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Epcg

K.RAJA (Tax Consultant) (217 Points)

24 December 2014

Sir,

A jobworker furnished finished goods and supplied to other party and the other party sent the same to another one Trader and the same finished goods send to Exports through the Trader. In this position my doubt is, for this transaction the above jobwroker applicable to take export obligation for their EPCG. Kindly clarify alongwith some Rules.

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2 Replies

RAMESH KUMAR VERMA (Advocate ) (5965 Points)
Replied 24 December 2014

kindly Noted:

The EPCG scheme allows import of capital goods for pre production, production and post production (including CKD/SKD thereof as well as computer software systems) at 5% Customs duty subject to an export obligation equivalent to 8 times of duty saved on capital goods imported under EPCG scheme to be fulfilled over a period of 8 years reckoned from the date of issuance of licence.

However, in respect of EPCG licences with a CIF value of Rs.100 crore or more, the same export obligation shall be required to be fulfilled over a period of 12 years. The capital goods shall include spares, jigs, fixtures, dies and moulds. EPCG licence may also be issued for import of components of such capital goods required for assembly or manufacturer of capital goods by the licence holder. Second hand capital goods upto 10 years old may also be imported under the EPCG scheme.

Sub-Contracting 'para 6.15

EOU/EHTP/STP unit, including gem and jewellery units, may on the basis of annual permission from the Custom authorities, subcontract production process in DTA, which may also involve change of form or nature of goods, through job work by units in the DTA. These units may also subcontract upto 50% of the overall production of previous year in value terms for job work in DTA with the permission of the Customs authorities. Subcontracting of both production and production process may also be undertaken without any limit through other EOU/EHTP/ STP/SEZ units on the basis of records maintained in the unit.Subcontracting of part of production process may also be permitted abroad with the approval of the Development Commissioner.

EOU may, on the basis of annual permission from the Customs authorities, undertake job work for export, on behalf of DTA exporter, provided the goods are exported directly from EOU and export document shall jointly in the name of DTA/EOU. For such exports, the DTA units will be entitled for refund of duty paid on the inputs by way of Brand Rate of duty drawback.
Scrap/waste/remnants generated through job work may either be cleared from the job worker’s premises on payment of applicable duty or destroyed in the presence of Customs/ Excise authorities or returned to the unit. Destruction shall not apply to gold, silver, platinum, diamond, precious and semi precious stones.
Sub-contracting/exchange by gems and jewellery EOUs through other EOUs or SEZ units or units in DTA shall be as per procedure indicated in Appendix 14-I of Handbook (Vol-I).

Sub- Contracting 7.12
SEZ unit, may subcontract a part of their production or production process through units in the DTA or through other SEZ/EOU/EPZ/ EHTP/ STP, with the permission of Customs authorities. Subcontracting of part of production process may also be permitted abroad with the approval of the Board of Approval.
Subcontracting by SEZ gems and jewellery units shall be subject to following conditions :-

Goods, finished or semi-finished, including studded jewellery, containing quantity and purity equal to the gold/ silver/platinum so taken out, shall be brought back to the Zone within 30 days. Further, no diamond, precious or semi-precious stones shall be allowed to be taken out of the Zone for sub-contracting.

Receive plain gold/silver/platinum jewellery from DTA in exchange of equivalent quantity of gold/silver/ platinum, as the case may be, contained in the said jewellery.

The DTA unit undertaking job work or supplying jewellery against exchange of gold/silver/platinum shall not be entitled to export benefits.

All units, including gem and jewellery, may sub-contract part of the production or production process through other units in the same SEZ without permission of Customs authorities subject to records being maintained by both the supplying and receiving units.
SEZ units other than gems and jewellery units may be allowed to undertake job-work for export, on behalf of DTA exporter, provided the finished goods are exported directly from SEZ units. For such exports, the DTA units will be entitled for refund of duty paid on the inputs by way of Brand Rate of duty drawback.
Scrap/ waste/ remnants generated through job work may either be cleared from the job worker’s premises on payment of applicable duty or returned to the unit.
SEZ units shall not be eligible for wastage or manufacturing loss against the jewellery received from DTA after processing as mentioned in (i) and against exchange of gold/silver/platinum as mentioned in (ii) above.

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Roshan Thomas (C.E.O ) (356 Points)
Replied 24 December 2014

No the job worker cannot take benefit of epcg. The person who imports under the scheme can only take the benefit. It is similar to any other case of job work. Pls see the job work notification of central excise