EPCG License taken by EOU

[Govinda Raju]

Hi

We are 100% Export oriented unit. We have initiated to exit EOU and consequently applied for EPCG license for capital goods imports being a major exporter. However, subsequently company has delayed to exit and now shelved the plan. Now, to close EPCG license, DGFT insisting for closure certificate or pay the duty with Penalty suggesting contravention of act. However, there is no leak of duty revenue, we have complete record of export related to EPCG license though we are an EOU. From the perspective of regulatory there is definitely not a double benefit of export scheme availed then how there will loss of revenue to the government. Can I please have your views.

Thanks

Raju

[Shilpi Jain]

Ideally if the goods procured under EPCG and EOU are properly bifurcated and shown with the details of respective export, I don't think there should be any issue.

[KASTURI SETHI]

Dear Sir,

You have not exited EOU. Have you received any letter from the office of DGFT or is it all verbal ?

[SOWMYA CA]

Hi,

The answer to the question depends on your current status, whether you are a DTA / EOU now. If you are still an EOU, you can apply for subsuming of export obligation on the EPCG with that of EOU and then upon issue of NOC from the development commissioner, you can proceed for formal closure of the EPCG. If you are a DTA, then you need to provide export details distinct of EOU obligations. That is to say, the export obligation of EOU cannot be used towards fulfilment of EPCG obligation.

[Govinda Raju]

Dear Shilpa Jain, Kasturi Sethi, Sowmya CA

Thank you very much for your response, I will work on it.

Dear Kasturi Sir, Yes the department has issued SCN calling for explanation, there is no definite section or rule they have referred but in plain suggested there is contravention of FTP rules.

Dear Sowmya ji,

We are continue to be EOU due to strategical reasons, we do have maintained exports separately mentioning EPCG reference as well as EOU reference. Thanks for your inputs.

Regards

Govind

[KASTURI SETHI]

Sh.Govinda Raju Ji,

Pl. share major contents of SCN including FTP Rules contravened as alleged in the SCN. Thus experts will be able to advise perfectly.

[Raghunandhaanan rvi]

Sir,

You can surrender the EPCG authorization anytime before the expiry of the export obligation period if it was not used. No authorizations with imports made against them shall be allowed to surrender. For further details, you may refer to question No. 121 of FAQ of DGFT on EPCG Scheme available in DGFT portal.

[Govinda Raju]

Dear Kasturi ji,

SCN only states Section 11(2) of the Foreign Trade (D&R) Act, 1992 where any person makes or abets or attempts to make any export or import in contravention of any provision of this act will leade to penal consequences.

As per SCN we are contravened Para 5.07(a) of the FTP where there is NOC requirement confirming we have exited EOU.

However, the act is silent on providing the remedy if there is no NOC though there will be NFE to prove as a total of EOU and EPCG. Though we can exhibit that we complied EPCG norm, non compliance to Para 5.07(a) is viewed as contravention at department level. However, they have given us the opportunity to provide our explanation which is yet to happen.

Thank you

[Govinda Raju]

Dear Raghunandan sir,

Thanks for your response, in the current scenario we have utilized the EPCG license..

Thanks you sir.

AI Summary

Company Faces DGFT Penalty for Delayed EOU Exit; Responds to SCN on FTP Rule Para 5.07(a) Compliance A 100% Export Oriented Unit (EOU) faced issues with the closure of an Export Promotion Capital Goods (EPCG) license after delaying its exit from EOU status. The Directorate General of Foreign Trade (DGFT) insists on a closure certificate or penalty payment for alleged contravention of rules, despite no revenue loss. Respondents suggest bifurcating exports under EPCG and EOU, obtaining a No Objection Certificate (NOC), and aligning export obligations. The company received a Show Cause Notice (SCN) citing contravention of the Foreign Trade Policy (FTP) rules, specifically Para 5.07(a), and is preparing a response.