Imported free of cost material for job work in EOU

[Asked by Guest]

Sir / Madam ,

We have a customer from USA who has sent us USA origin raw material free of cost to our EOU unit for job work. We will add indian origin raw material and produce final product . We will eventually export this product to customer . He wants us to only charge for the Indian origin raw material and processing cost .

How do we proceed on this situation as our excise officers are not aware of any such situation and donot know what to do and how to clear the goods

pl let me have your expert opinion .

regards

Rajendra Rane

Mumbai 9322221969

[KASTURI SETHI]

Sh.Rajendra Rane Ji,

You want to clear the goods for export as job worker. You will have to follow the valuation method provided under Rule 10 A of Central Excise Valuation Rules,2000 read with Board's circular no.902/22/2009-CX dated 20.10.2009 and Notification No.214/86-CE dated 25.3.86 as amended. Proper transaction value and proper duty has to be worked out and mentioned on the invoice as well as prescribed Form ARE-1 for export. While computing assessable value you will have to take into account landed cost of raw material (including imported and indigenous) and other elements for payment of proper duty (though not to be paid on for the purpose of export), otherwise there will be no correct transaction value and correct duty and hence correct amount of receipt of foreign exchange.After you will have to resort to some lawful basis for arriving at Transaction Value. The Govt. foregoes the duty for export with an aim to receive foreign exchange. The Valuation Rules do not allow to exclude the value of imported raw material though received free of cost by you.By exclusion,the quantum of foreign exchange to be received in lieu of exported will be effected. Hence answer to your query is in the negative.

[Rajagopalan Ranganathan]

Sir,

Transaction value in your case will include the value of raw material supplied free of cost, value of material added by you, your processing charges and your profit. Transaction value is to be indicated in Form ARE-1 under which you have to clear for export the goods after job work. This value will be shown in the export invoice also. However you will collect from your foreign customer only value of the material added by you, your processing charges and your profit.

Hello Mr. Rane,

We have a similar query for our EOU unit in Bangalore. Further to the opinions given by the experts, were you able to carry out the transaction above ?

Could you please share your experience/procedure ?

Regards

Priya G S

9243601161 Ext 310

AI Summary

Transaction value must include free imported inputs and be stated in export invoice and ARE-1; collect only processing charges.
Imported free-of-cost inputs supplied to an EOU for job work must be included in the Transaction Value for export valuation; assessable value must reflect landed cost of all raw materials (imported and indigenous), processing charges and profit, and this transaction value must be shown on the export invoice and in Form ARE-1, although the exporter may collect only payment for indigenous material, processing charges and profit from the foreign customer.