EXIT From EOU scheme

[Desikan Srinivasan]

We want to exit from EOU scheme. We have some export proceeds not realised yet but the NFE is positive excluding this unrealised export proceeds. The customs are not issuing the NOC till the realisation of the full export proceeds . They are asking to pay the duty on the duty free raw material used in the sales for which proceed not realised yet to issue the NOC. As per the FTP para 6.18 no such clause is there for exit for EOU scheme . Can anyone clarify on this please whether we need to pay duty on the Raw Materail used in unrealised export proceeds eventhough NFE is positive ?

[Snehal Kulkarni]

Please read the Para 6.18 (a) of FTP

(a) With approval of DC, an EOU may opt out of scheme. Such exit shall be subject to payment of Excise and Customs duties and industrial policy in force.

It is clear that you have pay the Differential Customs Duty on the Raw material. You can avail the Cenvat Credit of CVD and Additional Duty of Customs thereon.

Or you can also avail the Advance Authorisation for the raw material lying with you.

For Capital Goods you have option to convert the duty liability into the EPCG scheme.

 

[Desikan Srinivasan]

Thanks Mr. Mangesh for the reply. Actually we have paid duty on the raw material lying in stock but my question is whether duty is payable on the raw material used in the export which is not yet realised ? In the Para 6.18 of FTP it is not clear.

[RadheyShyam Mangal]

For EOU the period of realisation of export proceeds is 12 months from the date of exports or further period if extended by the Authorised dealer/ RBI. The Department cannot insist to deposit the differential duty on the Raw Materail used in unrealised export proceeds if it is within the period as above. However to avoid confrontation with the department, I suggest to give undertaking to the Department to deposit the differential duty on the Raw Materail used in unrealised export proceeds  if the same is not realized in 12 months from the date of exports or further period if extended by the Authorised dealer/ RBI.

AI Summary

Duty liability on raw material may arise on EOU exit, though the export realisation period limits immediate duty demands.
Exit from the EOU scheme requires payment of excise and customs duties, including the differential customs duty on raw materials used in exports; taxpayers can claim Cenvat credit, apply Advance Authorisation for inputs, or convert capital goods liability into the EPCG scheme. The realisation regime grants a limited period for export proceeds to be realised, constraining the department from demanding immediate duty deposit during that period, though an undertaking to deposit duty if proceeds remain unrealised is often tendered to avoid dispute.