EXIT FORM EOU

[Hasmukh Patel]

Dear ALL,

At the time of exit form EOU scheme, why EOU may pay full custom duty on the finished goods lying in stock ? Nomaly it is under section 3(1) of C.Ex Act2002. The wording is that 'o be sold any other palce in india'

If the finished goods is not sold by EOU then why EOU pay the duty under section 3(1) / dity as like imported goods in india.

I think the EOU may reverce the benefits take to manufacturing of final finished goods layin in the stock ata the time of exit of eou.

I want all your opinions.

[Ganeshan Kalyani]

Sir reversing the credit and paying the credit is one and the same, right ?

[KASTURI SETHI]

Sh.Patel Ji,

Govt. of India forgoes various types of duties for the sake of foreign exchange to be earned by EOU by way of export of their products. There are provisions for DTA sale also. When the unit has lost its status of EOU, it forfeits the benefits/sops being availed as EOU. After exit/debonding, it has become normal PBC unit.

[Suryanarayana Sathineni]

While concurring the views expressed by our friends, I would like to give the following additional points

• There is a specific procedure prescribed under FTP for de bonding of EOU (6.18 and Appendix 14 I as per my remembrance
• In terms of the above, once an EOU is proposed to be de bonded, all the duties not paid on the materials,capital goods, consumables, components, work-in process and Finished goods to be paid subject to the conditions/provisions prescribed therein .
• DTA sale is different from De-bonding and DTA sale is available to an EOU which is operating under the said scheme and not for the unit under de bonding ( You may also refer Shiv Industries case in this regard)
• Further, there is a concept that why to pay duties on FG and WIP at all since after de-bonding , the unit become DTA and whenever the said goods cleared from DTA being liable for duties. ( This view was upheld in Solitaire machine Tools case)
• However, unless the FTP provisions are not amended, the chances of upholding your view are remote one need to wait for such amendment or one need to represent the DGFT to amend the said para 6.18 and the appendix considering the various changes took place in EOU scheme since them including cenvat facility extended to EOUs in 2004.

Hope I have clarified the issue to the extent possible.

Best Regards

Suryanarayana

[KASTURI SETHI]

Sh.Surya Narayana Ji,

Sir, Nicely explained. Cleared the air completely.Thanks a lot.

[Hasmukh Patel]

Thanks a lot to all.

 

I know all procedure of debonding. I was also debond our two units.

I want only discuss and possibility or Chance to fight with gov. on the same poin.

The gov.officer ask to pay full duty and deny the noti 23/2003 ce under new amended section 3(1) on finished goods.

As per new section 3(1) the wording is goods to be sale any other place in india( Amend after SC decesion in SIV IND)​ & the EOU unit do not sale it's finished goods any other place in india.

My question it that if gov. not consider it as sale & deny the noti 23/2003 ce , then why EOU pay duty on finished goods?

As per central excise rule duty liability on finished goods at the time of clearance form factory gate. So I want to ask why EOU apy the duty on finished goods instead of reverce the benefits for manufacturing of finished goods. It mean pay the duty on RM-PM procure without payment of duty & take the cenvat credit on it.

If EOU pay the duty on finished goods and convert in normal DTA unit,then after the duty liability arrival on clearance of same finished goods.It's like duble taxation on finished goods.

In FTP there is no single wording that to be sale any other palce in india.

I think EOU may fight on same ground for duty payment on finished goods, because at the

time of duty payment & receive NOC for central excise dept. the status of unit is EOU not DTA.

After receive final exit letter form development commissoner the unit becom normal DTA unit.

[Kishan Barai]

Respected Hasmukh Patel Jee,

According to me you need to pay custom duty on finished goods lying in stock before EXIT from EOU.

Now I have one solution is that you export your finished goods left over & then apply for EXIT. I hope this will help all.

Cordially yours,

Kishan Barai

[Hasmukh Patel]

I have no require any advise,because we have already exit form EOU in 2012. This topic as for discussion to understand the rule and solusions.

[Kishan Barai]

Opps I am very sorry Hasmukh Patel bhai

[Suryanarayana Sathineni]

Dear Friend,

I have already explained the issue in detail including the reason why we have to pay full duty in the absence of para 6.18 and the related appendix therein.

I have also given a favourable case law according to which at the time of exit, EOU need not pay duties on FG and WIP.

I handled two de bonding activities out of which one is involving duties of about 40+ crores and in one case AI have paid about ₹ 9+ crores under protest since the Jurisdictional AC refused to give no objection and duty payment certificate. We have filed the appeals in both the cases and in one case ( amount involved 60 Lakhs) the CESTAT allowed our appeal considering the Solitaire machine tools case. However, the second appeals involving 9+ crores is still pending before CESTAT and if this also decided then one can get some confidence about our argument but it is a time taking process.

As stated a representation in the mean time to DGFT/Ministry of commerce requesting for amendment of para 6.18 may yield some result..

Best Regards

Suryanarayana

[Hasmukh Patel]

Thanks a lot

Recently new judgement​ on 1st April-16 of CESTAT - Delhi in case for Maral Overseas Ltd., C.C.E., Indore - 2016 (4) TMI 771 - CESTAT NEW DELHI focus on para 6.18 of FTP. See the tribunal decision.

I want to know real interpritation of the said decision.

 

[Suryanarayana Sathineni]

Dear Friend,

If you have the copy of the judgment readily pl. post the same so that I will try to give my view.

Best Regards

Suryanarayana

[Suryanarayana Sathineni]

Dear Friend,

I have gone through the case law cited by you which is decided on the lines of Shiv Industries case by the Hon'ble Apex Court and stated in my earlier view.

As already explained, thee issue involved in the case is ...

In terms of Para 6.18 of FTP, to debond an EOU the EOU unit need to pay applicable duties on all the items including FG lying in stock as on the specified date.

Whereas, the appellant in that case contended that why cant he pay the concessional rate of duty in terms of Notification No. 23/2003-CE instead of full duties in terms of para 6.18 of FTP

The Hon'ble Tribunal held that DTA clearance under concessional rate of duty ( NF 23/2003-CE) is available only to an operational EOU and not for the De bonding/de bonded unit.

Hope I have clarified your doubt.

Best Regards

Suryanarayana

AI Summary

Duty liability on finished goods at EOU exit requires payment of full duty under FTP de bonding rules. De bonding under the FTP requires payment of duties on materials, capital goods, consumables, components, work in process and finished goods in stock as on the specified date; concessional DTA clearance rates are treated as available only to operational EOUs, so exit normally triggers reversal of EOU benefits and full duty liability unless FTP provisions are amended or relief is obtained through appeal or representation.