EOU Debonding - Utilisation of Cenvat Credit, Central Excise

[Charles Prabhu Jesuraj]

Dear All,

While debonding from EOU, we need to pay the customs duty/Excise duty on the closing stock. for paying the excise duty can we utilise the cenvat/service tax credit accumulated by the EOU unit. pl. provide me the details with rulings in Cenvat & central excise rules.

Posts / Replies

[Naveed S]

Yes..

Procedure is also provided below for reference :--

Exit from EOU Scheme

6.18 (a) With approval of DC, an EOU may opt out of scheme. Such exit shall be subject to payment of Excise and Customs duties and industrial policy in force.

(b) If unit has not achieved obligations, it shall also be liable to penalty at the time of exit.

(c) In the event of a gems and jewellery unit ceasing its operation, gold and other precious metals, alloys, gems and other materials available for manufacture of jewellery, shall be handed over to an agency nominated by DoC, at price to be determined by that agency.

(d) An EOU / EHTP / STP / BTP unit may also be permitted by DC to exit from the scheme at any time on payment of duty on capital goods under the prevailing EPCG Scheme for DTA Units. This will be subject to fulfillment of positive NFE criteria under EOU scheme, eligibility criteria under EPCG scheme and standard conditions indicated in HBP v 1.

(e) Unit proposing to exit out of EOU scheme shall intimate DC and Customs and Central Excise authorities in writing. Unit shall assess duty liability arising out of debonding and submit details of such assessment to Customs and Central Excise authorities. Customs and Central Excise authorities shall confirm duty liabilities on priority basis, subject to the condition that the unit has achieved positive NFE, taking into consideration the depreciation allowed. After payment of duty and clearance of all dues, unit shall obtain "No Dues Certificate" from Customs and Central Excise authorities. On the basis of "No Dues Certificate" so issued by the Customs and Central Excise authorities, unit shall apply to DC for final debonding.

In case there is no proceeding pending under FT(D&R) Act, DC shall issue final debonding order within a period of 7 working days. Between "No Dues Certificate" issued by Customs and Central Excise authorities and final debonding order by DC, unit shall not be entitled to claim any exemption for procurement of capital goods or inputs. However, unit can claim Advance Authorisation / DEPB / Duty Drawback. Since the duty calculations and dues are disputed and take a long time, a BG / Bond / Installment processes backed by BG shall be provided for expediting the exit process.

(f) In cases where a unit is initially established as DTA unit with machines procured from abroad after payment of applicable import duty, or from domestic market after payment of excise duty, and unit is subsequently converted to EOU, in such cases removal of such capital goods to DTA after debonding would be without payment of duty. Similarly, in cases where a DTA unit imported capital goods under EPCG Scheme and after completely fulfilling export obligation gets converted into EOU, unit would not be charged customs duty on capital goods at the time of removal of such capital goods in DTA when debonding.

(g) An EOU / EHTP / STP / BTP unit may also be permitted by DC to exit under Advance Authorization as a one time option. This will be subject to fulfillment of positive NFE criteria.

[Charles Prabhu Jesuraj]

Naveed,

 

Thanks for your reply. My question is on, can we utilise the accumulated cenvat/service tax credit for paying off the excise duty on the closing stock.

[Naveed S]

Yes, you can utilise the cenvat/service tax credit for payment on clearances of the closing finished stock, after debonding is done.

[Charles Prabhu Jesuraj]

Naveed,

My question on utilisation of the accumulated cemvat/service tax credit by EOU, can we adjust this cenvat credit for paying the duty on the closing stock.

We need to pay the duty on the closing stok after getting the in principle approval from MEPZ/SEZ, then approch the excise authorities for payment duty to get the NOC and then need to approch the MEPZ/SEZ for final debonding. Hence the duty payment comes before the debonding.

[Naveed S]

The accumulated cemvat/service tax credit by EOU, cannot be adjusted for paying the duty on the closing stock,while Debonding from EOU.

However, the accumulated credit may be utilized for for payment of duty on DTA clearances or can be claimed as Refund. Also refer to Rule 17(1) of the Central Excise Rule, 2002 Further, a portion of Board's circular no. 799/32/2004-CX, DT. 23/09/2004 is reproduced below :

 It has been observed that EOUs are entitled to avail CENVAT Credit Scheme w.e.f. 06.09.2004 vide notification No. 18/2004-CE (N.T.) dated 6.9.2004. Thus, the EOUs who receive duty paid goods can avail input credit for the duty paid on such goods and utilize the credit for payment of duty on DTA clearances and if for some reasons, the credit cannot be utilized, the same can be claimed as refund under Rule 5 of Cenvat credit rule 2004,

In view of above, the accumulated balance can be utilized for above two purposes only.