Epcg

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Mridul Kogta (Querist)
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25 August 2015 What is the penalty and interest on non fulfillment of Export obligation for machines imported under EPCG licence

RAMESH KUMAR VERMA

RAMESH KUMAR VERMA (Expert)
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26 August 2015 please note Import of capital goods shall be subject to Actual User condition till export obligation is completed.

Para 5.04 of Foreign Trade Policy 2015-2020
regarding Export Obligation (EO)

Following conditions shall apply to the fulfilment of EO:-
sub para (a) EO shall be fulfilled by the authorisation holder through export of goods which are manufactured by him or his supporting manufacturer / services rendered by him, for which the EPCG authorisation has been granted.

(b) EO under the scheme shall be, over and above, the average level of exports achieved by the applicant in the preceding three licensing years for the same and similar products within the overall EO period including extended period, if any; except for categories mentioned in paragraph 5.13(a) of HBP. Such average would be the arithmetic mean of export performance in the preceding three licensing years for same and similar products.

(c) In case of indigenous sourcing of Capital Goods, specific EO shall be 25% less than the EO stipulated in Para 5.01.

(d) Shipments under Advance Authorisation, DFIA, Drawback scheme or reward schemes under Chapter 3 of FTP; would also count for fulfillment of EO under EPCG Scheme.

Para 5.09 of ftp 2015-2020

"Incentive for early EO fulfilment
With a view to accelerating exports, in cases where Authorisation holder has fulfilled 75% or more of specific export obligation and 100% of Average Export Obligation till date, if any, in half or less than half the original export obligation period specified, remaining export obligation shall be condoned and the Authorisation redeemed by RA concerned. However no benefit under para 5.21 of HBP shall be permitted where incentive for early EO fulfilment has been availed.

Para 5.10 Reduced EO for Green Technology Products
For exporters of Green Technology Products, Specific EO shall be 75% of EO as stipulated in Para 5.01. There shall be no change in average EO imposed, if any, as stipulated in Para 5.04. The list of Green Technology Products is given in Para 5.29 of HBP.

Para 5.11 Reduced EO for North East Region and Jammu & Kashmir
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"For units located in Arunachal Pradesh, Assam, Manipur, Meghalaya, Mizoram, Nagaland, Sikkim, Tripura and Jammu & Kashmir, specific EO shall be 25% of the EO, as stipulated in Para 5.01. There shall be no change in average EO imposed, if any, as stipulated in Para 5.04 "

Para 5.12of Hand Book Of Policy Procedures 2015-2020

Calculation of Average Export Obligation
While calculating Average Export
******************************************* Obligation, exports counted/being counted for fulfilling specific EO against EPCG Authorisations within valid EO Period (whether original or extended) that have been made in the preceding 3 years will not be taken into account.

para 5.14 of hand book of policy procedures 2015-2020 Block-wise Fulfilment of EO
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(a) The Authorisation holder under the EPCG scheme shall, while maintaining the average export obligation, fulfill the specific export obligation over the prescribed block period in the following proportions:

Period from the date of issue of Authorisation :

Block of 1st to 4th year=50%,Minimum export obligation to be fulfilled.

Block of 5th and 6th year=50% Balance EO export obligation to be fulfilled.

subpara 5.14 asks that (c) Where EO of the first block is not fulfilled in terms of the above proportions, except in cases where the EO prescribed for first block is extended by the Regional Authority subject to payment of composition fee of 2% on duty saved amount proportionate to unfulfilled portion of EO pertaining to the block, the Authorization holder shall, within 3 months from the expiry of the block, pay duties of customs (along with applicable interest as notified by DOR) proportionate to duty saved amount on total unfulfilled EO of the first block.

Para 5.23 of Hand Book of Policy Procedures
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Regularization of Bonafide Default
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(a) In case, EPCG authorisation holder fails to fulfil prescribed export obligation, he shall pay Customs Duty along with applicable interest as prescribed by Customs Authority. Such facility can also be availed by EPCG authorisation holder to exit at his option. The authorisation holder will have the option to furnish valid duty credit scrips, issued under Chapter 3 or Chapter 5 of FTP, for payment of the Customs duty component.

(b) Authorisation holder can also pay duty and interest suo-motu on the basis of self /own calculation as per the procedure specified in paragraph 4.50 of HBP.

In case of failure to fulfil export obligation or any other condition of authorisation, authorisation holder shall be liable for action under FT (D&R) Act, 1992, as amended, Orders and Rules made thereunder, provisions of FTP/HBP, Customs Act, 1962, as amended from time to time or any other law in force.

Regards,