Sub-contracting of Production or production Process by EOU to DTA unit and Job-working by EOU for DTA unit. - Central Excise Practice Manual (OLD) - Central Excise

Sub-contracting of Production or production Process by EOU to DTA unit and Job-working by EOU for DTA unit. The EOU/EHTP/STP units are licensed as private bonded warehouses under section 58 of the Customs Act, 1962 as well as permitted to undertake manufacturing activity in bonded premises under section 65 of the Customs Act, 1962 . It is not always possible or feasible for the EOUs to have facility to carry out all the parts of the production process in the bonded warehouse. For the purpose of carrying out that process, the unit may require removal of in-process goods into DTA or abroad. Sometimes, the EOUs may have export order in hand which exceed its production capacity. This may force EOU to make use of manufacturing capacity available in the domestic market for carrying out production at the premises of the sub-contractor in DTA. Conversely, at times, EOU may not have any export order resulting in idle capacity. This may force them to undertake manufacturing activity on behalf of DTA unit for export. Considering these practical difficulties, EOU/STP/EHTP/BTP units have been allowed the facility to sub-contract part of the production process or complete production process to be carried out by DTA unit. Further, they have also been allowed to send the in-process goods abroad for carrying out certain processes on these goods and import thereafter. Conversely, EOUs are allowed to undertake job work activities on behalf of DTA unit for the purpose of export. Para 6.14 of the FTP also provides that the EOUs may also sub-contract the entire production in DTA upto the limit of 50% FOB value of exports. However, this does not imply that EOUs can sub-contract its production into DTA regularly. This facility has been extended specifically to allow the EOUs to manage excess export orders and to fulfill export commitments within stipulated time. Though EOU/EHTP/STP/BTP units are granted license under Sections 58 and 65 of the Customs Act, 1962 , these units are also governed by the provisions of Central Excise Act, 1944 . Any EOU having DTA inter-action by way of domestic procurement or domestic sale or job work is required to be a Central Excise registrant. Under the Central Excise Law, facility of job work is allowed. To enable EOU/EHTP/ STP/BTP units to send inputs, in-process goods into domestic market for the purpose of carrying out job work activities in DTA, specific provisions have been incorporated in the exemption notifications, namely, 52/2003-Customs and 22/2003-CE, both dated 31.3.2003 governing duty free import/procurement by EOUs respectively. Further, in order to facilitate the activity of job work, CBEC vide Circular No.65/2002-Customs, dated 07.10.2002 has prescribed detailed procedure required to be followed by EOUs for sending raw materials/in-process goods in DTA for job work. The CBEC Circular also provides that facility of job work does not mean that the EOUs would parcel out substantial manufacturing operations in the DTA. With this view only, it has been provided that the units having substantial manufacturing facility would be allowed to send goods for job work.