Circular No. 78 dated 3^rd July 1995

I am directed to say that notification No. 114/95-Cus. Dated 8.6.1995 has been issued with a view to harmonise the respective customs exemptions notification for 100% EOU units and for similar units located in the Export Processing Zones (EPZs).

2.      As may be noted the referred notification deletes paragraph 2 of notification 13/81-Cus dated 9.2.1981. The subject paragraph 2 provided for customs duty exemption on goods imported by the 100% EOUs when such goods are not exported but are supplied to ONGC, OIL, GAIL, for their projects in India against global tenders subject to certain conditions. This was a special provision introduced in the notification at the time when the 100% EOU scheme did not envisage any DTA sales. Thereafter, the 100% EOU scheme has undergone significant changes and the present position is that DTA sales upto a specified limit are permitted as a part of the scheme.

3.      Hence, the implication of para 2 of notification 13/81 was to firstly extend the benefit of duty free imports if the manufactured goods are not exported but supplied to the agencies mentioned therein. Secondly, if the goods so supplied are not excisable then in terms of paragraph 2 no duty is chargeable. This is in contrast to the general existing legal position regarding supplies of non-excisable goods to the DTA, which is that such goods would be subject to the customs duty as if these are imported goods.

4.      As stated, paragraph 2 in notification 13/81 has been a unique dispensation for 100% EOUs. this facility is not available in the notification for similar units situated in the EPZs namely notification No. 133/94-Cus. dated 22.6.94.

5.      With the issue of notification 114/95-Cus dated 8.6.1995, the implication it that both 100% EOU units and such units located in the EPZs are now placed at par as regards the levy of duty on DTA clearances. The legal position now is that the duty on DTA sales will be determined in terms of the relevant Central Excise notification if the goods are excisable. If the goods are not excisable then full customs duty will be charged as if the said goods have been imported. This position applies equally to 100% EOU unit as also units in the EPZs.

6.      I am directed to say that the Board desires that the aforestated legal positions regarding duty leviability of goods cleared in the DTA from 100% EOUs and such units in the EPZ together with the implications of the new notification No. 114/95 dated 8.6.1995 may be immediately brought to the notice of the concerned officers of the Department. In particular, the clearances for DTA in terms of the rescinded para 2, may be reviewed with effect from 8.6.2995, so that the assessments are correctly made in terms of the amendment. Trade interests may be suitably informed.