TMI BlogEXPORT ORIENTED UNITSX X X X Extracts X X X X X X X X Extracts X X X X ..... .3 Owing to options available to such units under the Foreign Trade Policy and the nature of goods manufactured, each unit is likely to have a unique pattern of inflow (of duty free or exempted goods) and outflow (of exempted or dutiable goods). To give an example, some units may procure capital goods indigenously claiming excise duty exemption while others may import them free of customs duty. In addition, EOUs are also permitted to send goods out for job work as well as to receive goods from units in the DTA for job work. As a general principle, it may be useful to begin audit of a unit by creating a flow chart that would clearly show these movements so that the nature and extent of duty liability for each movement is clearly identifiable. 7.3.1 Evaluation of Internal Controls would be particularly useful in identifying potential risks to revenue for each of these movements. Such evaluation would also throw up risks owing to substitution of imported raw materials, their diversion into DTA and inflation of wastages and rejects factors unique to EOUs. Depending on the nature of goods being manufactured, auditors may have to use suitable indicators of risk on account of suc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... oms Act read with Customs Valuation Rules and instructions issued by the Board; whether the DTA sale is within the prescribed limit and made on the basis of actual physical exports (and not deemed exports); ix. Whether excess DTA sales are effected at concessional duty by inflating the FOB value of exports. x. Whether duty on DTA sales is short-paid by under-invoicing the value or mis-classification. xi. Whether the facility of partial conversion of DTA unit into EOU is being misused. Such misuse is possible, firstly, when the duty free capital goods or raw materials etc. are used by a non-entitled unit i.e. the DTA unit. Secondly, duty free imported goods may be diverted to the DTA unit and also the production of the DTA is shown as the production of EOU for obtaining concession which can easily be done especially, when two units share common facilities and where they may not be under continuous Customs or Excise supervision. xii. Whether any imported goods/inputs/consumables attracting antidumping duty have been used in the manufacture of goods cleared into DTA.If so, whether proportionate anti-dumping duty leviable thereon has been paid or not. xiii. Whether there ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ds should be ascertained under Section 14 of the Customs Act, 1962. It is important to note that the exemption would continue to apply to goods imported or procured under this exemption, even when they are used for the manufacture of goods that are cleared into the DTA as per the permission of the Competent Authority (and not exported), as long as the appropriate excise duty is paid on the finished products. i. Examine the Bond register with that of Import documents so as to ensure that the goods obtained duty free are covered in the relevant Annexure of the notification. ii. Check whether the capital goods are installed or otherwise used within one year from the date of importation or procurement or extended period allowed by the Assistant/ Deputy Commissioner, failing which duty together with interest should be demanded. iii.Similarly, in case of other goods check whether they have been used for intended purposes or re-exported within three years or extended period. iv. Check whether the goods produced or packaged have been exported within a period of one year or extended period from the date of import/ procurement. v. Check unused goods (including empty cones, bob ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... c) Check whether duty liability in respect of goods short received or not received has been demanded. 7.6.5 Exports: a) Check whether the proof of export has been received within six months of export. In case of non-receipt, check whether show cause notice has been issued demanding duty. b) Check as per Para 6.10 of Foreign Trade Policy read with Para 6.19 of Hand Book of Procedures, Appendix 14I of Handbook of procedures are in order. 7.6.6 DTA sales: Notification No.24/2003-CE exempts all excisable goods manufactured in a 100% EOU from the whole of excise duty [basic, additional (in lieu of sales tax) additional (textiles and textile articles)]. This exemption is applicable so long as the goods are not brought to any other place in India. In other words, DTA clearances of such goods would be liable to excise duty, unless they are exempt under some other notification. The highest rate of duty applicable to such clearances is that specified in section 3 of the Central Excise Act, viz., the aggregate of all customs duties. The effective rate of duty in case of DTA sales, may however, be lower as prescribed in notification No.23/2003-CE. This rate depends o ..... X X X X Extracts X X X X X X X X Extracts X X X X
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