NFE calculation

[sivakumar vellanki]

My company is an 100% EOU. It wants to exit from EOU scheme and switchover to EPCG Scheme. Accordingly, it got 'in principle' permission to exit from eou, from the Development Commissioner, VSEZ, Vizg. On the basis of the said permission, it got EPCG licnese from JDFT,Hyderabad, on 13th March, 2012. Afterwards, it submitted the relevant papers/documents to the Asst.  Commissioner, Kadapa Division and paid the relevant duties on DTA sales and indigenous capital goods. Now, the AC wants confirmaion of positive NFE from the Development Commissioner, VSEZ, Vizag. So, when we approached the Developemnt Commissioner, he said that the policy is not clear whether whole  value of imported capital goods to be deducted or amortization value of capital goods to be deducted from NFE. 

According to para 6.9.4 of chapter 6 of FTP 2009-14, the following sentence is added.

" For Existing units, appropriate customs and central excise duties should be paid where NFE is less than Deprecation claimed by the unit, before exit"

Hence, Development Commissioner has referred the matter to MOC. In turn, MOC refers the matter to DGFT. We clearly explained to the Development Commisisoner, Assit. Commisiioner of Custons and Central Excidse and the  Director, Joint SEcretary and Under Secretary in MOC that as the unit is exiting from EOU Scheme prior to the first ten years, only depreciation has to  be cosnidered as foreign out flow for the purpose of calculation of NFE. Circular no. 12/2008, is also shown to them. But, Development commissioner said that they will not follow the circulars issued by Ministry of Finance.

So, can you guide me in this regard.

Regards,

V. Sivakumar

9642517459

AI Summary

Net foreign exchange calculation: include CIF of imported inputs and pro rata value of duty free capital goods on exit.
NFE on exit is computed as A - B, with A as FOB exports and B as the CIF value of all imported inputs and imported capital goods; duty free, leased, loaned or transferred imported capital goods are included pro rata in B for the period they remained with the unit, the pro rata value being the depreciation charged by the unit (not less than depreciation); where NFE is less than depreciation claimed, appropriate customs and central excise duties must be paid.