CUS CIR NO. 55/2004 DATE 14/10/2004

Debonding by EOU/EHTP/STP Units.
I am directed to invite your attention to Board’s Circular No. 8/2004-Customs, dated 28-1-2004 on the above subject. whereunder it has been provided that EOUs against whom any show cause notice for demand of duty is pending may be allowed to be debonded on furnishing undertaking on stamp paper along with Bank Guarantee of 10% of the amount involved.

2. Clarification has been sought as to whether 10% Bank Guarantee is to be insisted upon in the case of those show cause notices involving an issue which has already been decided against the revenue and department has preferred appeal against such decision. The issue has been considered in the Board. If the decision of the Tribunal is in favour of the assessee, strictly speaking, no duty is payable, notwithstanding the fact that Department has preferred appeal, [for example Favourite Industries v Commissioner of Central Excise, Surat-I, 2003 (156)) ELT 802 (Tri-Mumbai) where the issue was whether goods supplied by an EOU is to be considered as goods supplied by a manufacturer in India-Appeal filed by Department before the Apex Court in CA No.D 24920/03]. Further, as the ratio-decidendi of the case has not attained finality because of appeal preferred by the department, Show Cause Notices on these issues are pending for adjudication even for other EOUs. Therefore, in all such cases where the Department has lost in the CESTAT and has preferred appeal to Apex Court, the amount involved in SCN issued on the same issue either in respect of the said unit or any other unit, will not be taken into consideration for computing 10% Bank Guarantee amount of such demand

3. The EOU/EHTP/STP units are required to execute B-17 Bond at the time of commencement of the unit. The units are also required either to furnish surety or security along with the B-17 bond. In cases where security has been furnished in form of Bank Guarantee along with the bond and the assessee requests to adjust 10% of duty as required to be furnished in terms of Circular 8/2004-Cus out of the said Bank Guarantee, such requests of the unit may be considered. However, before acceding to such request it may please be ensured that the Bank Guarantee is valid.

4. Clarification has also been sought as to whether part duty deposited earlier by the assessee during the course of investigation can be adjusted towards 10% duty required to be paid at the time of debonding in terms of Circular 8/2004. The matter has been considered. The intention of the Circular 8/2004- Cus is to take 10% bank guarantee of the duty demanded at the time of debonding. Therefore, the duty paid earlier during the course of investigation can not be used to adjust the 10% guarantee required at the time of debonding. However, while calculating 10% of the amount involved in terms of the Circular No. 8/2004-Cus dated 28.01.2004, the deposited amount against the Show Cause Notice would be deducted from the total demand and the Bank Guarantee amount would be 10% of such deducted amount. For example, if an EOU has a demand notice of Rs. 100/ and he has deposited Rs. 10/ then the Bank Guarantee amount would be 10% of (100-10) i.e Rs 9/..

5.The Circular was placed on the website of the CBEC and also it was advertised in the newspaper. The views/comments received have been considered.

6. Wide publicity may please be given to the above said instruction by way of issuance of Public Notice.

7. Hindi version follows.

(Ranjit Kumar)
Sr. Technical Officer (FTT)

F.No.305/185/2003-FTT (Pt)

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