CUSTOMS CIRCULAR No.38/2000-Cus. Date 10th May, 2000.

DTA sale of plastic agglomerate / granules reprocessed out of plastic scrap by EOU / EPZ units - Computation of CVD & doubts regarding availability of exemption to E0Us / EPZ units under notification Nos.5/98-CE, dated 2.6.98, 5/99-CE dated 28.2.99 and 6/2000-CE, dated 1st March, 2000 - reg.

I am directed to invite your attention on the above subject and to state that a doubt has been raised regarding levy of additional duty of customs (CVD) on DTA sale of reprocessed plastic agglomerates / granules (reprocessed out of plastic scrap) by EOU/EPZ units. The doubt has arisen in relation to exemption for plastic materials falling under heading Nos. 39.01 to 39.14 under notification Nos. 5/98-CE, dated 2.6.98 (ref. S. No. 63), 5/99-CE, dated 28.2.99 (ref. S. No. 64) and 6/2000-CE, dated 1.3.2000 (ref. S. No. 63).

2. The matter has been examined. The aforesaid notifications exempt plastic materials falling under heading Nos. 39.01, to 39.14 from excise duty, subject to the condition that they are reprocessed in India out of the scrap or the waste of goods falling within Chapters 39, 54, 55, 56, 59, 64, 84, 85, 86, 87, 90, 91, 92, 93, 94, 95 and 96. It may be seen that the notification enjoins fulfilment of two conditions for availing of the exemption: (i) reprocessing of plastic scrap material should be done in India; (ii) plastic scrap or waste should be of the goods falling within the above mentioned Chapters of the Customs Tariff.

3. In so far as levy of additional duty of customs (CVD) on imports of reprocessed plastic materials (viz. Plastic granules / agglomerates) is concerned, condition (i) above will not be satisfied because, the reprocessing has not been done in India. Thus, in case of normal imports of reprocessed plastic materials, the importers / domestic manufacturers are liable to pay, among other duties, additional duty of customs (CVD). It, therefore, follows that no CVD exemption will be available when reprocessed plastic materials are cleared in Domestic Tariff Area (DTA) by E0Us and EPZ units. In other words, the plastic processor E0Us / EPZ units are liable to pay, among other duties, excise duty equivalent to CVD payable on imported reprocessed plastic materials (e.g. plastic granules / agglomerates) in respect of their DTA clearances of such materials / goods.

4. In view of the position explained above, you are requested to kindly review the DTA clearances made by plastic processor E0Us / EPZ units to satisfy yourself as to whether the Customs authorities in charge of E0Us / EPZ units have taken the said CVD into account in their computation of excise duty while allowing DTA clearance of reprocessed plastic materials and initiate action to recover short levy, if any, urgently. The details of such short levy and recovery, if any, may be furnished to the Board by 25th May, 2000.

5. Difficulty, if any, in implementation of the above instructions may kindly be brought to the notice of the Board.

6. These instructions supercede the individual clarifications issued earlier by the Board.

(C.P. Goyal)
S.T.O. (FTT)

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