Excise procedure in case domestic procurment of spares/machinery in invalidation of EPCG

[Narendra Soni]

Dear Experts,

Please suggest what procedure is required to do to obtain spares/machinery at NIL rate of duty from domestic supplier under invalidation of EPCG licence.

We have invalidation, what are next steps of excise formalities so that our supplier can remove the item without payment of duty.

Urgent please.

[Mahir S]

Soni ji,

Please refer to chapter 7 of the Foreign Trade Policy 2015-2020 pertaining to Deemed Exports. In the said chapter further refer to para 7.2, which states as under :-

(c) Supply of capital goods against EPCG Authorisation;

In view of above, clearance of capital goods by a local manufacturer to another unit under EPCG sales without payment of duty is permissible.

The procedure is the same as for deemed exports – the goods are required to be cleared from the supplier unit under the cover of ARE – 1 in the same manner as in the case of physical exports but with modification that the removal of the ARE -1 was prescribed to be against the EPCG Authorisation.

Further, for the purpose of claiming deemed export benefits, if any, the indigenous supplier shall have to produce documentary evidence substantiating the realization of proceeds from the recipient.

[Narendra Soni]

Thanks Mihir Ji.But, in case of raw material/Inputs, we arrange annexure I / annexure 45 from our central excise deptt and execute bond with the deptt. sent the same to our supplier, on the basis of these documents he supply duty free goods and issue invoice (not ARE-1) against invalidation of advance authorisation, Kindly confirm is there any formalities of these types in case of supply against invalidation of EPCg licence.

[CSSANJAY MALHOTRA]

Dear Narendra,

Initially, please note that Capital Goods or its spares is to be purchased on Payment of Excise Duty against EPCG with Invalidation letter from domestic sources.

TED (Terminal Excise Duty) Refund can be claimed either by Supplier OR Receiver of goods from the office of respective DGFT as agreed between parties.

Receiver of goods has the option to avail CENVAT benefit in case he opts out of claiming the benefit of TED from DGFT. Following documents needs to be submitted with the office of jurisdictional DGFT for claiming TED.

• Copy of Excise Invoice (CENVAT Copy) in Original with mention of supply against EPCG & Invalidation letter stated on same.
• Excise Duty Payment certificate from Office of Central Excise Supdt of Supplier.
• Disclaimer certificate from Supplier as to non availment of TED benefits by them.
• Bank Certificate from Supplier regarding payments made by them against Invalidation letter supplies.

On the other hand, Supplier can avail the Duty Drawback benefit as per All India Duty Drawback Rates on supplies against Invalidation letter as the same are treated as "Deemed Exports".

No Annexure/ARE-1 is required for Duty exemption in case of invalidation supplies against EPCG, the same hold goods i.e. ARE-3/CT-1/Annexure-45 against Advance Licence supplies.

[DR.MARIAPPAN GOVINDARAJAN]

Thanks to Shri Mahir and Sanjay Malhotra.

[Narendra Soni]

Thanks experts, one more suggetion please - Wheter instaltion certificate is required for domestic procured spares/machines under invalidation of EPCG.

[Narendra Soni]

Thanks experts, one more suggestion please,- Whether installation certificate is required in case of domestic procurement under invalidation of EPCG.

[CSSANJAY MALHOTRA]

Dear Mr. Soni ji,

Installation Certificate in respect of Capital Goods is required from office of Supdt Central Excise OR from Chartered Engineer at the option of Licence Holder even against Installation Letter.

Please understand that Installation of Capital Goods is important for claiming TED benefits and Invalidation is nothing but issued against EPCG, hence principal document remains EPCG only.

Capital Goods is to be furnished within a period of 6 months from the date of completion of Import as per Para 5.04 of HBP 2015-20 to the office of DGFT with copy to Central Excise office.

[MUKUND THAKKAR]

Dear Soni,

Installation certificate is required in case of domestic procurement under invalidation of EPCG. Invalidation letter for procurement from indigniously, other procedure is remain same. please obtain the insrallation certificate to avoid difficulty during the time of submission of EO. to DGFT..

[Mahir S]

Yes sir, installation certificate is required even in case of domestic procurement under invalidation of EPCG, as no specific exemption is granted thereon; as rightly explained above.

The Authorization Holder would have to produce the installation certificate as issued by Jurisdictional Central Excise Department within Six Months from the date of receipt of goods to the Regional Authority (DGFT Office). Further, in case of import of spares, the installation certificate needs to be submitted within period of three years from the date of import

However, in case of units not registered with Central Excise Department/Authorities, the Authorization Holder shall produce a certificate from an independent Chartered Engineer confirming the installation of Capital goods/spare.

[Mahir S]

Varun ji,

Where export is effected by merchant-exporter, the bond has to be necessarily furnished by him. However, if Merchant Exporter is not providing the CT-1 then the Supplier Manufacturer cannot supply the goods against the Regular Annual LUT filed by him.(Manufacturer).

It is open for the manufacturer to furnish bond on behalf of the merchant-exporter. It is clarified that in such cases, the manufacturer will not take a stand that since he is responsible for the duty liability, the export should be allowed on the basis of the Letter of Undertaking, which he has already furnished to the Department. In such circumstances, the application in Form ARE.1 will be in the name of the manufacturer who executes the Bond. All other procedures for admission of the proof of export would be the same as in the case of manufacturer-exporters.

It should be noted that once a manufacturer furnished bond for exports by merchant exporters, then it would be his own responsibility to account for the export of the goods.

AI Summary

Guidelines for Obtaining Machinery at NIL Duty: EPCG License Invalidation, TED Refunds, and CENVAT Benefits Explained A discussion forum addressed the procedure for obtaining spares or machinery at a NIL duty rate under the invalidation of an EPCG license. Experts advised referring to the Foreign Trade Policy and the need for specific documentation, including an installation certificate from Central Excise or a Chartered Engineer. Terminal Excise Duty (TED) refunds and CENVAT benefits were discussed, with the supplier or receiver claiming TED based on agreement. The procedure for claiming duty drawbacks was also highlighted. The importance of installation certificates for claiming TED benefits and fulfilling EPCG requirements was emphasized, with different guidelines for registered and non-registered units.