G.S.R. (E): In exercise of the powers conferred by sub-section (1) of section 25 of the Customs Act, 1962 (52 of 1962), the Central Government, being satisfied that it, is necessary in the public interest so to do hereby exempts goods specified in the Table annexed hereto from so much of the duty of customs leviable thereon which is specified in the First Schedule to the Customs Tariff Act, 1975 (51 of 1975) as is in excess of the amount calculated at the rate of 5% ad valoram and from the whole of the additional duty and special additional duty leviable thereon respectively under sections 3 and 3A of the said Customs Tariff Act.

2. The exemption contained in paragraph 1, shall be subject to the following conditions, namely:-

(1) The goods imported are covered by a valid licence issued under the Export Promotions Capital goods (EPCG) Scheme in terms of paragraph 6.2 of the Export and import Policy permitting import of goods at the rate of 5% duty and the said licence is produced for debit by the proper officer of the customs at the item of clearance:

Provided that for the import of spare parts, the validity period of the licence shall be deemed to be the period permitted for fulfillment of the export obligation in full.

(2) The importer executes a bond in such form and for such sum and with such surety or security as may be specified by the Assistant Commissioner of Customs or Deputy Commissioner of Customs binding himself to fulfill export obligation equivalent to five times the CIF value of the goods imported on FOB basis, or four times the CIF value of capital goods on Net Foreign Exchange basis as specified in the licence, or for such higher amount as may be fixed by the Licensing Authority or for such amount as may be fixed by the Licensing Authority in terms of clause (i) of Paragraph 5.4 of the Export and Import Policy, 2002-2007 [OLD- or for such higher sum as may be fixed by the Licensing Authority ], within a period of eight years from the date of issue of licence, in the following proportions, namely:-

(In above condition (2) the words, brackets, letters & figures (or for such higher amount as may be fixed by the Licensing Authority or for such amount as may be fixed by the Licensing Authority in terms of clause (i) of Paragraph 5.4 of the Export and Import Policy, 2002-2007) has been substituted vide CUS NTF NO. 65/2004 DATE 22/06/2004)
 

Provided that where the CIF value of licence is not less than Rs.100crores, the export obligation shall be fulfilled within a period of 12 years from the date of issue of licence in the following proportions, namely: -
 

Provided further that where a sick unit notified by the Board for Industrial and Financial Reconstruction (BIFR) is subsequently taken over by another unit for revival, the export obligation may be fulfilled within a period of 12 years from the date of issue of license:

Provided also that export obligation of particular block may be set off by the excess exports made in the said preceding block(s).

(In condition (2) second proviso has been substituted vide Cus Ntf No.116/2002 Date 28/10/2002)

[OLD Provided further that export obligation of a particular block may be set off by the excess export made in the said preceding block(s).";]

(In condition (2) proviso has been substituted vide Cus Ntf No.49/2002 date 24/04/2002)

[OLD Provided that export obligation of a particular block may be set off by against the excess exports made in the said preceding blocks;]

(3) The importer produces within 30 days from the expiry of each block of two years from the date of issue of licence or within such extended period as the Assistant Commissioner of Customs or Deputy Commissioner of Customs may allow, evidence to the satisfaction of the Assistant Commissioner of Customs or Deputy Commissioner of Customs showing the extent of export obligation fulfilled, and where the export obligation of any particular block of two years is not fulfilled in terms of the proceeding condition, the importer shall within three months from the expiry of the said block pay duties of customs of an equal amount equal to that portion of duties leviable on the goods but for the exemption contained herein which bears the same proportion as the unfulfilled portion of the export obligation bears to the total export obligation together with interest at the rate of 15% per annum from the date of clearance of the goods.

(4) The importer shall, if he fails to discharge a minimum of 25% of the export obligation prescribed for any particular block of two years for two consecutive block, be liable to pay forthwith the whole of the duties of customs leviable on the goods imported but for the exemption contained in this notification together with interest at the rate of 15% per annum from the date of clearance of the goods.

(In conditions (3)&(4) bold figure has been substituted vide Cus Ntf No.113/2002 Date 16/10/2002)

(5) The capital goods imported, assembled or manufactured are installed in the importers factory or premises and a certificate from the jurisdictional Assistant Commissioner of Central Excise or Deputy Commissioner of Central Excise or an independent Commissioner of Central Excise or an independent Chartered Engineer, as the case may be, is produced confirming installation and use of capital goods in the importer's factory or premises, within six months from the date of completion of imports or within such extended period as the said Assistant Commissioner of Customs or Deputy Commissioner of Customs may allow.

Provided that in the case of, -

(i) manufacturer exporter and merchant exporter having supporting manufacturer (s)/vendor(s),

(ii) import of irrigation equipment for use in contract farming for export of agricultural products, and

(iii) importer rendering services,

the capital goods may be installed at the factory or premises of such other person whose name and address are endorsed on the licence referred to in condition (1) and where the bond for full difference of duty, if necessary, in terms of condition (2), with a bank guarantee is executed by the importer and such other person binding themselves jointly and severally to fulfill the export obligation and all other conditions of this notification and to pay duty with interest in case of default.

(6) Notwithstanding anything contained in conditions (3) and (4), where the Licensing authority grants extension of blockwise period for any block(s) or overall period of fulfilment of export obligation upto a period of two years or regularisation of shortfall, in export obligation, not exceeding 5 per cent of such export obligation, the said block-wise period or overall period of export obligation may be extended and the said shortfall in export obligation be condoned by the Assistant Commissioner of Customs or Deputy Commissioner of Customs:

proviso, the following provisos shall be substituted, namely:–

Provided that in respect of licence holder units affected by the earthquake in the State of Gujarat in the Month of January 2001, the Licensing Authority may grant extension in the overall period of export obligation up to one more year:

Provided further that in case of a licence holder unit referred in the first proviso, having overall export obligation period of 13 years and in case of other licence having export obligation period of 12 years, extension of overall period of export obligation shall not be allowed.

(In condition (6) proviso has been substituted vide CUS NTF NO.44/2003 DATE 21/03/2003)

[OLD Provided that in respect of licence having overall export obligation period of 12 years, the extension of overall period of export obligation shall not be allowed.]

(In condition (6) proviso has been substituted vide Cus Ntf No.116/2002 Date 28/10/2002)

(Condition (6) has been substituted vide Cus Ntf No.49/2002 date 24/04/2002)

[OLD (6) Notwithstanding contained in conditions (3) and (4), where the Licensing Authority grants an extension of block-wise period or overall period of fulfillment of export obligation or regularisation of shortfall in export obligation, not exceeding 5% of such export obligation, the said block-wise period or overall period of export obligation may be extended and the said shortfall in export obligation be condoned by the Assistant Commissioner of Customs or Deputy Commissioner of Customs.

Provided that extension of block-wise period of export obligation shall not be allowed for more than one block of two years.

Provided further that extension of block-wise period of export obligation for the fourth block of two years shall not be allowed for more than a period of one year.]

3. Where the goods are found defective or unfit for use, the said goods may be re-exported back to the foreign supplier within 3 years form the date of payment of duty on the importation thereof.

Provided that at the time or re-export the goods are identified to the satisfaction of the Assistant Commissioner of Customs or Deputy Commissioner of customs as the goods which were imported.

4. where the total exports of a sector or product group during the year 2007-08 has declined by more than 5% as compared to the year 2006-07, the average export obligation of the licencee for 2007-08 may be reduced proportionate to the reduction in exports of that particular sector /product group during 2007-08 as against 2006-07;

5. In a case of default in export obligation, when the duty on goods is paid to regularise the default, the amount of interest paid by the importer shall not exceed the amount of duty if such regularisation has been dealt in terms of Public Notice of the Government of India in the Ministry of Commerce No. 22 (RE-2013)/2009-2014 dated the 12th August, 2013.

(In the Notification, Paragraph 5 has been inserted vide CUS NTF NO. 46/2013 DATE 26/09/2013)
 

Explanation - In this notification,-

(1) "Capital Goods" means any plant, machinery, equipment and accessories required for -

(a) manufacture or production of other goods, including packaging machinery and equipment, power generating sets, machine tools, catalysts for initial charge, and equipment and instruments for testing, research and development, quality and pollution control;

(b) use in manufacturing, mining, agriculture, marine, aquaculture, animal husbandry, floriculture, horticulture, pisciculture, poultry, viticulture and sericulture;

(c) rendering services;

(2)"Export and Import Policy: means the Export and Import Policy 1997-2002 published vide notification of the Government of India in the Ministry of Commerce, No. 1 (RE-99)/1997-2002, dated the 31st march, 2000

(3)"Licensing Authority"; means the Director General, Foreign Trade appointed under section 6 of the Foreign Trade (Development and Regulation) Act, 1992 (22 of 1992) or an officer authorised by him to grant a licence under the said Act;

(4)" export obligation",-

(i) in relation to importers other than those rendering services, means export to a place outside India of products manufactured place outside India of products manufacture with the use of capital goods imported, assembled or manufactured in term of this notification or making of supplies of such products in terms of clauses (a), (b), (d), (e), (f) an (g) of paragraph 10.2 of the Export and Import Policy; and

(ii) in relation to importers rendering services, means receiving payments in freely convertible foreign currency for services rendered thought the use of such capital goods;

(iii) means, export of goods in terms of the notification of the Government of India in the Ministry of Commerce and Industry (Department of Commerce) No. 28(RE-2003)/2002-2007 dated 28th January, 2004.

(Sub-clause (iii) has been inserted vide CUS NTF NO. 29/2004 DATE 28/01/2004)

(iv) shall be, over and above, the average level of exports achieved by the licencee in the preceding three licencing years for same and similar products.

(5) "Net foreign exchange", in relation to importers other than those rendering services, means FOB value of products exported in discharge of obligation in terms of this notification minus CIF value of inputs used in manufacture thereof where such inputs have been, -

(a) imported by the importer directly against a licence; or

(b) procured indigenously, for which the importer claims replenishment under the duty Exemption Scheme as contained in Chapter 7 of the Export and Import policy,

and the said foreign exchange is earned in freely convertible currency.

(Paragraph 4 & in the Explanation, in clause (4), sub-clause (iv) has been inserted vide CUS NTF NO. 65/2008 DATE 09/05/2008)