Interest on Raw Materials stock at the time of 100% EOU Exit

[SNEHAL SHAH]

Dear sir ,

We are manufacturing of Pharma product and recently ( before 6 Month ) , we got final Exit order from SEEPZ .

We have already paid duty amount on Raw Materials stock at the time of EOU exit with relevant Bill of entry assessed by Jurisdiction range officer Central Excise.

We have received Interest amount demanding letter from SEEPZ, on duty amount paid on these raw materials stock.

We have already used this input stock for production of FG and paid duty amount at the time of removal.

Can unit have to pay Interest amount on Raw materials stock ? Any provision please share .

Please give valuable feedback on this .

Regards,

SNEHAL SHAH

[KASTURI SETHI]

Sir,

Yes. You will have to pay interest. You have enjoyed exemption from duty payable on raw material. Interest has to be paid for the period involved. No need to mention authority. It is very much clear.

[Kishan Barai]

Totally agree with KASTURI SETHI Sir

[SNEHAL SHAH]

Dear all ,

Thanks for valuable feedback .

Can any one share some Notification or circular regarding interest on de-bonding stock ??

Regards,

SNEHAL SHAH

[KASTURI SETHI]

Thanks a lot to Sh.Krishan Barai, an expert for prompt response. Prompt action has a great value. Untimely or delayed opinion is of no value at all.

[Suryanarayana Sathineni]

Dear Friend,

I am afraid, there is no requirement of payment of Interest on the duty payable on duty free Capital goods,materials,WIP or FG at the time of exit or de bonding from EOU.

There is no such requirement of payment of interest except duty in terms of Para 6.18 of FTP and Appendix 14-I-L

Best Regards

Suryanarayana

[Kishan Barai]

Respected Suryanarayana Sir,

Suppose if some one import duty free component in EOU & apply for EOU Exit then how it is allowed ?

EOU has to achieve positive value addition by exporting the goods made up of imported components

one also has to pay duty with interest on imported component not used for export

Please elaborate sir,

Thank You

[Suryanarayana Sathineni]

Dear Shri. Kishan Barai Ji,

If you see the main query, it was a subseqauent demand of interest on the duties paid for exit from EOU Scheme which was granted final exit or De-bonding.

In terms of the provisions cited by me in the previous reply, on the occassion of exit from EOU scheme, the unit has to follow the procedure and guidelines provided therein which is subject to the unit achieving the positive NFE condition. If it is other wise the question of granting exit from the scheme does not arise.

Further, even if you see the provisions of cenvat credit Rules, if you clear the inputs/CG as such , you are required to pay the amount equal to the credit taken since in this case duty already paid.

Even in the other situation also with respect to EOU, if an EOU is unable to utilize the materials for the intended purposes ( for use in the mfr. of goods meant for export in this case), then the unit is under obligation to clear the goods on payment of duties which were not paid at the time of duty free procurement ( import or local). Similarly in case of clearance of Capital Goods by an EOU also, it was provided in the Notification that the unit should pay the duty on the depreciated value .

In any of the provisions, payment of interest is not mandated and in the similar way on Exit from EOU also there is no requirement to pay interest.

Coming to the view expressed by Shri. Kasturi Sethi Ji that interest is payable for misuse/enjoying the exemption, I respectfully submit that in the subject query, it is not by any stretch of imagination it is treated as mis-use of exemption since the FTP provides for such a facility for exit from the scheme on payment of duties on the stock of materials, wip and Finished goods and no interest payment is provided there in.

Hope the above inputs give the required clarity on the issue.

Best Regards

Suryanarayana

[Kishan Barai]

Thank You Very Much Sir for such a Wonderful Detailed Reply.

Thank You

[SNEHAL SHAH]

Thanks a lot all of you , specially to Mr.Suryanarayana Sathineni for wonderful reply .

regards,

SNE

[KASTURI SETHI]

Really appreciable reply by Sh.Suryanarayan, Sir. He has virtually solved the problem by penetrating ( rather X-RAYING) into law. Thank a lot. Fantastic.

AI Summary

Interest on duty-exempt raw materials: duty on de-bonding stock is payable; requirement to pay interest remains disputed. Dispute concerns whether interest is payable on duties assessed and paid on raw material stock at the time of EOU exit (de-bonding). The operative practice requires payment of duty on raw materials, WIP and finished goods when an EOU exits the scheme and clears such stocks domestically. Some contributors assert interest is payable for the period of exemption enjoyed, while others observe that the Foreign Trade Policy exit procedures and related rules require duty payment but do not expressly mandate interest.