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 Accordingly, since the BCD exemption stands deemed to be withdrawn at the time of DTA clearance, the consequential exemption from AIDC on the inputs also stands withdrawn, implying that the EOU is required to reverse/pay AIDC..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 foregone BCD and AIDC on inputs used in manufactured goods.
When an EOU clears finished goods into the DTA by paying foregone Basic Customs Duty, the BCD exemption is treated as never allowed and, because the Agriculture Infrastructure and Development Cess exemption is conditional on the BCD exemption, the AIDC exemption also stands withdrawn; consequently the EOU must pay/reverse both the foregone BCD and the foregone AIDC on inputs used in the manufacture of such goods.