Rejection of goods sent - without payment of duties

[Govinda Raju]

We are an 100% eou unit, kindly let me know the rejection can be sent back to origianal supplier, with out payment of duties, if yes kindly let know the notification no/circluar no. as in the FTP it tells that rejects can be sold in dta by paying appropriate duties.

[Rama Krishana]

Supplies for DTA unit to EOU is treated as deemed export and allowed to be removed without payment of duty. In this case, DTA unit enjoys certain benefits. If EOU unit sent back to the rejected material to the DTA unit without payment of any duty, it may result into an anomaly in which no duty is paid at the time of supply from DTA to EOU and no duty is paid at the time of rejection sent back from EOU to DTA [You may note that rejection may be sent back to original supplier or some other person]. Therefore, it may be necessary that while sent back the rejection to the DTA unit EOU needs to pay appropriate duty - refer to para 6.8(d) with 6.8(a)

[Anish Jain]

I am not agree with Mr.Rama Krishana. In my opinion para 6.8(d) covers those cases in which final product is rejected. In your case material procured has been rejected & this situatio is covered under para 6.17 (c. which covers replacement/rejection/return of imported & indegineous goods.But the procedure has not been prescribed here. in my opinion after getting permission from concerned AC/DC you can send material on payment of duty or without payment of duty under bond. As you have already executed a bond B-17 with department & duty is already debited under that bond. in my opinion there is no need to furnish other bond but you can sent material without payemt of duty and get a letter from excise authority of your supplier that material has been received back. on the basis of this certificate you are entitle to credit the bond with duty amout involved in rejection. kindly refer rule 20 of central excise rules, 2002

[Rama Krishana]

Thanks for corrected me Mr. Anish. I have considered the issue and rejection is permanent in nature. But, where the issue is of replacement / repair of goods procured from the DTA unit, obviously not duty is required to be paid either by the EOU unit and / or by the DTA unit. Para 6.17 of the Foreign Trade Policy is application in such case.

[Susant Mohanty]

Can a foreign supplier take back the goods which are supplied to SEZ and ultimately rejected. if yes then what is the procedure. Further can an authorized agent of the foreign supplier in India can take back the rejected goods on behalf of the foreign supplier.

AI Summary

Deemed export rules may require duty payment or bond when rejected goods are returned to domestic suppliers. Return of rejected goods by an EOU to a DTA supplier raises potential duty liability because deemed export treatment on the initial supply can create an anomaly if no duty is charged on the return; alternative application of Foreign Trade Policy rejection/return provisions may permit returns under administrative permission or bond arrangements and allow crediting of bond duty on receipt evidence, while replacement/repair cases are treated separately under the Policy.