Goods manufactured from indigenous materials in EOUs - CBEC's Customs Manual 2023 - Customs

18. Goods manufactured from indigenous materials in EOUs: 18.1 Excisable goods manufactured out of wholly indigenous excisable inputs are allowed clearance into DTA on payment of only Central Excise duty. [Refer Circular No. 12/2008-Cus., dated 24-7-2008] 18.1.1 The indigenous goods supplied to the EOUs/EPZ/SEZ/EHTP/STP units after availing the deemed export benefits are to be treated as imported goods and accordingly, duty as applicable to the imported goods is liable to be paid. Once the goods are treated as imported goods and applicable Customs Duty is paid at the time of their transfer/sale back into DTA or exit, there is no requirement of refund of the deemed export benefits availed on such goods or for the production of a certificate from the Development Commissioner regarding refund or nonavailment of deemed export benefits at the time of clearance of such goods or exit. 18.1.2 Alternatively, the EOU/STP/EHTP units would also be allowed to clear the domestically procured goods or on exit, on payment of Excise Duty as per Notification No. 22/2003CE dated 31.03.2003 only on production of certificate from Development Commissioner to the effect that deemed export benefits have been paid back or not availed, as the case may be, as envisaged in Circular No.74/2001-Cus dated 04.12.2001. [Refer Circular No.13/2017-Cus F. No. DGEP/FTP/07/2015(Part-I) Date:10.04.2017] 18.2 Where goods are either non-excisable or are leviable to nil rate of import duty, no exemption in respect of inputs utilized for manufacture of such goods is allowed. An EOU is required to pay back the duty foregone on the inputs used in manufacture of goods cleared in DTA on which no duty is leviable. 18.3 Proviso to sub-section (1) of section 5A of the Central Excise Act, 1944 states that unless specifically provided in a notification, no exemption therein shall apply to excisable goods which are produced or manufactured by an EOU and cleared to the DTA. Further, EOUs are eligible for duty free import or domestic procurement of their inputs or raw materials under Notification No. 22/2003-CE dated 31.3.2003 and Notification No. 52/2003- Customs dated 31.03.2003. However, as per a proviso [the second proviso to para 6 in case of Notification No. 22/2003-CE and first proviso to para 3 in case of Notification No. 52/2003- Customs], if the goods produced or manufactured by EOUs and cleared to DTA if imported are either non-excisable or leviable to Nil basic customs duty [BCD] and additional duty of customs [CVD], then EOUs cannot avail the exemptions under these notifications on inputs utilized in manufacture/processing/packaging etc. of such goods [cleared to DTA]. In addition, there are a number of customs and excise duty exemption notifications which prescribe concessional [including Nil] duty rates on specified goods [inputs/raw materials etc.] for use in manufacture of specified goods, subject to conditions prescribed. EOUs were not able to avail benefit of such exemptions on inputs imported or procured domestically by them. The matter has been clarified vide Annexure III of D.O. F.No. 334/7/2017-TRU dated 12-2017 of JS(TRU-I). Non-applicability of exemptions under notifications issued under section 5A of the Central Excise Act, 1944 is only in respect of excisable goods produced or manufactured by an EOU and cleared to DTA and not in respect of inputs/raw materials procured by them domestically and utilised for production/manufacture of goods which are cleared by them to DTA. In view of the above, it has been clarified that EOUs will also be eligible to import or procure raw materials/inputs at other concessional/Nil rate of BCD, excise duty/CVD or SAD, as the the case may be, provided they fulfill all conditions for being eligible to such concessional or Nil duty. For these purposes, if an EOU is already registered with the jurisdictional Central Excise Authority, it will not be required to take any fresh registration under the Customs (Import of Goods at Concessional Rate of Duty for Manufacture of Excisable Goods) Rules, 2016 or the Central Excise (Removal of Goods at Concessional Rate of Duty for Manufacture of Excisable and Other Goods) Rules, 2016, as the case may be. Further, there will be no need for an EOU to separately comply with the Central Excise (Removal of Goods at Concessional Rate of Duty for Manufacture of Excisable Goods) Rules, 2016 for availing the CVD exemption, if the procedure under the Customs (Import of Goods at Concessional Rate of Duty for Manufacture of Excisable Goods) Rule, 2016 is followed by it for availing exemption / concession from BCD on imports of inputs/raw materials.