Permanant transfer of duty free goods by Advanc Authorisation

[Dashrath Walkoli]

We are a manufacturing company having multiple units under the same GSTIN within one State. One of our units is an Export Oriented Unit (EOU) and the other units operate as Domestic Tariff Area (DTA) units. We import raw materials duty-free under Advance Authorisation in terms of Notif No. 21/2023-Customs and Notif No. 23/2023-Customs.

Due to operational requirements, we permanently transfer certain duty-free inputs imported by our DTA unit (AA holder) to our EOU unit. The EOU is not endorsed as a supporting manufacturer in the Advance Authorisation.

We seek expert opinion on the following:

1. Actual User / Factory of Importer & Condition (xii)
Notif 23/2023-Cus prescribes an “actual user” condition, while Notif 21/2023-Cus requires that the imported materials be used in the “factory of the importer”. Further, Condition (xii) of both notifications prohibits transfer, sale or disposal of the exempted materials.

As the EOU is a separately licensed premises under Customs law and FTP, 2023, but part of the same legal entity (same GSTIN), would transfer of AA-imported inputs from a DTA unit to the EOU unit amount to violation of the “actual user” condition, the “factory of the importer” requirement, or the non-transferability restriction under Condition (xii)?

2. Applicability of Para 4.10 of HBP, 2023
Para 4.10 of the HBP, 2023 permits inter-unit transfer of inputs imported under Advance Authorisation, subject to prior intimation.

Can Para 4.10 be relied upon to permit transfer of AA-imported materials from a DTA unit to an EOU unit of the same GSTIN?
Does Para 4.10 override or relax the restrictions contained in Condition (xii) and the actual user / factory of importer conditions under Notifications 21/2023-Cus and 23/2023-Cus?

3. Duty Reversal
If such permanent transfer is undertaken, is reversal of Basic Customs Duty and IGST through TR-6 required at the time of transfer to the EOU?

AI Summary

Advance Authorisation imports transfer from DTA unit to EOU requires actual-user/factory endorsement; non-transferability risks duty and IGST reversal Notifications 21/2023-Cus and 23/2023-Cus impose an 'actual user' and 'factory of the importer' requirement plus Condition (xii) barring transfer, sale or disposal of duty-exempt goods; consequence: moving Advance Authorisation (AA) imports from a DTA unit to an EOU that is a separately licensed customs/FTP premises (even under the same GSTIN) will prima facie breach those conditions unless the EOU is expressly endorsed as a supporting manufacturer or specific permission is obtained. Para 4.10 of HBP, 2023 permits inter-unit transfers subject to prior intimation; consequence: it can facilitate such transfers if its procedural conditions are met but does not, by itself, negate the substantive non-transferability or actual-user/factory requirements absent express relaxation or endorsement. Permanent transfer to an EOU triggers reversal of Basic Customs Duty and IGST liability (e.g., via TR-6) unless an exemption or specific procedural dispensation applies.