EOU and DTA unit in same compound-Separation of units - Central Excise - 01/2006

EOU and DTA unit in same compound-Separation of units Commissioner of Central Excise Ahmedabad-III, Trade Notice No. 1/2006, Dated 11-1-2006 A copy of Revenue Secretary, New Delhi's D.O. Letter F. No. 587/CE/1/2005, dated 9-2-2005 TRU is enclosed herewith for information and guidance of the trade arid field formations. Further, fencing separating EOU DTA must be strong and at least 4' high in all units having DTA unit as well as an EOU. All Trade Associations/Chamber of Commerce and the Members of the RAC/PGC are requested to bring this to the notice of their members/constituents. Enclosure 1. The Directorate General of Central Excise Intelligence (DGCEI) has booked a case of evasion of duty of Rs. 8.32 crore against M/s. Tata Yazaki Autocomp Ltd., (M/s. TYAL), Waghall, Distt. Pune, Maharashtra. M/s. TYAL is a Joint venture company having 50 : 50 equity participation by M/s. Tata Autocomp Ltd. - a TATA Group company and M/s. Yazaki of Japan. 2. Investigation conducted so far have revealed that M/s. TYAL have a DTA Unit as well as a 100% EOU. Both are located in the same compound, without any demarcation/fencing. Both units are engaged in the manufacture and assembly of the same product, namely wiring harness. The 100% EOU imports the inputs, namely automotive components, without payment of customs duty, while the DTA unit sources the raw materials from the domestic market. The 100% EOU, on paper, has shown part of its production as if manufactured in the DTA unit. The goods so manufactured in the 100% EOU, but shown as if manufactured by their DTA unit, were cleared for sale in the local market paying Central Excise duty leviably in the DTA Unit, which is lower than the duty that would be otherwise on DTA sales by a 100% EOU. Investigations have revealed that the DTA sales of the EOU had also far exceeded the quantity permitted to them by the Development Commissioner. Thus, M/s. TYAL have not only evaded Excise Duty, but have also violated the provisions of the EXIM Policy regarding DTA sales by 100% EOUs. 3. Investigations suggest that the aforementioned illegal activities of M/s. TYAL have been facilitated by the fact that they have been allowed to operate their DTA unit as well as their 100% EOU from within the same premises. It is likely that such a practice may be followed by other manufacturers also. I find that the EXIM Policy 2002-2007 vide Para 20 of the Handbook thereof contained a provision for ensuring the distinct identity of goods manufactured by various units of an industrial enterprise operating both as a DTA unit as well as an EOU. The present Policy vide Para 6.3.8 of the Handbook now even more expressly requires separate earmarked premises for different units. Considering the spirit of these provisions of the EXIM Policy in the backdrop of the case booked by the DGCEI. I would suggest that suitable instructions be issued to all Development Commissioners to ensure that separate units of an industrial enterprise, operating both as a DTA unit as well as an EOU, are clearly demarcated. In fact, EOUs must also be asked to declare their other units. If any, located in the vicinity of the EOU or in the same city. this would help to keep a better check on them. With regards, Your sincerely Sd/- (K.M. Chandrasekhar) Sri S.N. Menon. Secretary Department of Commerce Udyog Bhawan