Bangalore City Customs Commissionerate vide Public Notice No. 25/2021 dated May 27, 2021 issued Standard Operating Procedure (“SOP”) regarding various issues concerning EOUs/STPIs/EHTP.
Recognizing the potential role of EOU /STPI/EHTP units (hereinafter referred to as EOUs) in the Make-in-India initiative and as a measure of improving the ease of doing business, the need to comply with warehousing provisions as well as ‘bonding’ and ‘de-bonding’ by these units has been done away with effect from 13.8.2016. As a consequence, EOUs units were delicensed as warehouses under Customs Act, 1962. Additional changes regarding procedures were brought into existence on implementation of GST with effect from 01.07.2017. However, these Units were required to continue to adhere to the provisions of Notification 52/2003-Customs dated 31.3.2003, Foreign Trade Policy (FTP), Handbook of Procedures (HBP) and other applicable notifications.
Further, considering the lockdown due to the outbreak of Covid -19 and its related precautions enforced by the Government, trade facilitation measures have been notified in Public Notice No. 11/2020 dated 26.03.2020 issued by Commissioner of Customs, Bengaluru City Customs Commissionerate. To maintain the ‘social distancing’, requirement of submission of hard copies in respect of approval of Annexure III for import of goods, permission for re-export/re-import, intimation of daily export/imports, etc. have been dismantled and Importers were requested to send all such documents in designated gov mail ids of Export Promotion Cells.
The said PN facilitated 1) faster processing of intimations 2) fostered greater trade facilitation by doing away with the requirement of importer/ CHA to physically visit the EPCs and 3) enhanced transparency by bringing in faceless processing of EOU requests. Subsequently, Internal processes of EPCs were streamlined to suit the changed mode of functioning through implementation of e-office, data management and scrutiny through new electronic means and by. devising standard checks that suits eprocessing of files. This will aid easier and better integration to ICEGATE/ICES once the module for EOUs is devised. The applications of Importers have been processed in mail on time bound manner without any hassle or difficulties to Importers. The prescriptive timelines and the documents required to be submitted are listed in Annexure-V enclosed to this Public Notice.
Upon review of the functioning of EOUs by the Commissionerate, instances have come to the notice that some of these Units are not adhering to the provisions of the relevant notifications, FTP /HBP. Some of such instances are:
(a) Clearance of finished goods in Domestic tariff area (DTA) without reversing the Customs duty foregone on the imported raw materials used in the manufacture,
(b) clearance of finished goods in DTA without achieving positive Net Foreign Exchange earnings (NFE),
(c) payment of Customs duty through ITC credit in GST returns instead of proper TR6 challan,
(d) suppression of facts about DTA clearance of finished goods,
(e) Non-payment (reversal) of Customs duties on scrap beyond SION Norms,
(f) Not following the procedure for Inter-unit Transfer, Third Party Exports and job-work,
(g) Debiting only 25% of duty forgone amount in B.17 Bond in respect of imported raw materials, etc.
Apprehensions have also been expressed by the Trade regarding the procedures to be followed post GST. To resolve all such difficulties being faced by the EOUs, for better trade facilitation and also to have a standard operating procedure for various issues concerning these Units, it has become expedient to issue this Public Notice for information, guidance and strict compliance by trade and Custom House agents associated with the EOU’s. Further reference is also invited to Circular No.10/2021- Customs dated 17.05.2021. Wherever IGCRD provisions are applicable to EOU s, the revised provisions as per Circular No.10 / 2021 may be referred to for compliance, along with Public Notice. The Public notice might not have touched upon provisions regarding specific category of industries in Notification 52/2003 Cus. and FTP and hence for the said specific provisions, the above notification and FTP may only be referred for compliance.
Procedures for import of goods
EOUs/EHTPs/STPs are entitled to import all types of goods including capital goods, raw materials, components, packing materials, consumables, spares and various other specified category of equipment including material handling equipment, required for export production / service or in connection therewith, without payment of customs duty leviable thereon under the first schedule to the Customs Tariff Act, 1975 (51 of 1975), additional duty, if any leviable thereon under sub – sections (1),(3) and (5) of section 3 of the said Customs Tariff Act ( herein after referred to as ‘custom duty’) and IGST in terms Notification No. 52/2003- Customs dated 31.3.2003, as amended. The EOUs intending to import the goods without payment of customs duty and IGST, shall require to follow the procedures prescribed under Rule 5 of Customs (IGCRD) Rules, 2017. The clarification brought in by Circular No.10/2021- Customs dated 17.05.2021 may also be referred to in this regard. Regarding the applicability of health cess exemption provided by notification No. 8/2020- Cus dated 02.02.2020, the same will be clarified from DGEP and communicated to trade in due course.
B-17 Bond and surety/ security
EOUs execute a general-purpose 8-17 bond along with surety or security covering the duty foregone on imported goods. This bond is prescribed under Notification No. 1/2018 CE (N.T.) dated 5.12.2018. This bond also takes care of the interest of revenue against risks arising out of goods lost in transit, goods taken into DTA for job work/ repair/ display etc.
Basically the 8-1 7 bond is an ‘all purpose’ bond covering liabilities of the EOU under Customs/Central Excise /GST Acts. The 8-17 bond is executed with the jurisdictional Assistant/Deputy Commissioner of Customs (EPC). Surety or security equivalent to 5% of the bond amount in the form of bank guarantee or cash deposit or any other mode of security recognized by the Government is required to be given by the EOUs. The BG should have ‘auto renewal’ clause invariably. In the case of surety, a letter from the person standing surety duly certified by a Chartered Accountant for solvency is also required to be submitted.
As regards the Surety by Proprietorship or partnership firm, CBIC vide Circular No. 3/2021 Cus dated 03.02.2021 has clarified that in case of 8-17 bond executed by EOU/STP/EHTPs in capacity of Proprietorship or partnership firm, surety cannot be given by Proprietor/ partner himself. Such sureties must be given by an independent legal entity other than the Proprietor/ Partner of the concerned Proprietorship/ Partnership EOU firm.
Units which have achieved positive NFE and are in existence for the last three years with unblemished track record having export turnover of Rs. 5 Crores or above and have not been· issued a show cause notice or a confirmed demand, during the preceding. 3 years on grounds other than procedural violations, under the penal provision of the Customs Act, the Central Excise Act, the Foreign Trade (Development & Regulation) Act, the Foreign Exchange Management Act, the Finance Act; 1994 covering Service Tax or any allied Acts or the rules made thereunder, on account of fraud / collusion / willful mis-statement/ suppression of facts or contravention of any of the provisions thereunder, are exempted from furnishing Bank Guarantee etc. or Surety along with B-1 7 bond. The importers who are Authorized Economic Operators and Status Holders are also exempted from furnishing the BG, subject to provisions in Foreign Trade Policy.
(Reference: Notification No. 1/2018 CE (N.T.) dated 5.12.2018, Circular No. 27/18 -Customs dated 14.8.2018, 54/2004 -Cus dated 13.10.2004 and 36/2011 Cus dated 12.08.2011, Circular No. 03/2021-Customs dated 03.02.2021)
Import of goods
The EOUs are entitled to import the goods without payment of duty in terms of Notification No. 52/2003 Cus dated 31.3.2003 as amended, by following the procedures contained in Customs (IGCRD) Rules, 2017. The EOUs that intend to import the goods need to give intimation to the officers of EPC as required under Rule 5 of Customs (IGCRD) Rules, 2017 about the estimated quantity and value of the goods to be imported for a period not exceeding one year. The Units are also required to mention the duty foregone on such imports and the debit particulars in B.17 Bond.
The Units also file the Annexure for the individual consignments. Further, for the sake of convenience, both at the end of the department and the Importer, it is clarified that the Importer along with the Annexure III application are required to enclose the statement which contains the details, such as opening balance of bond amount, credit taken, debit against the Annexure and closing balance of Bond amount. In case if any amendments that are required to be made to Annexure III/ Annexure I already submitted to the department, on account of change in the value of the goods due to exchange rates, revision in the price of the goods vis-a-vis duty foregone amount etc., the Importer in writing shall bring the said facts to notice of the DC/ AC of EPC and concerned port officers. The Amendments may be serially numbered for identification, in case of multiple amendments. It is clarified that in case of import of inputs, the unit need to debit an amount equal to duty foregone on such imports and 25% of duty foregone amount in case of capital goods. After the clearance of goods from the port, the EOUs need to give an intimation about the procurement of goods along with the copies of Bill of Entries and Invoices to the Assistant Commissioner/Deputy Commissioner of EPC within 2 days from the date of receipt of the imported goods in EOU unit premises.
It is observed “that some of the EOUs are importing the goods on regular basis and may find difficulties for furnishing the intimations along with the copies of all the documents within 2 days from the date of receipt of the imported goods in EOU (or Job work) unit premises. Considering the difficulties faced by such big Importers, it is decided to do away with the requirement of submitting the import documents, on a case-to-case basis based on one time approval from Assistant Commissioner/ Deputy Commissioner of EPC. However, those units are required to maintain all such documents in digital file and furnish as and when the officers ask to produce the same for verification.
(Reference: Customs (IGCRD) Rules, 2017, Circular No. 29/2017 Cus dated 17.7.2017)
Procurement of indigenous goods
For the indigenous procurement of goods covered under GST, the EOU will not get ab-initio exemptions. Such supplies would be on payment of CGST /SGST /UTGST /IGST. The taxes so paid will be neutralized by ITC or refund of tax paid on such supplies can be claimed either by the recipient or supplier of such supplies. For the indigenous procurement of goods covered under Fourth Schedule, the EOU will continue to get ab-initio exemptions from central excise duty. The Procedure regarding procurement of supplies of goods from OTA by EOU/EHTP/STP/BTP Unit for deemed exports benefits in terms of section 14 7 of CGST Act, 2017 has been prescribed vide Circular No. 14/ 14/2017-GST dated 6.11.2017. The detailed procedures to be followed by EOUs are prescribed in the above referred Circular.
(Reference: CBIC Circular No. 14/14/2017-GST dated the 6.11.2017)
Time limit for utilization of imported capital goods and inputs
The period of utilization of goods, including capital goods, procured/imported by EOU shall be co-terminus with the validity of LOP, subject to the exceptions provided in FTP and 52/2003.
(Reference: Notification No. 34/2015 Cus dated 25.5.2015)
Domestic Tariff Area (DTA) sale:
The EOUs are entitled to sell finished goods (subject to restrictions in FTP) in OTA subject to reversal of customs duty, availed as concession at the time of imports along with the payment of IGST. The duties and cess to be reversed will be those as provided in para 6.08 of FTP. The reversal of customs duty is based on the duty foregone on inputs that have gone into the production of such finished goods. DTA sale shall be subject to fulfilment of the following main four conditions:
I. Net Foreign Exchange fulfilment:
II. Payment of applicable GST on product under DTA sale:
III. Reversal of the BCD exemption
IV. Refund of any benefits taken (including those mentioned in Para 6)
The Importer who has cleared the goods in DTA is required to give an intimation to AC/DC of EPC in the format enclosed to this PN(In addition, Permissions if required from various authorities, including from customs, for DTA sales as per FTP 2015-20, HBP and relevant APPENDIX may be obtained). The reversal of customs duty shall be remitted under TR6 Challans duly counter signed by the Superintendent/Inspector at the jurisdictional export promotion cell. However, on a case-to-case basis, subject to requirements of banks regarding process of manual challan, Assistant Commissioner/Deputy Commissioner may allow importers, intimation by way of, sending the scanned copies of TR6 Challans (with bank seal) along with the copies of Demand Draft/ Cheque by mail. The data in the intimations, to be submitted before the submission of Form-A for the relevant month, will have to be reconciled with the Form-A figures and in case of discrepancies, the customs authorities may call for documents to verify the same and units should be able to produce documents that will enable the department to reconcile thee-way bills generated and DTA sales. All DTA sales transactions are to be invariably reported in the monthly return in Form A along with duty paid particulars.
EOUs which are facing difficulties to make the duty payment (reversal on account of DTA Sales) on consignment basis may also consider depositing the duty amount in advance based on estimate of DTA sales for a certain period. The advance amount may be utilized for DTA sales by debiting the amount out of the advance amount deposited. The units which intend to deposit the amount in advance are required to record the entries in simple statement, to be submitted to EPC, which consists of date of making the payment, amount of advance amount, date/invoice of the DTA sales, amount of duty adjusted against the DTA invoice and balance amount.
(Reference: Para 6.08 of FTP 2015-20 read with Notification No. 52/2003 Cus dated 31.03.2003, as amended)
Inter-unit transfer
Inter-unit transfer of manufactured and capital goods from one EOU unit to another EOU / SEZ unit is permitted in terms of Para 6.13 of the FTP. Sale of unutilized goods is also allowed from one EOU to another EOU / SEZ unit in terms of Para 6.15 of FTP. The inter unit transfer can also be under the cover of a tax invoice or delivery challan along with payment of GST as applicable. However, such transfer would be without payment of custom duty. The supplier unit will endorse on such documents the amount of custom duty, availed as exemption, if any, on the goods intended to be transferred. The recipient unit would be responsible for paying such basic customs duty, as is obligated under Notification no. 52/2003-Cus dated 31-3-2003, when the finished goods made out of such goods or such goods are cleared in DTA. The Units making inter-unit transfer or supplier are required to furnish the prior intimations to the jurisdictional EPC.
(Refer Circular No.29/2017 Customs date 17.7.2017 & 35/2016 Cus dated 29.7.2016)
Clearance of by-products/rejects/waste/scrap, etc.
Scrap/ waste/ remnants arising out of production process or in connection therewith are allowed to be sold in DTA, as per SION notified by Directorate General of Foreign Trade. In respect of items not covered by SION norms, Development Commissioner may fix ad-hoc norms for a period of six months and within this period, norm should be fixed by Norms Committee and ad-hoc norms will continue till such time. As per Notification No. 52/2003 Cus dated 31.3.2003 as amended, where SION norms are not fixed, scrap clearance up to 2% of the input quantity is allowed. Sale of waste/ scrap/ remnants by units beyond the above said norms or beyond 2% of the input quantity (in applicable cases}, shall be on payment of full duties and subject to restrictions in Para 6.08 FTP. However, no duties/ taxes on scrap/ waste/ remnants are charged, in case same are destroyed with permission of Customs authorities (subject to clarification in 6.15(b} of FTP}. The EOUs shall give intimation for clearance of waste/scrap to the customs officer by furnishing the quantum of waste generated, duty foregone on such scrap along with the letter of approval given by the CSEZ/STPI.
(Reference: Para 6.08 (v) of FTP, 2015-20, Para 6.15 (b) of FTP, 2015-20)
Procedure for Re-export
The goods or parts thereof, on being imported / indigenously procured and found defective or otherwise unfit for use or which have been damaged or become defective subsequently, may be returned and replacement obtained or destroyed. In the event of replacement, goods may be brought back from foreign suppliers or their authorized agents in India or indigenous suppliers. In case the supplier of such goods does not insist for re-exportation, such goods are required to be either destroyed or cleared into DTA on payment of full Customs duty. In all the cases of re-export, the Units shall take a prior approval from the jurisdictional EPCs. The Importer seeking the permission shall require submitting the application in the enclosed format Annexure III along with documents mentioned in Annexure V.
(Reference: para 6.17 of FTP,2015-20)
Sub-contracting
As per para 6.14 of FTP read with Notification No.52/2003 Cus, dated 31.3.2003, the Units may sub-contract the part of their production process to DTA (subject to restrictions in FTP) through job work based on annual permission from Customs authorities. The annual permission for sub-contract may be granted by the DC/ AC of EPC subject to observance of the conditions as · enumerated in para 6.14 of FTP and Notification No.52/2003 Customs dated 31.3.2003, as amended. The units are also allowed to sub-contract part of the production process abroad and export from there. The intermediate goods so removed to sub- contractor abroad shall be allowed to be cleared under export documents.
The importer can send the imported goods (subject to exceptions in FTP) for job work, for manufacture of goods, subject to giving due intimation in duplicate to the DC/ AC of EPC. The Format of intimation should be as per the Annexure IV. The data in the intimations, to be submitted before the submission of Form-A for the relevant month, will have to reconciled with the Form-A figures and in case of discrepancies, the customs authorities may call for documents to verify the same. The provisions as per 6.21 of HBP,2015-2020 are to be strictly adhered to by the units. Circulars No 65/2002 Cus and No.26/2003 Cus may also be referred to for clarity on timelines regarding return of goods. Further the unit is required to follow the procedures as per Section 143 of CGST Act, 2017 read with Rule 45 of CGST Rules, 2017 and Circular No. 38/ 12/2018 dated 26.3.2018 for Job work. it is advised to endorse the copy of the intimation/return, required to be filed, under the above said statutes with the GST Authorities, to Export Promotion Cells also in mail. The said condition can be waived on case to case basis by Assistant Commissioner/ Deputy Commissioner, EPC based on the track record of the units. Trade has raised concern regarding alignment of return timelines of inputs sent for job work between the FTP and GST procedures. The same will be clarified from DGEP and communicated to trade in due course.
(Reference: para 6.14 of FTP, Circular No. 12/2008-Cus., dated 24-7-2008, Circular No.50/2018 customs dated 6.12.2018, No. 65/2002 Cus dated 07-10-2002, No. 26/2003 Cus dated 1-4-2003 and 9/2021 Cus (N. T) dated 1.2.2021)
De-bonding of capital goods
An EOU can clear any capital goods to any other place in India or debond in accordance with FTP with the permission of the Development Commissioner and on payment of duty on the value and the rate prevailing at the time of imports on the depreciated value. Clearance/ debonding of capital goods on the depreciated value proportionate to the NFE achieved by the unit which is arrived at after taking into consideration the rate of depreciation allowable on such capital goods is allowed. In case the unit has not achieved positive NFE in the above manner, the duty foregone at the time of import shall be paid on such value of goods in proportion to the non achieved portion of NFE. The depreciation of computers and capital goods shall be allowed as per Para 6.37 of HBP and Notification No: 52/2003-Cus as amended. The Importer seeking the permission for de-bonding the capital goods should submit the request with AC/DC of EPC along with the documents mentioned in.
(Reference: para 6.lS(b) of FTP, Circular No. 12/2008- Cus., dated 24-7-2008, Circular No.50/2018 customs dated 6.12.2018 and 9/2021 Cus (N. TJ dated 1.2.2021)
Re credit
Since the B-1 7 Bond is a running Bond Account, the Units may seek re-credit of the amount debited at the time of import of goods. The EOUs after consumption of the imported raw materials and clearance/ export of resultant products, shall give an information regarding the amount of recredit subject to the condition that the Unit shall furnish the consumption statement of raw materials along with the export/ clearance duly certified by the Chartered Accountant. The consumption statement must be in excel sheet and consist of details such as Bill of Entry no/date, description of the goods imported, Opening Balance, Quantity Imported, Value in INR, Total Quantity, Consumption Quantity, Quantity Exported, Quantity Re-exported, Quantity Cleared to Domestic Market, Closing Balance and Goods manufactured during the Quarter. The correlation of BOEs and Clearances, even if not reproduced in the consumption statement, should be maintained in Digital format and should be submitted to the department, as and when asked for.
The Units can also seek re-credit on account of disposal of capital goods, permanent re-export of capital goods, destruction of capital goods subject to condition that the Units must furnish the copy of necessary permission obtained from the Development Commissioner or STPI authorities along with proof of disposal/ destruction/ re-export on permanent basis.
Replacement/repair of imported /indigenous goods
EOUs may send capital goods abroad for repair with permission of Customs authorities. However, no permission will be required for sending capital goods for repair within the country.Removal of capital goods by all units irrespective of status within the country for the purpose of test, repair, calibration and refining on the basis of prior intimation to the proper officer subject to maintenance of proper accounts of removal and receipts of goods is also allowed.
(Reference: para 6.17 of FTP & 6.28 of HBP 2015-20)
Third Party Exports
As per Para 9.60 and 2.42 of FTP, 2015-20, ‘third party exports’ means exports made by an exporter or manufacturer on behalf of another person. In such cases, export documents such as shipping bills shall indicate the names of both manufacturer and third-party exporter. The BRC, Self-Declaration Form, export orders and Invoice should be in the name of third-party exporter. 16.2. EOUs are entitled to export the goods through other exporter (third party exporter) subject to certain conditions as prescribed under Para 6.19 of HBP, 2015-20. If the EOUs fail to fulfill the conditions as stated above, such exports shall be treated as DTA sales, accordingly Units need to reverse the customs duty involved in the manufacture of such finished goods.
(Reference: Para 9. 60, 2.42 of FTP, 2015-20 and 6.19 of HBP,2015-20)
Records and returns
In view of the condition of warehousing having been dispensed with respect to the units, the warehoused goods register (warehousing bond register) shall not be required to be maintained w.e.f 13th August 2016. However, to maintain records of receipts, storage, processing and removal of goods, imported by the units, the Board has prescribed that the units shall maintain records of imported goods, in digital form, based upon data elements contained in Form A. A digital copy of Form A, containing transactions for the month, shall be provided to the proper officer, each month (by the 10th of month) in a CD or Pen drive, as convenient to the unit. The return submission is strictly monitored by EPCs under this jurisdiction and it is informed that penal action will be initiated for non-submission of the same within the due date. The EOUs should also submit the Quarterly Performance Report and Annual Performance Reports as mandated by DGFT Public Notice no. 36/2015-2020 dated 04.09.2018.
(Reference: Circular No 7/2021 Cus dated 22.2.2021 and 35/2016-Customs dated 29.07.2016)
Exit from the Scheme
The EOUs shall pay the GST and reverse the customs duty on the raw materials, semi-finished and finished goods lying in stock at the time of debonding. The capital goods shall also be de-bonded on payment applicable duties on the depreciated value thereof. The depreciation would be allowed subject to achievement of positive NFE. The Unit seeking exit from the scheme is required to file a legal undertaking to the effect that all duties of Customs including GST has been fully paid by them on the semi-finished goods, raw materials in stock, capital goods etc., and in the event of any dues that may accrue in future on account of audit, verification etc., the same will be remitted to the Govt. account.
The EOU units can Exit from EOU Scheme subject to approval of the Development Commissioner. The detailed guidelines for exiting out of EOU.EHTP/STP Scheme are given in the para 6.18(e) of FTP and Appendix 14-1-L of HBP, 2015-20. The Development Commissioner first gives permission for ‘in-principle’ de-bonding, and then the unit is required to pay all pending Customs/ Central Excise duties/Service Tax/GST to obtain no-dues certificate from Central Tax & Customs authorities. In cases where a demand is still pending, the unit may be asked to submit the undertaking and BG as prescribed in Circular No. 8/2004 Cus dated 28.1.2004. Thereafter the Development Commissioner permits final debonding.
(Reference: Para 6.18 of FTP, 2015-20 and Circular No. 8/2004 Cus dated 28.1.2004)
Strict compliance to the provisions of Customs Act and Rules
All the EOU/STPI/EHTP Units working under the jurisdiction of Bengaluru City Customs Commissionerate shall adhere to the instructions given in this Public Notice, scrupulously, failing which appropriate penal action will be initiated under the Customs Act, 1962 and the Rules made thereunder, for violation/contravention. A provisional period of three months is given for all the stake holders to submit a declaration about compliance to this Public Notice particularly regarding the payment of customs duty on DTA clearances for the period July 2017 onwards in the enclosed form Annexure I, failing which their import authorization Annexures will not be taken on record. Utmost care should be taken while submitting the declaration keeping in mind the fact that the department has access to the e-way bill data and Customs authorities may audit/inspect the premises at any time. Any mis-declaration noticed during such verification will attract penal provision under Customs Act, 1962. The contents of this Public Notice are not exhaustive and therefore, for any specific issues, the stake holders are required to refer to the relevant Notifications, FTP, HBP and Circulars issued in this regard. All intimations and declarations mentioned in this PN are to be sent to the following designated official e-mail ids
|
SI No. |
Name of the Formation | e-mail Id |
| 1. | Export Promotion Cell (Central) | |
|
2. |
Export Promotion Cell (East) | e12ceast-citycus@gov.in |
| 3. | Export Promotion Cell (South) | |
|
4. |
Export Promotion Cell (Chitradurga) | e12c-chitradurga@gov.in |
| 5. | Export Promotion Cell (Mysore) |
All communications to the EPCs may be sent only to the above designated mail ids and not to any other mail id.
All members of the Regional Advisory Committee, Trade Associations and Chamber of Commerce in the State of Karnataka are requested to circulate this Public Notice among their constituent members for wide dissemination. Difficulties faced or suggestions, if any, may be brought to notice.
The SOP along with Annexures can be accessed at: https://bangalorecustoms.gov.in/pdfhtmfls_user/city_pn_25_2021.pdf