Legal provisions when manufacturing capacity of the product is increased then mentioned in LOP

[Suvarna Kumar]

Dear Sir , In our LOP mention 1 year manufactering capacity of the the 1 prouduct is 20000 sqm if our capacity is increased and we produce above 20000 sqm .if there is Any legal problems ???

[Rama Krishana]

There is no policy or scheme of the central government under FTP to prevent an EOU to enhance its installed capacity and generate more production. IF you see the condition application to EOU, monitoring of EOU units or provisions of penalties etc. you would not find any provision restricting an EOU to produce more and export more. Yes, the performance of an EOU can not be less than the minimum prescribed by the FTP or LoP. But it it is exceeding and you are earning minimum NFE, you may go ahead. In addition, it is better always that you should intimate the fact of enhancement of your capacity to the DGFT office timely.

[RadheyShyam Mangal]

I agree with the view expressed by RamaKrishnaji. However, to avoid problem from the Central Excise department while claiming exemption on procurement of duty free inputs for enhanced capacity, it always advisable to get the LOP modified from the office of Development Commissioner. The D.C. SEZ has delegated power to enhance the capacity of manufacture in LOP under para 6.32 (4) of HBP as under (4) "To permit capacity enhancement without any limit in case of de-licensed industries only; "

AI Summary

Capacity enhancement in Letter of Permission: excess production permitted but notify authorities and seek LOP modification. Increase in installed manufacturing capacity beyond the limit stated in the Letter of Permission does not by itself bar an export oriented unit from producing or exporting more than the LOP figure, provided minimum performance metrics such as net foreign exchange earnings are met; however units should intimate capacity enhancement and, to secure duty free input claims and avoid Central Excise disputes, seek formal modification of the LOP or rely on delegated permission for capacity enhancement.