Clarification regarding reversal of AIDC along with BCD on DTA sale by EOUs

[Dashrath Walkoli]

I seek clarification regarding the applicability of reversal of Agriculture Infrastructure and Development Cess (AIDC) in cases where an Export Oriented Unit (EOU) clears finished goods to the Domestic Tariff Area (DTA).

The relevant statutory provisions and the CBIC's interpretation are as follows:

1. Statutory Background:

• Imports/Procurements by EOU are exempt from BCD under Notification No. 52/2003-Customs, dated 31.03.2003 (as amended).
• The AIDC exemption is granted under Notification No. 11/2021-Customs, dated 01.02.2021 (Sr. No. 19), which is conditional on the BCD exemption being 'claimed and allowed' under Notification No. 52/2003.

2. CBIC Clarification (Circular No. 07/2021-Customs, dated 22.02.2021):

• The Circular’s Deeming Provision (Para 1.2) clarifies that when an EOU clears finished goods into the DTA by paying the foregone BCD, 'it is treated as if no exemption of BCD was allowed to the EOU under notification no. 52/2003-Cus dated 31.03.2003.'

3. Accordingly, since the BCD exemption stands deemed to be withdrawn at the time of DTA clearance, the consequential exemption from AIDC on the inputs also stands withdrawn, implying that the EOU is required to reverse/pay AIDC..

My query is

Whether for DTA clearances of finished goods, the EOU is mandatorily required to reverse/pay both the Basic Customs Duty (BCD) and the Agriculture Infrastructure and Development Cess (AIDC) that were foregone on the inputs utilized in the manufacture of such goods ?.

Yours faithfully

AI Summary

EOU DTA clearances require reversal of BCD and AIDC exemptions under Notifications 52/2003 and 11/2021 An Export Oriented Unit sought clarification on whether, upon clearing finished goods into the Domestic Tariff Area, it must reverse/pay both Basic Customs Duty and Agriculture Infrastructure and Development Cess foregone on inputs. The discussion explains that exemption from AIDC under Notification 11/2021-Customs is conditional on BCD exemption under Notification 52/2003-Customs being claimed and allowed. CBIC Circular 07/2021 deems that, when foregone BCD is paid at the time of DTA clearance, it is as if no BCD exemption was ever granted. Consequently, the AIDC exemption also stands withdrawn, requiring payment of both BCD and AIDC on inputs used in DTA-cleared goods.