CUS CIR NO. /2005

Foreign Trade Policy (FTP) announced on 8-4-2005- Amendment of notifications relating to EOU and Gems and Jewellery Export Promotion Schemes- Reg.
I am directed to invite your attention to the Foreign Trade Policy 2004-2009 (FTP), incorporating the Annual Supplement as updated on 8th April 2005. Certain amendments have been carried out in the Foreign Trade Policy and Hand Book of Procedure (HOP). In order to implement the amendments relating to EOU/EHTP/STP Schemes and Gem and Jewellery Export Promotion Scheme necessary amendments have been carried out in the notifications governing duty free import/ procurement of goods and DTA sale of goods by EOU/EHTP/STP as well as in notifications relating to Gem and Jewellery Schemes. In this regard notification No 50/2005-Cus and 28/2005-CE, both dated 20.05.2005, may please be referred to. Important features of the amendments carried out through the notifications are discussed below:

(i) Procurement & Import of Spares by Granite sector:

2. In the notification No. 52/2003-Customs, and 22/2003-CE both dated 31st March, 2003, governing duty free import of goods and duty free domestic procurement by EOU/EHTP/STP, there are provisions allowing such duty free import/procurement of specified goods by units engaged in manufacture and export of granite articles for the purpose of quarrying of granite. Paragraph 6.7(a) of the Foreign Trade Policy has been amended to allow duty free import of spares upto 5% of value of capital goods specified in Sl. No. 1 to 29 in relation to EOUs engaged in manufacture and export of granite articles. To implement this provision, notification No 52/2003-Custom and 22/2003-CE both dated 31.3.2003, have been amended suitably.

(ii) Transfer of Samples from one EOU to another on returnable basis:

3. A new provision has been incorporated in FTP [Para 6.29.4 of HOP] to allow transfer of samples of finished product by one EOU/EHTP/STP to other EOU/EHTP/STP/SEZ unit on returnable basis. In order to implement the provision, Notifications No. 52/2003-Cus and 22/2003-CE both dated 31.3.2003, governing duty free import/procurement of goods by EOU/EHTP/STP units have been amended suitably. The EOU/EHTP/STP units transferring samples of finished products shall be required to intimate about the details of samples to the jurisdictional Deputy Commissioner/Assistant Commissioner prior to such transfer and the goods so transferred shall be returned to the unit within a period of 30 days.

(iii) Inter-unit supply of capital goods on the basis of prior intimation instead of permission from Customs/Development Commissioner.

4. Prior to the amendments made through the notifications No. 50/2005-Cus and 28/2005-CE, both dated 20.05.2005 , EOU/EHTP/STP units were allowed to transfer duty free capital goods to other EOU/EHTP/STP units on the basis of permission given by Customs and Development Commissioner. The paragraph 6.13(b) has been amended to do away with the requirement of permission in respect of such transfer of capital goods and to allow inter-unit transfer of capital goods on the basis of prior intimation to the Development Commissioner and Customs authorities with the aim to repose greater confidence on trade and to provide procedural relaxation to the units. The notifications No. 52/2003-Cus and 22/2003-CE governing duty free import and procurement by EOU/EHTP/STP units, respectively, have been amended suitably in order to implement the provision.

(iv) Doing away with the requirement of ARO for supply of goods by EOU/EHTP/STP units to advance License Holders.

5. Paragraph 4.1.11 of FTP allowed the holders of Advance License and DFRC to source goods from EOU/EHTP/STP against Advance Release Order issued by DGFT or Back-to-Back inland letter of credit issued by banks. These are instruments for sourcing goods from indigenous sources against Advance License and DFRC. The Notification No 23/2003-CE governing DTA sale of goods manufactured by EOU/EHTP/STP on concessional rate of duty, also provided that EOU/EHTP/STP may sell the goods against Advance Release Order (ARO) issued against Advance License or DFRC. In the amended FTP the provision for ARO has been done away with in respect of procurement of goods from EOU/EHTP/STP. It has been provided that Advance License Holders or DFRC holder can source goods from EOU/EHTP/STP on the basis of Advance license or DFRC it self. Therefore, in order to implement the provision of FTP, the Notification No 23/2003-CE dated 31-3-2005, has been suitable amended. Henceforth the goods manufactured in EOU/EHTP/STP may be supplied to Advance License Holders/ or DFRC holders on the basis of Advance License or DFRC itself. However, the jurisdictional Deputy Commissioner/Assistant Commissioner shall make endorsement on the reverse of the original copy Advance License/DFRC so as to clearly indicate the extent of the quantity and value already utilized. Further, in order to facilitate reconciliation of goods so procured with the Advance license or DFRC, a certified copy of the advance license or DFRC duly endorsed by the jurisdictional Deputy Commissioner/Assistant Commissioner shall be sent to the licensing authority and concerned Deputy Commissioner/Assistant Commissioner of Customs/Central Excise of the licensee. In addition to that, the procedure as applicable for duty free import of goods against advance license /DFRC would continue to apply.

(v) Simplified procedure for Inter-unit Transfer of Manufactured goods:

6. Paragraph 6.13(a) of FTP provides for transfer of manufactured goods from one EOU/EHTP/STP to another EOU/EHTP/STP unit. It has been brought to the notice of the Board by DGFT that for such inter-unit transfer, no uniform procedure is followed in the field. For the purpose of uniformity, it is decided to prescribe the following procedure in respect of such inter unit transfer of manufactured goods.

6 (a). Since goods manufactured in EOU/EHTP/STP are mostly excisable goods and inter unit transfer of goods from one unit to another is only bond to bond transfer, it has been decided that in all such cases goods would be removed from one EOU/EHTP/STP to another under the cover of ARE-3. However, the goods to be transferred shall be properly examined by the bond officer and sealed in the presence of bond officer before dispatch to other EOU/EHTP/STP unit. The jurisdictional customs/ central excise officer in charge (bond officer) of the receiving unit shall examine the goods on receipt of the same in the premises of receiving unit and give re-warehousing certificate. The copy of the re-warehousing certificate along with examination report shall then be sent to the jurisdictional customs/ central excise officer in charge of the transferor unit.

(vi) Exit from EOU:

7. Paragraph 6.18(e) of the FTP has been amended in order to rationalize and simplify the procedure for de-bonding. As per the new procedure, the EOU/EHTP/STP units proposing to de-bond would intimate Development Commissioner and jurisdictional Customs/ Central Excise authority in writing. The unit would itself assess the duty liability and submit the details of such assessment to jurisdictional Customs/ Central Excise authority. The Deputy/Assistant Commissioner of Customs/Central Excise would be required to confirm the duty liability on priority within 15 working days of receipt of detail of assessment from the unit and issue “No Dues Certificate” to the unit after payment of duties and other dues. In case of any discrepancy, it should be conveyed to the unit with in the said 15 days. On receipt of the above mentioned “No Dues Certificate”, the unit shall apply to development commissioner for final de-bonding.

(vii) Export of cut and polished diamond for certification or grading:

8. The paragraph 4A.2 of FTP provides for export of cut and polished diamonds each weighing 0.25 of a carat in weight to specified agencies abroad for the purpose of certification and grading and re-import thereof. A new agency, namely, Central Gem Laboratory, Miyagi Building,5-15-14 UenoTaito-Ku,Tokyo, Japan has also been included in the list of the agencies to whom the cut and polished diamond can be sent for certification or grading. However, notification No 55/2001-Cus dated 16-5-2001, allowed export of cut and polished diamonds of not less then 0.50 carat in weight for the purpose of certification and grading to specified agencies and subsequent re-import with out payment of duty. In order to align the existing customs notification with the provision of FTP, Notification No. 55/2001-Cus has been suitably amended.

(viii) Re-import of rejected jewellery:

9. In the FTP, 2004-2009, that came into effect in 31st August,2004, a provision was made in the HOP vide paragraph 4.83 to allow exporters of plain/studded precious metal jewellery for re-import of duty free jewellery, rejected and returned by the buyer, upto 2% of FOB value of exports in the preceding licensing year. The notification No 94/96-Cus dated 16-12-96 already allows re-import of goods at duty reduced by the said exemption notification. The re-import of rejected jewellery is covered under Sl.No 3 of the Table to the Notification No 94/96-Cus dated 16-12-96. However, if any export incentive had been availed on the export of goods, which have been re-imported, the same has to be paid back as the re-import has nullified the effect of export.

(ix) Increase limit of duty free import of sample by Gem & Jewllery sector:

10. The notification No. 154/94-Cus dated 13.07.1994 allows duty free import of commercial sample valued upto Rs 60,000 or 15 units in number within a period of last twelve months, as personal baggage by bonafide commercial travelers or businessman or imported by post or air. A new Paragraph No. 4A.31 has been inserted in HOP so as to enable exporters of Gem and Jewellery sector to import samples without payment of duty up to Rs. Three Lakhs or upto 0.25% of average three years export, whichever is lower. In order to implement the provision of HOP, notification No. 154/94-Cus dated 13.07.1994 has been amended suitably. However, to obviate chances of misuse, the notification imposes a condition that the importer shall produce a certificate from the Gem and Jewellery Export Promotion Council certifying the value of export made during three immediately preceding years and also the value and quantity of goods already imported under this notification during the last twelve months. The information provided by the Gem and Jewellery Export Promotion Council may be used to ensure that the notification is properly implemented.

(x) Import of plain/studded/metal jewellery for the purpose of jobbing and subsequent export.

11. The Customs Notification No 32/97-Cus dated 1-4-97 allows duty free import for execution of export order placed on the importer. It has been brought to the notice by the DGFT that overseas manufacturers and traders prefer sending the semi finished jewellery for job work in India for processing in India and subsequent export thereof. Therefore such semi finished gold jewellery of 18 carat and below and platinum and silver jewellery may also be imported duty free under the Notification No 32/97-Cus subject to the conditions of the notification.

Other proposals not linked with the amendments in FTP

(xi) Sharing of Goods between EOU/STP units.

12. The provision for sharing of specified good (common facilities ) were allowed between the STP units belonging to the same owner, located in the same compound or adjoining premises. Requests have been received from trade and industry, to allow sharing of specified goods between STP and EOU. The sharing of common facilities between the STP units was allowed on the ground that it would optimize the utilization of IT infrastructure between two units of the same owner and thus would reduce the operating cost. The STPs are also sector specific EOUs. In order to meet the requirement of dynamic nature of IT industry, it has been found justified to allow sharing of certain common facilities amongst STP/EHTP/EOU units belonging to the same owner.

12(a). Accordingly, the notification no. 52/2003-Cus and 22/2003-CE both dated 31.3.2003 have been amended to allow sharing of specified goods viz. diesel generating sets, captive power plants, central air-conditioning equipments, uninterrupted power supply system, networking equipments, EPABX, fax, photocopier equipments, data transfer protocol equipments and security system between EOU/STP/ EHTP units belonging to the same owner and irrespective of their location. However, such goods shall not be removed from the unit, which has imported or procured such goods.

(xii) Ahmedabad to be Declared as eligible Airport for import of Gold by EOUs

13. The Notification No 52/2003-Cus governing duty free import of goods by EOUs provided that the units engaged in manufacture and export of gem and jewellery might import/export goods other then capital goods by air freight through customs airport of Mumbai, Kolkata, Chennai, Thiruvanantapuram, Delhi and Bangalore. Representations have been received to allow import of goods by the gem and jewelry units through Ahmedabad Airport also. In order to facilitate units to use the airport nearer to their units, it has been decided to allow import of goods be gem and jewellery sector in EOUs through Ahemedabad Airport also. The Notification No 52/2003-Cus dated 31-3-2003 has been amended accordingly.

(xiii) Personal carriage of samples of Gem & Jewellery.

14. Paragraph 6.24 of HOP provides for personal carriage of gold/platinum/silver jewellery, cut and polished diamond, precious, semi-precious stones, beads and articles as samples upto US $ 100,000 for export promotion tours and temporary display/ sale abroad. The paragraph 6.39.8 of HOP relating to Fast Track clearance provides that status holder EOUs will be allowed personal carriage without any permission from Development Commissioner or Customs. The CBEC has already implemented Fast Track Clearance Procedure vide Circular No 12/2005-Cus and it has been provided that such samples may be carried by status holders EOU on prior intimation to Customs. The similar provision for personal carriage of gem and jewellery samples are contained in condition (6) (iv) of the notification 52/2003-Cus dated 31-3-2003. In order to bring parity between the Board’s circular no 12/2005-Cus and the conditions of exemption notification no 52/2003-Cus, necessary amendment has been carried out in the notification 52/2003-Cus dated 31.3.2003.

(xiv) Import/procurement of DG Sets

15. The notification Nos 52/2003-Cus and 22/2003-CE both dated 31-3-2003 governing duty free import and procurement of goods by EOU/EHTP/STP provided for import/procurement of DG sets/captive power plant on the recommendation of Development Commissioner/Designated officer. Para 6.39.6 of HOP relating to Fast Track Clearance provides that procurement of DG sets of capacity commensurate with the actual requirement of the unit shall be permitted to status holder EOU/EHTP/STP under intimation to the Development Commissioner and the jurisdictional Central excise authority. Therefore, in order to align the notification Nos 52/2003-Cus and 22/2003-CE both dated 31-3-2003 with the provision of HOP, suitable amendment in these notifications have been carried out.

(xv) Re-warehousing Certificate.

16. Instances have come to the notice of the Board that, in many cases, the field formations issue re-warehousing certificates in respect of duty free imported /indigenous goods without any physical verification of receipt of such goods, leading to misuse of exemption notification. It may be noted that input and capital goods are allowed to be imported or procured from indigenous sources on the condition that such goods shall be used within the bonded premises of EOU for specified purpose. It is the responsibility of bond officer to ensure that duty free goods are received in the premises of EOU/EHTP/STP units and duly accounted for. Therefore, it is reiterated that re-warehousing certificate should be issued only after physical verification of receipt of such goods.

(xvi) DTA Sale

17. The paragraph 6.8 (a) of the FTP provides that EOU/EHTP/STP may sell goods upto 50% of FOB value of exports in DTA on payment of concessional duty subject to fulfillment of positive NFE. It also provides that within the entitlement of DTA sale, the unit has to sell in DTA its products similar to the goods, which are exported or expected to be exported. There has been doubt as to what constitutes ‘similar goods”. Further, when the units are not required to take any permission for DTA sale under paragraph 6.39.9, it is felt necessary to provide definition of “similar goods” to bring clarity and uniformity. Therefore, it has been decided that the definition of “similar goods” would be based on the definition of similar goods as provided in the Customs Valuation (Determination of Price of Imported Goods) Rules, 1988. The ‘similar goods’ means “goods which is although not alike in all respects, have like characteristics and like component materials which enable them to perform the same functions and to be commercially interchangeable with the goods which have been exported or expected to be exported having regard to the quality, reputation and the existence of trade mark and produced in the same unit and by the same person who produced the export goods” The Board’s Circular No. 85/95 dated 26-7-95 issued in this regard stands rescinded.

(xvii) Verification of Premises of EOU/EHTP/STP.

18. The Development Commissioners are required to verify the premises of the EOU before issuance of LOP. However, on many occasions it was found that proper verification could not be conducted by them on account of non-availability of sufficient manpower and infrastructure. Therefore, based on request of the Board to issue LOP only after necessary site verification, the Department of Commerce suggested that the site verification may be conducted through the office of the jurisdictional Deputy Commissioner or Assistant Commissioner of Customs or Central Excise, as the case may be. Therefore, it has been decided that the office of the jurisdictional Deputy Commissioner or Assistant Commissioner of Customs or Central Excise, as the case may be, would undertake the site verification on receipt of such requests from the Development Commissioner and would send the factual report to the Development Commissioner. In view of this, in case any such request is received from the Development Commissioner for verification of premises, the same may be attended on priority keeping in mind that LOP has to be issued within a fix time frame.

(xviii) CT-3 and Procurement Certificate

19. Please refer to the Board’s letter dated 17-10-2002 issued from F.No 305/119/2000-FTT, wherein it was suggested that in case any serious discrepancies are noticed against any EOU, immediate action may be taken by way of suspension of the facility of issuance of CT-3/procurement certificates.

19(a) The matter has been revisited. The withdrawal of CT-3/Procurement certificates facility causes a great hardship and adversely affects their day-to-day operations by denying exemption on inputs meant for production of export goods. It also impinges upon the livelihood of the labour engaged in manufacturing and production activities of the affected EOUs. Therefore, it has been decided that in case of any gross misuse/abuse of the EOU/EHTP/STP Scheme by any EOU/EHTP/STP is noticed or any evidence suggesting prima-facie evasion of substantial duty by EOU/EHTP/STP comes into light, the CT-3 procurement certificate facility to the EOU/EHTP/STP may not be suspended with immediate effect. Instead the Commissioner may withdraw the facility of pre-authenticated CT-3 certificate for a period of six months at a time and allow the unit to import / procure goods duty free on the basis of individual CT-3 certificates/ procurement certificates subject to the condition that the unit furnishes additional bank guarantee to cover the 100% duty forgone on such duty free import/procurement. However, this executive order of the commissioner may be reviewed or amended by the jurisdictional Chief Commissioner of Customs or Central Excise, on receipt of any request from the unit. In order to clarify, it is informed that while deciding the withdrawal of the facility of pre-authenticated CT-3 certificate, proper care may be taken that the withdrawal is not done for mere procedural violations.

20. Wide publicity may please be given to these instructions by way of issuance of Public Notice.

21. Hindi version will follow.

Yours faithfully

(Ranjit Kumar)
Sr. Technical Officer (FTT)
Telephone No 23093859

F. No.305/69/2005-FTT(Part IV)

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