowed to sell surplus/unutilized goods, imported or procured duty free in DTA on payment of duty on the value at the time of import/procurement and at rates in force on the date of payment of such duty, in case the unit is unable for v ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... itional duty of customs subject to following the provisions of EXIM Policy HOP Vol.-1, 1997-2002 conditions of notification 28/2001-CE dated 16-5-2001 . The goods may also be cleared to a person holding an ARO issued by the Licensing Authority against a DFRC or Back-to-Back Inland Letter of Credit issued by a bank on the payment of additional duty of customs subject to following of the provisions of EXIM Policy and HOP Vol.1 Vol.-1, 1997-2002 conditions of notification No. 28/2001-CE dated 16-5-2001 . (Reference Board's circular No.31/2001-Cus, dated 24-5-2001 ). Sub-Contracting : 37. The EOUs, other g than Gem Jewellery units, are allowed to sub-contract part of their production process in DTA. These units may also sub-contract up-to 50% of production for job-work in DTA. Sub-contracting of both production and production process are also allowed to be undertaken through other EOU/EPZ/EHTP/STP/SEZ units on the basis of records maintained by the unit. 38. For sub-contractual work performed outside, the units are required to take annual permission from the Customs authorities and are required to furnish information, such as, processes to be carried out on sub ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tion process in DTA. However, such gem jewellery EOUs are allowed to receive plain gold/silver/platinum jewellery from DTA against exchange of gold/silver/platinum of the same purity quantity in weight as that of the jewellery. The EOU is not eligible for any wastage or manufacturing loss against such jewellery. The DTA units supplying such jewellery against exchange of gold/silver/platinum are not entitled for deemed export benefits. (Reference Board's Instructions F. No. 305/107/93-FTT dated 31-1-1994 and 8-4-1994, Circular Nos. 59/98-Cus, dated 12-8-1998 , 67/98-Cus, dated 14-9-98 , 35/99-Cus, 74/99-Cus, dated 5-11-99, 31/2001-Cus, dated 24-5-2001 ). Temporary Removal of Goods : 43. The EOUs, Software Technology Park Units or Electronic Hardware Technology Park Units engaged in development of software are allowed to remove imported laptop computers and video projection system out of the bonded premises temporarily without payment of duty subject to following the prescribed procedures. (Reference Board's Circular Nos.17/98-Cus dated 16-3-98 84/2000-Cus dated 16-4-2000). Inter-unit transfer : 44. An EOU is allowed to transfer imported or manufactur ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to the retail outlets or showrooms set up in the departure lounge or Customs warehouse at international airports for being handed over to the said passenger for the purpose of export. (vi) Removal of moulds, tools, patterns, and drawings into the DTA for jobwork without payment of duty and to be returned to the unit thereafter. (vii) For availing of the above mentioned facilities, prior permission of Assistant Commissioner / Deputy Commissioner is required. Cost Recovery Charges/Cost Sharing 47. Cost recovery charges are the amount recoverable from the EOU on account of the expenses incurred by the Government for the posting of Customs staff at its premises to supervise their operations. The cost of posts created for EOUs has been determined at an amount equivalent to the actual salary and emoluments of the staff deployed i.e. the average pay and allowances including D.A., H.R.A., C.C.A. etc. The EOUs pay in advance the cost recovery charges determined for the entire year. Generally, one Customs officer supervises the functioning of four to five units and the cost recovery charges are shared amongst them. (Reference Board's instruction F. No. 11018/63/87-Ad IV, d ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ion efforts while not jeopardizing the interests of revenue. Recovery of Duty Forgone under EOU Scheme and Penal Action for Abuse/ Diversion etc. : 51. Under EOU Scheme, the units are required to achieve minimum NFEP and Export Performance as stipulated in the Exim Policy. In case of failure to achieve the minimum NFEP and EP, the duty forgone under the EOU scheme along with interest is recoverable from the units. Further, the duty is recoverable from the units in case of non receipt of imported/ indigenously procured goods in the factory premises after import/procurement, loss of goods in transit, non accountal of imported/ indigenously procured goods, unauthorized DTA sale, clandestine removal etc. Duty can also be demanded in case of failure to utilize duty free imported/indigenously procured goods including capital goods within the prescribed time limit. The duty is also recoverable on goods removed for job working/ display/ testing/ quality testing, but not received back in the unit within the specified period of time. 52. Apart from recovery of duty forgone, the law also provides for taking penal action where any 100% EOU is found to have indulged into any fraud ..... X X X X Extracts X X X X X X X X Extracts X X X X
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