Export Oriented Units (EOUs)-An Introduction

Introduction Objectives of the Export oriented unit Major Sectors in EOUs Export from EOU EOU Activities Need for Special License Choosing the Location for EOU EOU Unit Obligations Bonding Period of EOU EOU in Exim Policy

Introduction

The Export Oriented Units (EOUs) scheme, introduced in early 1981, is complementary to the SEZ scheme. It adopts the same production regime but offers a wide option in locations with reference to factors like source of raw materials, ports of export, hinterland facilities, availability of technological skills, existence of an industrial base and the need for a larger area of land for the project. As on 31st December 2005, 1924 units are in operation under the EOU scheme.

Objectives of the Export oriented unit:

The main objectives of the EOU scheme is to increase exports, earn foreign exchange to the country, transfer of latest technologies stimulate direct foreign investment and to generate additional employment.

Major Sectors in EOUs:

GRANITE TEXTILES / GARMENTS FOOD PROCESSING CHEMICALS COMPUTER SOFTWARE COFFEE PHARMACEUTICALS GEM & JEWELLERY ENGINEERING GOODS ELECTRICAL & ELECTRONICS AQUA & PEARL CULTURE

Export from EOU

Exports from EOUs during 2004-2005 were of the order of Rs.36806.17 crores as compared to the export of Rs.28827.58 crores achieved during 2003-2004, registering a growth of 27.68%.

EOU Activities

Initially, EOUs were mainly concentrated in Textiles and Yarn, Food Processing, Electronics, Chemicals, Plastics, Granites and Minerals/Ores. But now a day, EOU has extended it area of work which includes functions like manufacturing, servicing, development of software, trading, repair, remaking, reconditioning, re-engineering including making of gold/silver/platinum jewellery and articles thereof, agriculture including agro-processing, aquaculture, animal husbandry, bio-technology, floriculture, horticulture, pisiculture, viticulture, poultry, sericulture and granites.

Need for Special License

To set up an EOU for the following sectors, an EOU owner needs a special license.

Arms and ammunition, Explosives and allied items of defense equipment, Defense aircraft and warships, Atomic substances, Narcotics and psychotropic substances and hazardous

chemicals, Distillation and brewing of alcoholic drinks, Cigarettes/cigars and manufactured tobacco substitutes.

In the above mention cases, EOU owner are required to submit the application form to the Development Commissioner who will then put them up to the Board of Approvals (BOA).

Choosing the Location for EOU

EOUs can be set up anywhere in the country and may be engaged in the manufacture and production of software, floriculture, horticulture, agriculture, aquaculture, animal husbandry, pisciculture, poultry and sericulture or other similar activities.

However, it should be noted that in case of large cities where the population is more than one million, such as Bangalore and Cochin, the proposed location should be at least 25 km away from the Standard Urban Area limits of that city unless, it is to be located in an area designated as an "industrial area" before the 25th July, 1991. Non-polluting EOUs such as electronics, computer software and printing are exempt from such restriction while choosing the area.

Apart from local zonal office and state government, setting up of an EOU is also strictly guided by the environmental rules and regulations. Therefore, an even if the EOU unit has fulfilled all locational policy but not suitable from environmental point of view then the Ministry of

Environment, Government of India has right to cancel the proposal. In such situation industrialist would be required to abide by that decision.

EOU Unit Obligations

The EOUs are required to achieve the minimum NFEP (Net Foreign Exchange Earning as a Percentage of Exports) and the minimum EP (Export Performance) as per the provisions of EXIM Policy which vary from sector to sector. As for instance, the units with investment in plant and machinery of Rs.5 crore and above are required to achieve positive NFEP and export US$ 3.5 million or 3 times the CIF value of imported capital goods, whichever is higher, for 5 years. For electronics hardware sector, minimum NFEP has to be ‘positive’ and minimum EP for 5 years is US$ 1 million or 3 times the CIF value of imported capital goods, whichever is higher. NFEP is calculated cumulatively for a period of 5 years from the commencement of commercial production according to a prescribed formula.

Bonding Period of EOU

The EOUs are licensed to manufacture goods within the bonded time period for the purpose of export. As per the Exim Policy, the period of bonding is initially for five years, which is extendable to another five years by the Development Commissioner. However on a request of EOU Unit, time period can also be extended for another five year by the Commissioner / Chief Commissioner of Customs.

EOU in Exim Policy

Currently EOU scheme is mentioned in the Chapter 9 of the Foreign Trade Policy (1997-2002) and Chapter 9 of the Handbook of Procedures, Volume-I (HOP). The EOUs can export all products except prohibited items of exports in ITC (HS).

Recent Policy Changes in the EOUs Scheme (w.e.f. 7th April, 2006)

The export of goods up to one and half percent of the FOB value.

In order to facilitate the smooth functioning of the EOU units, the Development Commissioners will fix time limits for finalizing the disposal of matters relating to EOUs.

New units engaged in export of Agriculture/Horticulture/Aqua-Culture products have been now allowed to remove capital goods inputs to the DTA on producing bank guarantee equivalent to the duty foregone on the capital goods/input proposed to be taken out.

The EOU units in Textile Sector are allowed to dispose off the left over material/fabrics up to 2 per cent of Cost Insurance Freight (CIF) value of imports, on consignment basis. Recognizing that settling the accounts for every consignment is complex and time consuming it has been decided to allow

disposal of left over material on the basis of previous year's imports.

Export Oriented Unit Scheme

The EOU scheme was introduced in the year 1980 vide Ministry of Commerce resolution dated 31st December 1980. The purpose of the scheme was basically to boost exports by creating additional production capacity. It was introduced as a complementary scheme to the Free Trade Zones/ Export Processing Zone (EPZ) Scheme introduced in the sixties which had not attracted many units due to locational restrictions. The exporters showed willingness to set up units with long term commitment to exports under Customs bond operations provided they had the freedom to locate them in places of their choice and given most of the benefits as provided to units set up in the Zones.

2.        Over the years the Scheme has undergone various changes and its scope also expanded substantially as compared to the initial Scheme, which was basically for manufacturing sector with certain minimum value addition in terms of export earnings. The EOU scheme is, at present, governed by the provisions of Chapter 9 of the Export and Import (EXIM) Policy, 1997-2002 and Chapter 9 of the Handbook of Procedures, Volume-I ( HOP). Under this scheme, the units undertaking to export their entire production of goods are allowed to be set up. These units may be engaged in the manufacture, services, development of software, trading, repair, remaking, reconditioning, re-engineering including making of gold/silver/platinum jewellery and articles thereof, agriculture including agro-processing, aquaculture, animal husbandry, bio-technology, floriculture, horticulture, pisiculture, viticulture, poultry, sericulture and granites. The EOUs can export all products except prohibited items of exports in ITC (HS).

3.        Under the EOU scheme, the units are allowed to import or procure locally without payment of duty all types of goods including capital goods, raw materials, components, packing materials, consumables, spares and various other specified categories of equipments including material handling equipments, required for export production or in connection therewith. Even the goods appearing in the restricted list of the EXIM Policy (1997-02) are permitted to be imported. However, the goods prohibited for import are not permitted. In the case of EOUs engaged in agriculture, animal husbandry, floriculture, horticulture, pisciculture, viticulture, poultry, sericulture and granite quarrying, only specified categories of goods mentioned in the relevant notification have been permitted to be imported duty-free.

4.        The Customs exemption notifications for import & related Central Excise exemption notification when the goods are procured from local manufacturing units, prescribe several conditions to be fulfilled by the beneficiaries keeping in view the objective of the Scheme and to prevent abuse. Working in Customs Bond is one of the essential prerequisite-there being few exceptions. They also provide various flexibilities in the matter of taking out the materials for jobwork, interunit transfer. The EOUs are required to achieve the minimum NFEP (Net Foreign Exchange Earning as a Percentage of Exports) and the minimum EP (Export Performance) as per the provisions of EXIM Policy. The NFEP and EP varies from sector to sector. As for instance, the units with investment in plant and machinery of Rs.5 crore and above are required to achieve positive NFEP and export US$ 3.5 million or 3 times the CIF value of imported capital goods, whichever is higher, for 5 years. For electronics hardware sector, minimum NFEP has to be ‘positive’ and minimum EP for 5 years is US$ 1 million or 3 times the CIF value of imported capital goods, whichever is higher. NFEP is calculated cumulatively for a period of 5 years from the commencement of commercial production according to a prescribed formula.

5.        The EOUs are licensed to manufacture goods within the bonded premises for the purpose of export. As per the policy, the period of bonding is initially for five years, which is extendable to another five years by the Development Commissioner. On completion of the bonding period, it is

for the unit to decide whether to continue under, or to opt out, of the scheme. The imported capital goods are allowed to be warehoused for a period of 5 years. For other goods, the warehousing period is one year, which can be extended further by the Commissioner / Chief Commissioner of Customs. On an application being made by the unit, extension of the time limit is granted in all cases unless there is malafide and diversion of duty free materials. As on 31-3-2001, there are about 1350 EOUs functioning in the country.

Monitoring and Administrative Control :

**6.        The EOUs basically function under the administrative control of the Development Commissioner of the Export Processing Zones, whose jurisdiction has been notified by the Ministry of Commerce. In all, there are seven Development Commissioners at Mumbai, Gandhidham, Chennai, Cochin, Vizag, Noida and Calcutta, who supervise the functioning of the EOUs and eight Export Processing Zones/Special Economic Zones in the country. The Development Commissioners of the EPZs/SEZs are the Licensing Authorities in respect of units under the EOU Scheme, as per specified territorial jurisdiction as indicated in the Export and Import Policy.

7.        The provisions of the Customs and Central Excise law in respect of the EOUs are administered by the Commissioners of Customs and Central Excise, who work under the control of Central Board of Excise & Customs. The work relating to EOUs is handled by the staff of jurisdictional Commissioner of Central Excise. However, in the case of EOUs located in port cities/towns or within the municipal limits of port cities/towns, the work is handled by jurisdictional Commissioner of Customs, Seaport. (Reference Board’s Circular Nos. 72/2000-Cus, dated 31-8-2000 and 87/2000-Cus, dated 2-11-2000.)

8.        For setting up of an EOU, three copies of the application in the prescribed form are required to be submitted to the Development Commissioner. In certain cases, approval of the Board of Approval (BOA) is required. Applications for setting up of Electronic Hardware Technology Park/Software Technology Park units are submitted to the officer designated by the Ministry of Information Technology for this purpose. After approval of the application and issuance of Letter of Permission, the applicant is required to execute a legal undertaking with the Development Commissioner/Designated Officer concerned within the prescribed time period. On execution of legal undertaking, a green card is issued to the unit.

**9.        On the policy front, all decisions relating to the EOUs are taken by the Board of Approvals (BOA), set up under the Ministry of Commerce. The BOA is chaired by the Secretary, Ministry of Commerce and includes the Chairman, C.B.E.C. or his nominee as a member. In the case of units engaged in manufacture of electronic hardware and software, the policy decisions are taken by the Inter Ministerial Standing Committee (IMSC) set up under the Ministry of Information Technology and the same are implemented through its Designated Officers. Chairman, C.B.E.C. or his nominee is a member of the IMSC. The availability of any benefit under Customs or Central Excise Acts or the notifications issued thereunder has, however, to be determined by the Commissioner of Customs or Central Excise having jurisdiction-guided by CBEC in areas of doubt. Appropriate inter Ministerial liaison is maintained for ensuring uniformity as far as possible in the Exim Policy provisions and the provisions built in the relevant Customs & Central Excise notifications.

Customs Bonding of EOUs :

10.        The premises of EOU are approved as a Customs bonded warehouse under the warehousing provisions of the Customs Act. The manufacturing and other operations are carried out under customs bond and the unit bearing appropriate charges for officers on cost recovery basis. In case of units in Aquaculture, Horticulture, Floriculture, Granite quarrying etc exemption

from bonding is given for administrative reasons with certain other safeguards being put in place to check that duty free benefits where availed are not abused. The EOUs are required to execute a multipurpose bond with surety/ security with jurisdictional Customs/ Central Excise officers. (Reference Board’s Circular No. 15/95-Cus, dated 23-2-1995)

Customs and Central Excise Notifications relating to EOU Scheme:

11.        To enable EOUs to import / procure locally their requirement of raw materials, capital goods and office equipment etc. duty free, a number of Customs and Central Excise notifications have been issued by the Ministry of Finance. These notifications specify the different categories of items allowed to be imported / procured duty free as well as the conditions thereof. The notifications are as under:

(i) General activity of manufacture, production, packaging of products and service activities for export- Notification Nos. 53/97 Cus dated 3.6.97 and 1/95-CE, dated 4-1-1995.

(ii) Software technology products for export- Notification Nos. 140/91 Cus, dated 22.10.91 and 1/95-CE, dated 4-1-1995.

(iii) Electronic hardware products for export- Notification Nos. 96/93 Cus, dated 2.3.93 and 1/95-CE, dated 4-1-1995.

(iv) Floriculture, Pisciculture etc. for export- Notification Nos. 126/94-Cus dated 3.6.94 and 136/94-CE, dated 23-2-1995.

(v) Aquaculture for export- Notification Nos. 196/94 Cus dated 8.12.94 and 10/95-CE, dated 8-12-1995.

(vi) Gold, silver and jewellery products for export- Notifications No. 277/90-Cus dated 12.12.90.

(vii)

Granite quarrying for export– Notification No. 58/2000-Cus, dated 8-5-2000 and 37/2000-CE, dated 8-5-2000.

General Conditions of Duty free Import:

**12.        The facility of duty free import (extending exemption both from basic & countervailing duty) is subject to certain general conditions in accordance with the EXIM Policy and these are summed up as follows:

(i) The goods are required to be imported into the EOU premises directly. However, Granite Quarrying units, agriculture and allied sector units are allowed to supply /transfer the capital goods and the inputs in the farms/fields with prior permission of Customs.

(ii) Prior to undertaking import / local procurement duty free, the unit is required to get their premises customs bonded. The unit is also required to execute a B-17 bond with surety/ security with jurisdictional Customs/ Central Excise officers and take out a licence under section 58 of the Customs Act, 1962.

(iii) The goods, except capital goods and spares, are required to be utilised within a period of one year or within such period as may be extended by the Customs authorities.

(iv) The importer is required to maintain a proper account of the import, consumption and utilisation of all imported/locally procured materials and exports made and submit them periodically to the Development Commissioner/ Customs.

(v) The importer is required to achieve minimum NFEP/export performance as per the provisions of EXIM Policy.

(vi) The importer is required to abide by the terms and conditions of the Letter of Permission/Letter of Intent /Industrial

Licence issued to the unit.

However, the sector specific customs / excise duty exemption notification(s) have certain additional conditions, which are also required to be followed by the units.

B-17 Bond :

13.        All the EOUs are required to execute a single all purpose bond i.e B-17 bond undertaking themselves to fulfil the conditions stipulated in the exemption notification of EOU scheme. This bond is taken to take care of the interests of revenue arising out of goods lost in transit, goods taken into Domestic Tariff Area for job work/ repair/ display etc but not brought back etc. The bond is executed with the jurisdictional Assistant Commissioner of Customs/Central Excise in charge of the unit. The format of the bond is prescribed vide notification No. 6/98-CE ( NT) dated 2-3-1998. The bond covers the activities which include, inter alia, transhipment of import /export goods between port of import/export and units' premises; duty-free import/procurement from the indigenous sources as per relevant notification and warehousing/storage in the unit; movement of duty-free goods for job work and return; temporary clearance for repair and display in exhibitions, testing/approvals etc.; and movement of goods against AR-4, AR-3A and CT-3 etc. and transfer from one warehouse to another. However, it does not cover the differential duty amount against advance DTA sale for which a separate bond is to be executed. The bond is taken for an amount equal to 25% of the duty forgone on the sanctioned requirement of capital goods plus the duty forgone on raw materials required for 3 months. Surety or security equivalent 5% of the bond amount in the form of bank guarantee is required to be given by the EOUs.

(Reference Board’s Circular Nos. 14/98-Customs, dated 10-3-1998, 42/98-Cus. dated 19-6-1998, 66/98-Cus, dated 15-9-98, 76/99-Cus, dated 17-11-1999, and 50/2000-Cus, dated 24-5-2000).

Import and Export Procedure :

**14.        With regard to clearance of import cargo, the EOUs are placed in a special category, eligible for fast track or green channel clearance through the Customs. Clearance of import consignments is allowed at the gateway port/ Aircargo Complexes on the strength of procurement certificate issued to the EOU by the jurisdictional Assistant Commissioner/Deputy Commissioner. In general, the EOU cargo is not examined at the gateway port. In case of loose cargo, marks & numbers on the packages are verified. As for sealed containers, the seal number and container number are verified with the Bill of Lading. If the seal is found intact, the container is allowed clearance. The imported cargo so cleared and brought into the unit’s premises are examined by the jurisdictional Customs/Central Excise officials. After examination (percentage check only), the goods are allowed to be used for export production. Re-warehousing certificate is to be submitted to the Assistant Commissioner/Deputy Commissioner in charge of the port of import within 90 days of the issue of procurement certificate.

            On the export side, the units having status of a Super Star Trading House, Star Trading House, Trading House, and Export House are allowed the facility of self-sealing of their export containers. (Board’s Circular Nos. 63/97-Cus, dated 21-11-1997, 14/98-Cus dated 10-3-98 and 90/98-Cus, dated 8-12-1998.)

Goods Imported /Exported and Found Defective:

**15.        Subject to grant of GR Waiver by the RBI the EOUs are allowed to make free replacement of the goods exported by them earlier and found defective, damaged or otherwise unfit by the overseas buyer. However, such defective, damaged or otherwise unfit for use goods

are required to be brought back subsequently, to the country. The units are also allowed to re-import part consignment/full consignment in case of failure of the foreign buyer to take delivery.

**16.        The EOUs are also allowed to receive free replacement of the goods imported and found defective, damaged or otherwise unfit for use prior to re-export of the same. However, such damaged, defective goods are required to be re-exported subsequently. In case the supplier of such goods does not insist for re-exportation, such goods are required to be either destroyed or cleared into DTA on payment of full customs duty. (Reference Boards Circular 60/99-Cus, dated 10-9-1999)

Procurement of Goods Indigenously under CT-3 Procedure :

17.        The EOUs can procure goods from DTA without payment of Central Excise duty subject to following of the Chapter X procedure of erstwhile Central Excise Rules, 1944. Such procurement from DTA is against CT-3, which is issued by the Superintendent of Customs/Central Excise in charge of the EOU. Such goods are required to be brought directly from the manufacturer /warehouse into the unit's premises under AR3A and examined by the designated officer. After examination of such goods, one copy of AR-3A is sent by registered post to the jurisdictional Central Excise authorities as a Re-warehousing Certificate in token of receipt of the goods in the unit. To avoid separate permission every time, the EOUs are issued pre-authenticated CT-3 in booklet form and against such pre-authenticated CT-3, the EOUs are allowed to procure capital goods, raw materials, consumables etc. Goods procured from DTA and found to be defective can be returned to the manufacturer under Chapter X procedure of erstwhile Central Excise Rules, 1944.

( Reference Board’s Circular No. 24/91-CX-8, dt. 01.07.1991 and 504/70/99 CE, dt. 30.12.99 and Board’s instructions dated 25-7-2001 issued from F. No. 305/121/2001-FTT)

DTA sale :

**18.        The EOUs ( other than gems & jewellery units) are allowed to sell goods (including rejects and byproducts) manufactured by them in DTA upto 50% of FOB value of exports on payment of concessional duty subject to achievement of prescribed NFEP. However, the DTA sale facility is not available for certain products such as motor car, alcoholic liquor, tea (except instant tea), books etc. The EOUs are allowed to remove the goods into DTA on a invoice. The invoice is used both as a transport document and also as a document for determining the assessable value. The EOUs can pay the duty by depositing the same in an authorized bank or the duty can also be debited from the Personal Ledger Account if an account current is maintained.  

Valuation of Goods Sold in DTA :

19.        Section 3 of the Central Excise Act, 1944 provides that the valuation of goods manufactured in the EOU and cleared into DTA is to be done in accordance with the provisions of the Customs law. Thus, when the invoice price of the goods under assessment is in the nature of transaction value, such invoice value can be accepted. (Board’s Circular No. 23/84-CX-6 dated 29-5-84 and Instructions issued vide File No. 268/35/92-CX-8 dated 17-8-94 and Circular No. 330/46/97-CX dated 20-8-97).

Levy of Central Excise Duty on Goods Produced or Manufactured by EOUs and Cleared into Domestic Tariff Area :

**20.        In terms of section 3 of the Central Excise Act, 1944, the excise duty leviable on goods manufactured in an EOU/EPZ unit and cleared into Domestic Tariff Area is the amount equal to the customs duty leviable under section 12 of the Customs Act, 1962 or under any other law for the time being in force on like goods produced or manufactured outside India, if imported into India. Thus, the measure of excise duty leviable on goods manufactured in EOU/ EPZs is worked out exactly in the same manner as applicable to imported goods.

*21.        On fulfillment of NFEP (Net Foreign Exchange Earnings as Percentage of Exports) the EOUs other than gem and jewellery units, are allowed to sell goods including rejects (upto 5% of FOB value of exports), waste, scrap, byproducts and services in DTA upto 50% of FOB value of exports at a concessional rate of duty in an amount equal to 50% of Customs duties. Sales beyond 50% attract full duties. It may be noted that the words "FOB value of exports" refers to physical exports only. Therefore, the value of deemed exports made by the unit is not considered while determining the FOB value of exports. However, the sales made to private bonded warehouses set up under paragraph 11.14 or a trading unit set up under paragraph 9.21 of the EXIM Policy are taken into account for the limited purpose of arriving at FOB value of exports by EOU/EPZ units provided payment for such sales are made from EEFC accounts. (Reference: Notification No.2/95-CE, dated 4.1.1995).

Goods Manufactured from Indigenous Materials in 100% EOUs

*22.        A concessional duty has been prescribed for goods sold in DTA which are manufactured entirely out of indigenous materials. In such cases, the duty charged is the effective rate of excise duty which is leviable on like goods manufactured & cleared by DTA units. (Reference: notification No.8/97-CE dated 1-3-97). However, if such goods manufactured by a DTA unit are fully exempt from excise duty or are chargeable to ‘nil’ rate of duty, the EOUs are required to pay 30% of each of duties of customs leviable on similar imported goods. (Reference: Notification No.13/98-CE, dated 2-6-98).

*Clearance of Byproducts, Rejects, Waste and Scrap, Non-excisable Goods, etc.:

23.        The DTA clearance of by-products and rejects on concessional rate duty is not allowed to the EOUs, which have failed to achieve the prescribed NFEP. In such cases, the EOUs are liable to pay full duty. Further, in case of these units, DTA clearance of finished goods is not allowed even on payment of full duty. In case of waste/scrap/remnants, the same are allowed to be sold in DTA on payment of concessional rate of duty within overall limit of 50% of FOB value of exports without insisting on achievement of prescribed NFEP. In case of sale of scrap/waste/remnants beyond this limit, it is allowed on payment of full duty. As for DTA clearance of goods manufactured by the EOUs which are not excisable (e.g. cut flowers) the duty on inputs and consumables etc. procured/imported duty free under exemption notifications, which have gone into production of such non-excisable goods cleared into DTA, is recovered.

Special Concessions for Certain Waste products and Other Goods Cleared from 100% EOUs :

24.        Apart from the above general concessions, special concessions are available for certain products. As per instance, under notification No.103/93-CE, dated 27.12.93 rags, trimmings and tailor cuttings arising in the course of manufacture of readymade garments are fully exempt from excise duty when cleared into DTA by EOUs. This is subject to the condition that the percentage of waste material in the form of rags, trimmings and tailor cuttings does not exceed the percentage fixed in this regard by the Board of Approval. (Reference: Notification No. 103/93-CE, dated 27-12-1993). Further, under notification No. 6/97-CE, dated 1-3-1997, the waste of fish or crustaceans, mollusks or other aquatic invertebrates falling in chapter heading 05.01, castor oil cake manufactured from the indigenous castor oil seeds on indigenous plant and machinery

falling under chapter heading 23.02, guar meal manufactured wholly from indigenous guar seeds falling under chapter heading 23.01 and yarn of jute and goods of jute, manufactured from wholly indigenous raw materials headings 53.07, 53.10, 5702.12, 5703.20, 58.01, 58.02, 58.06 or 6305.10 are fully exempt from payment of duty if manufactured by EOUs and cleared into DTA. Also, cotton waste falling under heading 52.02 are fully exempted if produced or manufactured by EOU and allowed to be sold in India. ( Reference: Notification No. 6/97-CE, dated 1-3-1997)

25.        In case of Gems and Jewellery EOUs, the units are allowed to sell upto 10% of FOB value of exports of the preceding year in DTA subject to fulfillment of NFEP as prescribed under the Export and Import Policy. In case of sale of plain gold jewellery, plain silver jewellery, studded gold jewellery, unsuitable/broken cut and polished diamonds, rough diamonds, precious and semi precious stones or dead stock in DTA, the units are allowed to pay concessional rate of duty. (Reference notification No. 20/97-CE, dated 11-4-1997).

26.        In addition to the above, under notification No. 20/98-CE, dated 18-7-1998, certain specified textile items are allowed to pay concessional duty in case of DTA sales of such items by EOUs. ( Reference: notification No. 20/98-CE, dated 18-7-1998).

Manner of Calculation on Duty of Goods Cleared in Domestic Tariff Area under Paragraph 9.9(b) of the Exim Policy:

27.        The manner of calculation of duty leviable on goods cleared in Domestic Tariff Area in terms of paragraph 9.9(b) of Exim Policy, 1997-2002 read with notification No. 2/95-CE, dated 4-1-1995 has been laid down in Board’s Circular No. 7/2001-Cus, dated 6-2-2001. To work out the total quantum of duty payable on goods cleared into DTA, each of the duty leviable on import of like goods is worked out first and thereafter, 50% of the amount of each duty so calculated, taken together is collected as excise duty on such goods produced by EOUs units when cleared into the DTA. (Reference: Board’s Circular No. 7/2001-Cus, dated 6.2.2001)

Clearance of Waste/ Scrap/ By products in DTA:

*28.        The EOUs are allowed to clear waste and scrap in Domestic Tariff Area on payment of concessional rate of duty or full rate of duty as explained in detail in paragraph 22. Norms for scrap/ waste material for export products under EOU have been prescribed in Appendix 41 of the Handbook of Procedures, Vol. I .

*29.        In case of gem & jewellery EOUs, scrap, dust or sweepings generated in the unit is allowed to be forwarded to the Government Mint or Private Mint for conversion into standard gold bars and return thereof to the unit subject to the observance of procedure laid down by the Commissioner of Customs. The said dust, scrap or sweepings are also allowed clearance into DTA on payment of applicable customs duty on the gold content in the said scrap, dust or sweepings. Samples of the sweepings/dust are taken at the time of clearance and sent to mint for assaying. The assessment is finalized when the reports are received from the mint.

( Board’s Circular 19/99-Cus, dated 29-4-1999)

Clearance of Samples :

**30.        The EOUs are allowed to supply or sell in DTA samples of goods produced by them for display or market promotion upto 1% of the previous year’s exports or maximum of Rs. 10 lakhs in the case of new unit going into production on payment of applicable duties. The units are also allowed to take out samples into DTA without payment of duty on returnable basis for the purpose of display/market promotion. In such cases, the procedure prescribed for sub-contracting is required to be followed.

*31.        The EOUs are allowed to send samples abroad through the courier. The packages containing such samples are sealed in the presence of the Customs officer and are handed over to the representative of the courier company authorised by the Commissioner of Customs for presentation to the Customs at the port of export. These sealed samples are not normally examined again before " let export" is given if the seals are found intact and not tampered. The representative of the courier company later hands over the proof of export to the jurisdictional Assistant/ Deputy Commissioner. (Reference Board’s Circular Nos. 22/98-Cus, dated 27-3-1998 and 52/99-Cus, dated 20-8-1999).

Clearance of Personal Computers :

*32.        The EOUs are allowed to remove personal computers not exceeding two in number for installation in their registered/administrative offices located in DTA subject to the following of the procedure prescribed in this regard. (Board’s Circular No.41/99-Customs dated 30-6-99)

Sale of Surplus/ Unutilized Goods :

**33.        The EOUs are allowed to sell surplus/unutilized goods, imported or procured duty free in DTA on payment of duty on the value at the time of import/procurement and at rates in force on the date of payment of such duty, in case the unit is unable for valid reasons to utilize the goods. The permission for such DTA sale is given by the jurisdictional Assistant Commissioner /Deputy Commissioner of Customs/ Central Excise as the case may be. Likewise, obsolete/surplus capital goods and spares can either be exported or disposed of in the DTA on payment of applicable duties. The benefit of depreciation, as applicable, is allowed in such cases. Duty is not charged if the goods are destroyed with the permission of Customs.

Destruction of Flowers/Horticulture Products :

**34.        Flowers, vegetables and agricultural products have a very short shelf life and are prone to malformation, injury, damage, infection etc. These products cannot be preserved for a longer period. There are circumstances (especially in case of floriculture units) when the units do not find the goods exportable/marketable for various reasons such as malformation, injury, damage, infection by pest and diseases etc. and the units have to resort to forced destruction of flowers, vegetables etc. In such cases, duty is not charged from the EOUs.

*35.        At times, the flowers and floriculture products deposited in the warehouse of the airlines at the international airports for the purpose of exports are not exported owing to various reasons, such as, delay in flights, cancellation of flights etc. In such cases, the units are allowed to sell such flowers and floriculture products in DTA on payment of applicable duty. For such DTA sales, the unit must have DTA sale entitlement under the scheme. The unit is required to bring permission from the concerned Development Commissioner for such DTA sale and shall clear the goods on payment of duty assessed by the concerned Assistant Commissioner/ Deputy Commissioner in charge of the cargo. The DTA sale is allowed against documents as are used for DTA sale by EOUs in the manner as if the goods cleared from the unit itself. (Reference Board’s Circular No.31/2001-Cus, dated 24-5-2001).

Clearance of Goods Manufactured by EOUs against Advance Release Order (ARO) or Back-to-Back Inland Letter of Credit issued against an Advance Licence or Duty Free Replenishment Certificate (DFRC).

36.        The goods manufactured by EOUs are allowed to be cleared against ARO & Back-to-Back Inland Letter of Credit issued against Advance Licence (except Advance Licence for intermediate supply) without payment of basic and additional duty of customs subject to following the provisions of EXIM Policy & HOP Vol.–1, 1997-2002 & conditions of notification 28/2001-CE

dated 16-5-2001. The goods may also be cleared to a person holding an ARO issued by the Licensing Authority against a DFRC or Back-to-Back Inland Letter of Credit issued by a bank on the payment of additional duty of customs subject to following of the provisions of EXIM Policy and HOP Vol.1 Vol.–1, 1997-2002 & conditions of notification No. 28/2001-CE dated 16-5-2001. (Reference Board’s circular No.31/2001-Cus, dated 24-5-2001).

*Sub-Contracting :

37.        The EOUs, other g than Gem & Jewellery units, are allowed to sub-contract part of their production process in DTA. These units may also sub-contract up-to 50% of production for job-work in DTA. Sub-contracting of both production and production process are also allowed to be undertaken through other EOU/EPZ/EHTP/STP/SEZ units on the basis of records maintained by the unit.

38.        For sub-contractual work performed outside, the units are required to take annual permission from the Customs authorities and are required to furnish information, such as, processes to be carried out on sub-contract basis and the name, address of the subcontractor etc. After getting the permission, the unit is required to follow the Receipt Challan/ Despatch Challan ( RCDC) procedure. Under this procedure, at the time of removal of goods, the unit prepares Despatch Challan giving information, such as, value of the goods, name & address of job worker, duty forgone on the goods and the period within which the goods will be received back. Similarly, the goods after completion of sub contractual work are received back in the unit on the basis of Receipt Challan. The scrap/waste/remnants generated at the job worker’s premises can be either cleared from the job worker’s premises on payment of duty or returned to the supplying unit. Exports from job worker’s premises are allowed in cases where the job workers are registered with the Central Excise department. A sample of goods exported is sent to the EOU for checking whether the goods supplied by it are utilised by the job worker in the export product.

39.        The EOUs are also allowed to remove moulds, jigs, tools, fixtures, tackles, instruments, hangers and patterns and drawings to the premises of sub-contractors subject to the condition that they are brought back to the bonded premises of EOU on completion of the job work within a stipulated period.

40.        The EOUs are allowed to sub-contract part of the production process abroad. The approval for sub-contracting abroad is accorded by the Board of Approval. The goods sent for job-work abroad are required to be returned to the unit for final processing/manufacturing before exports. The unit is required to execute a suitable bond for sub-contracting of goods abroad and is required to account for the goods including waste/rejects in the manner as prescribed by the Commissioner of Customs/ Central Excise in this behalf.

41.        To help utilize the idle capacity, the EOUs are allowed to undertake job work for export on behalf of DTA units. This is subject to the condition that the finished goods are exported directly from the EOU and export documents are made in the name of the DTA unit. On export of such goods manufactured by EOUs on behalf of the DTA unit, the DTA unit is entitled to refund of duty paid on the inputs by way of brand rate of duty drawback.

42.        As mentioned earlier, the gem & jewellery EOUs are not allowed to subcontract the production or production process in DTA. However, such gem & jewellery EOUs are allowed to receive plain gold/silver/platinum jewellery from DTA against exchange of gold/silver/platinum of

the same purity & quantity in weight as that of the jewellery. The EOU is not eligible for any wastage or manufacturing loss against such jewellery. The DTA units supplying such jewellery against exchange of gold/silver/platinum are not entitled for deemed export benefits.

(Reference Board’s Instructions F. No. 305/107/93-FTT dated 31-1-1994 and 8-4-1994, Circular Nos. 59/98-Cus, dated 12-8-1998, 67/98-Cus, dated 14-9-98, 35/99-Cus, 74/99-Cus, dated 5-11-99, 31/2001-Cus, dated 24-5-2001).

Temporary Removal of Goods :

**43.        The EOUs, Software Technology Park Units or Electronic Hardware Technology Park Units engaged in development of software are allowed to remove imported laptop computers and video projection system out of the bonded premises temporarily without payment of duty subject to following the prescribed procedures.

(Reference Board’s Circular Nos.17/98-Cus dated 16-3-98 & 84/2000-Cus dated 16-4-2000 ).

Inter-unit transfer :

**44.        An EOU is allowed to transfer imported or manufactured goods to another EOU/EPZ/STP/EHTP/SEZ unit. The officers in charge of the EOU supplying the material and the EOU receiving the material are expected to keep a watch on the movement of material between the EOUs. The rewarehousing certificate on transfer of the goods from one EOU to another is obtained by post and is crosschecked occasionally with the Superintendent in charge of the other unit to see whether the goods have been actually received in the unit or not. In case of non-receipt of rewarehousing certificate and similarly, non-receipt of proof of export from the proper officer within 90/180 days, the duty is demanded from the sending unit.

Repair, Reconditioning etc.:

*45.        The EOUs are permitted to import goods of any origin to carry on re-conditioning, repair, testing, calibration, quality improvement, upgradation of technology and re-engineering activities for export in freely convertible foreign currency provided such repairs, reconditioning, reengineering etc. are carried out in Customs bonded premises and the final goods are not sold within the country.

Special Provisions Relating to Gems & Jewellery EOUs.

*46.        The EOUs in gem & jewellery sector are allowed certain special facilities as mentioned below:

(i) the items of gem and jewellery to be taken out temporarily into DTA without payment of duty for the purpose of display and to be returned thereafter;

(ii) personal carriage of gold/silver/platinum jewellery or precious or semi-precious stones or beads and articles as samples upto US$ 1,00,000 for export promotion tours and temporary display or sale abroad subject to the condition that the exporter would bring back the jewellery or the goods or its sale proceeds within 45 days from the date of departure through normal banking channel;

(iii) export of jewellery including branded jewellery for display and sale in the permitted shops setup abroad, or in the showroom of their distributors or agents provided that items not sold abroad within 180 days, shall be re-imported

within next 45 days;

(iv) gem and jewellery units to remove parts & tools of machine temporarily without payment of duty for the purpose of repair and return thereof.

(v) gem and jewellery manufactured in the EOU situated in the municipal limits of Calcutta, Chennai, Delhi and Mumbai and sold to a foreign-bound passenger are allowed to be transferred to the retail outlets or showrooms set up in the departure lounge or Customs warehouse at international airports for being handed over to the said passenger for the purpose of export.

(vi) Removal of moulds, tools, patterns, and drawings into the DTA for jobwork without payment of duty and to be returned to the unit thereafter.

(vii)

For availing of the above mentioned facilities, prior permission of Assistant Commissioner / Deputy Commissioner is required.

Cost Recovery Charges/Cost Sharing

**47.        Cost recovery charges are the amount recoverable from the EOU on account of the expenses incurred by the Government for the posting of Customs staff at its premises to supervise their operations. The cost of posts created for EOUs has been determined at an amount equivalent to the actual salary and emoluments of the staff deployed i.e. the average pay and allowances including D.A., H.R.A., C.C.A. etc. The EOUs pay in advance the cost recovery charges determined for the entire year. Generally, one Customs officer supervises the functioning of four to five units and the cost recovery charges are shared amongst them.

(Reference Board’s instruction F. No. 11018/63/87-Ad IV, dated 11-1-88 and F.No.305/105/85-FTT, dated 10.6.86)

Supervision of EOUs by the Customs/ Central Excise:

*48.        Operational flexibility has been provided to EOUs by amendment of "Manufacture and Other Operations in Warehouse Regulations, 1966". The EOUs no longer carry out manufacturing operations under physical supervision of Customs officers. The procedure for locking of the warehouse, contral over the issue of imported goods etc. has been abolished. All the movements from and to the unit like clearance of raw materials/ component to the job workers premises, return of goods from the job-workers’ premises, clearance to other EOUs, export and sale in DTA are allowed to be made by the unit subject to maintenance of the records. Physical control over the EOUs has, thus, been replaced by Record Based Control.

49.        As physical control has been abolished greater stress is given on proper maintenance of prescribed records & accounts and non-maintenance of the accounts by the units is viewed seriously. The cost recovery officers/the officers incharge of EOUs are required to scrutinize /examine the accounts/ records of the units and transaction undertaken by the unit at least once in a month. The cost recovery officer has to ensure that all movements of goods are recorded in the proper register. The Chief Commissioner is empowered to order special audit of the unit by Cost Accountant nominated by him in this regard. Cost audit is employed as a tool to check the correctness of raw materials, quantity used, finished goods produced or other such situation.

(Board’s Circular No. 88/98-Cus, dated 2-12-1998)

Joint Monitoring of EOUs:

50.        The guidelines for monitoring the performance of EOUs have been laid down in Appendix 16-E of the Handbook of Procedures (Vol.I). As per the said guidelines, the performance of EOUs is to be jointly reviewed by the Development Commissioner and the concerned Customs/Central Excise officers. The purpose of joint review is to ensure that the performance of EOUs are effectively monitored and action is taken against the units which have contravened the provisions of the EXIM Policy/Handbook and the Customs Law/Procedures. Besides, such joint monitoring gives an opportunity to the Government to discuss and help resolve the problems/difficulties being faced by the EOUs. The idea is to remove all bottlenecks in export promotion efforts while not jeopardizing the interests of revenue.

Recovery of Duty Forgone under EOU Scheme and Penal Action for Abuse/ Diversion etc. :

*51.        Under EOU Scheme, the units are required to achieve minimum NFEP and Export Performance as stipulated in the Exim Policy. In case of failure to achieve the minimum NFEP and EP, the duty forgone under the EOU scheme along with interest is recoverable from the units. Further, the duty is recoverable from the units in case of non receipt of imported/ indigenously procured goods in the factory premises after import/procurement, loss of goods in transit, non accountal of imported/ indigenously procured goods, unauthorized DTA sale, clandestine removal etc. Duty can also be demanded in case of failure to utilize duty free imported/indigenously procured goods including capital goods within the prescribed time limit. The duty is also recoverable on goods removed for job working/ display/ testing/ quality testing, but not received back in the unit within the specified period of time.

52.        Apart from recovery of duty forgone, the law also provides for taking penal action where any 100% EOU is found to have indulged into any fraudulent activities eg. clandestine removal of production into DTA without payment of duties, diversion of duty free materials in transit to the unit after customs clearance or after receipt etc., not only the offending goods can be seized and confiscated, but even units penalized heavily/ prosecuted.

De-Bonding :

53.        An EOU may debond into a normal DTA unit subject to the approval of the Development Commissioner and following of prescribed procedure & fulfilling the laid down conditions. Such de-bonding is subject to penalty, if any, that may be imposed and payment of duties of customs and excise applicable at the time of de-bonding. The standard conditions of de-bonding, as indicated in the Handbook of Procedures provide, amongst other conditions, that the applicable customs and central excise duty would be paid on imported and indigenous capital goods, finished goods, raw materials, consumables, components etc. in stock. Further, the unit in question continues to be treated as an EOU till the date of final de-bonding order.

54.        The duty payable in terms of the relevant notifications by the units seeking debonding is as under:

(a)

Semi-finished and finished goods lying in stock at the time of de-bonding can be cleared on payment of the excise duty equal to aggregate duties of Customs payable on similar imported goods.

(b)

Capital goods, material handling equipment, office equipment and captive power plants can be cleared on payment of an amount equal to the customs duty leviable on such goods on the depreciated value thereof and at the rates in force on the date of payment of such duty.

(c) Goods including containers suitable for repeated use other than those at (b) above can be allowed clearance on payment of customs duty on their value at the time of import and

at the rate of duty in force on the date of payment of such duty.

(d)

Used packing materials such as cardboard boxes, polyethylene bags of a kind unsuitable for repeated use can be cleared without payment of duty.

55.        At the time of debonding, the EOUs are entitled for depreciation on imported/indigenous capital goods. The rate of depreciation on capital goods have been specified and in case of the computers and computer peripherals, accelerated rate of depreciation have been provided for.

56.        In the event of a gem and jewellery unit ceasing its operation, gold and other specious metals, alloys, gem and other materials available for manufacture of jewellery are handed over to a nominated agency (nominated by Department of Commerce) at a price determined by that agency.

(Reference Board’s instructions issued from F. No. 305/136/92-FTT dated 5-6-1992, Circular Nos. 27/98, dt. 1.04.1998 and 43/98-Cus., dt. 26.06.1998).

How to set-up an Export Oriented Unit

EOU Scheme

The needs for higher level of technological and industrial progress made the Government devise a series of export promotional schemes. EOU & SEZ Schemes are one among them, which provides an internationally competitive duty free environment coupled with better infrastructural facilities for export production.

Export Oriented Units (EOUs) now constitute a very important sector in the country’s Export Production scenario. They have become dominant players in our export strategy, and their share in the Country’s export performance is about 10%. The export growth rate of 30% compares very favorably with the National export growth rate.

How to set-up an Export Oriented Unit (EOU)

“How to set-up an Export Oriented Unit (EOU)” is a step-by-step process.

The information is divided into 5 parts:

Eligibility Criteia Prior to Approval

How to apply Approval Procedure

After Approval (what to do for commencement of Production)

I.   ELIGIBILITY CRITERIA

**Who is eligible to become an EOU?

An EOU can be set up by any entrepreneur for manufacturing of goods and also for rendering services.  An EOU can be set up for repair, reconditioning, re-making  and re-engineering also.

Trading activity is not allowed in the EOU Scheme.

EOU unit is required to achieve only positive Net Foreign Exchange (NFE) over a period of  5 years.

Policy for EOU is given in Chapter-6 Foreign Trade Policy and Chapter 6 of Handbook of Procedure (Vol. – I)

EOU can also be set up in the following sectors: -

AgricultureAnimal HusbandryAquacultureFloricultureHorticulturePiscicultureViticulturePoultry orSericulture

Conversion of existing DTA/EPCG (Export Promotion Capital Goods) units to EOU Scheme

Existing DTA units or EPCG units are permitted for conversion into EOU Scheme as one time option. In case there is an outstanding export commitment under the EPCG Scheme, it will be sub summed in the export performance (EP) of the unit. If the unit is having outstanding export commitment under the Advance Licensing Scheme, it will discharge the same as well, as per its conditions before conversion into EOU Scheme. However, duties of Customs and Central Excise already suffered shall not be refunded on conversion into EOU.

II.PRIOR TO APPROVAL

**1) Planning your venture:

Is it your own or Is it with foreign participation and, if so, nature of participation (foreign investment allowed 100%)

**2) What process do you intend to do i.e. Manufacturing, rendering and export of services or: -

AgricultureAnimal HusbandryAquacultureFloricultureHorticulturePiscicultureViticulturePoultry orSericultureRepair, reconditioning, re-making, re-engineering etc.

**3) Technology to be used:

Indigenous/ foreignRelated cost and conditions

*4) Feasibility report:

On your own or with help of consultant

*5) The finances involved:

Land, structure, buildings etc.(Please note, building construction material is not exempted from duty).Capital Goods, machinery etc.Payment for royalties etc.Administration and establishmentOthers : like interest on loans, related taxes and levies etc.

*6) The current competition overseas:

Main competitorsDemand and price levels.

**7) The import laws and other requirements in target markets:

Any fiscal/ non-fiscal barriers, like anti-dumping laws.Quota restrictions.Preferential treatment to competitor countries.

**8) Location of the Unit:

The first thing before setting up an EOU the entrepreneur has to decide the location of  unit: -

i.   close to port or rail/ road.ii.  availability of raw material andiii. Environment clearance needed if unit is located  within 25 kms of an urban town

Accordingly the application will be submitted to the concerned Development Commissioner under whose jurisdiction that state comes.

*9) Capital goods, machinery and equipment to be used:

Indigenous or foreign (allowed duty free)Related cost

10) The raw materials and other inputs, like consumables etc. that would be required:

Source (allowed duty free)CostMonthly, quarterly and annual requirements.

*11) The production process:

Whether production process requires air-conditioning plant, special furnaces or kilns etc.Details and cost. (Please note, air-conditioning equipment  permitted duty free only if it is essential for production process).

*12) The production capacity and spare capacity:

Do you intend to utilize the same by doing sub-contracting work for other export units in DTA or Export Oriented Units.Whether you want to get job work done outside the EOU.

Details of sub-contractors.Related costs.

*13) Any by-products turned out in the production process:

Details of by-productsWhether these would be exported or sold in Domestic Tariff Area (DTA)

14) Effluents or waste-material:

How do you propose to treat these or discharge them.

15) Packaging

Details of packaging (packaging material allowed without payment of duty)SourceCost

16) Power:

Whether the normal grid could supply adequate power.Or there would be a need for a captive power plant.Cost of power plantFuel required for captive power plant (e.g. furnace oil, LPG,  HSD, coal etc.) (allowed duty free)

**17) Other information:

Firm/company should be duly registered and details about Proprietor/Partner/ Directors etc.A current account with the bank authorized to deal in foreign exchange should be opened.Sale tax registration to be obtained from the Sale Tax Department.Investment details

**18) Mandatory clearances from State Government: -

Pollution clearance certificate.Approvals of building plan in cases where building is proposed to be constructed.Registration as a small scale industrial unit, if applicableRegistration under Factories Act.

*****III. HOW TO APPLY

All applications are to be filed with the concerned Development Commissioner of Special Economic Zone (For jurisdiction of Development Commissioner) Appendix 14-I- K

The unit/ promoter has to apply in the application form, to be given in triplicate given in Handbook of Procedures in Appendix 14-1A ( Please click here )

Project Report including a write up on the background of the promoters establishing their credentials and standing.

Please see Appendix 14-1B (Please click here) for documents required by the Development Commissioner for approval.

For sector specific conditions Please see Appendix 14-1C (Please click here)

DD for Rs. 5,000/- drawn in favour of The Pay & Accounts Officer, Ministry of Commerce and Industry, Department of Commerce, payable at the Central Bank of India, Udyog Bhavan, New Delhi.

Registration –cum-Membership Certificate (RCMC) should be obtained from the office of the concerned Development Commissioner.

Import Export Code: If the  unit does not have an Import Export code (IEC), it will apply in the prescribed form (Appendix 18-B)  to the Zone Administration for the same.

*****IV. APPROVAL PROCEDURE

Letter of Permission (LOP)

After submitting the application form and if every thing is in order, Letter of Permission (LOP) is issued by the Zone Administration within 2 weeks after interview of the promoter by the Approval Committee.  For format of LOP please see Appendix 14-IE (Please click here)

Legal undertaking (LUT)

A legal undertaking in the prescribed form undertaking to abide by the terms and conditions of the LOP has to be executed  by the unit in format given at Appendix 14-1F ( Please click here ) .

A Green Card will be issued  to the unit by the Zone Administration on request.

Approval from State Government  Agencies:

V. AFTER APPROVAL

After the approval from the Development Commissioner concerned, the manufacturing and other activities have to be undertaken under customs bond for which formal application is to be made to the jurisdictional Assistant Commissioner/ Deputy Commissioner of the Customs/ Central Excise for issuance of a Private Custom Bonded Warehouse Licence under section 58 and 65 of the Customs Act, 1962. The application shall be accompanied by the following documents/information: -

Copy of notification whereunder the place (proposed location of unit)  has been declared as warehousing station under section 9 of the Customs Act. In case the approved place is not a notified warehousing station, a separate application for issuance of such notification is to be submitted to the Commissioner of Customs through the jurisdictional Assistant Commissioner/ Deputy Commissioner.

Copy of LOI/LOP issued by Development Commissioner concerned and LUT accepted by the Development Commissioner.

Details of the premises including ground plan, purchase/rent/lease deed, allotment letter from Industrial Development Corporation/ Authority (if any)

Details about the constitution of the firm/company including its Proprietor/Partners/Directors etc.

Project Report indicating stage wise manufacturing process.

List of raw material, consumables and capital goods etc. required.

Undertaking that cost recovery and other charges shall be paid.

After verification of the premises and relevant documents, the requisite licence under section 58 and 65 of the Customs Act will be issued by the Assistant Commissioner/ Deputy Commissioner Customs/ Central Excise on priority basis.

B-17 Bond:

B-17 bond is a multi – purpose surety bond which the unit has to execute with the Jurisdictional Assistant/ Deputy Commissioner Customs/ Central Excise on a non-judicial stamp paper of Rs. 300/-. Format of the Bond is prescribed under Notification No. 6/98 CE (N.T) dt. 2-3-98.

B-17 Bond is a surety bond and in case valid surety cannot be arranged security @5% of the bond amount has to be furnished. The bond amount shall be equal to 25% of the duty foregone on the capital goods required in the next 5 years plus duty foregone on the value of raw material for a period of 3 months.

B-17- Bond covers the following activities:-

Duty free import/ procurement of goods as per relevant notification and warehousing/storage in the unit and their utilization.

Transhipment of import/ export of goods duty free between port of import/ export and units premises.

Movement of duty free goods for job work and return.

Temporary clearance for repair and display in exhibitions, testing/ approval etc.

However it dose not cover differential duty amount against advance DTA sale for which a separate bond is to be executed.

The unit has also to take a Central Excise Manufacture Code No. from the Superintendent, Central Excise to enable them to sell in the domestic market.

The Development Commissioner is empowered to grant approvals on the following matters: -

Import of additional capital goods Enhancement of production capacityBroad-banding/diversificationChange in name/ constitutionsChange of location/expansionExtension of validity of LOP/LOI/LOA:Import of Office equipment:Merger of two or more EOU/SEZ Units Import of spares and accessories of DG sets    Eligibility certificates for grant of employment visa to low level foreign technicians to be engaged by EOUs as per Ministry of Home Affairs Letter No. 250227/7/99-F-1 dated 20-9-1999 (Annexure-XI).Sale of goods in DTA.De-bonding/ Exit from EOU scheme.

**Approval from State Government   Agencies:

The unit has to secure approval for its wiring and electrical plan from the Electrical authorities.

It has  also to secure power allocation and wiring approval from the State Electricity Board.

The industrial water supply is undertaken by the

The unit has to take a registration under the State Government Sales Tax Act and Central Sales Tax Act.

In case the unit already has a registration with the State Sale Tax Department the address of the additional premises should also be endorsed in the registration certificate.

The unit has also to take Small Scale Industry (SSI) Registration from the District Industries Center to apply for State Government’s Investment Subsidy.

In case there are effluents or emissions the unit has to secure approval form the Pollution Control Board.

Every Zone has a statutory Single Window Clearance Board.

SETTING UP 100% EOUs 

The Government amended in November 1983 a concession scheme to facilitate the setting up of export-oriented units (EOUs) in order to enable them to meet requirements of foreign demand in terms of pricing, quality, precision etc.

EOUs can be set up anywhere in the country and may be engaged in the manufacture and production of software, floriculture, horticulture, agriculture, aquaculture, animal husbandry, pisciculture, poultry and sericulture or other similar activities.

A 100 per cent export-oriented unit is an industrial unit offering for export its entire production, excluding the permitted levels of domestic tariff area sales. EOUs may be set up with a foreign equity participation of up to 100 per cent. For setting up a 100 per cent EOU the following conditions are applicable : (i) the entire production and operation of 100 per cent EOUs must be in a customs bonded factory, unless specifically exempt from physical bonding; Goods will be

imported into the customs bonded factory.

(ii) the unit shall undertake to manufacture in the bonded area and to export its entire production for a period of 10 years ordinarily and 5 years in case of products liable to rapid technological change;

Regarding the export obligations of 100 per cent EOUs, the following conditions apply : - EOUs need not export their manufactured goods themselves but may use an export house/trading house/star trading house or other EOUs subject to certain conditions;- EOUs may execute export orders also through third parties given that the goods will be directly transferred from the customs bonded factory to the port of shipment and all export benefits will be to EOUs only.

(iii) an approved EOU will execute a bond/legal undertaking with the Development Commissioner concerned; Failure to fulfil the obligations stipulated in the letter of approval or intent will render the unit liable to penalty.

(vi) EOUs have to adhere to the minimum value addition conditions incorporated in the letter of permission/letter of intent/industrial license issued to them; In general, such minimum value addition will be 35 per cent for automatic approvals and 20 per cent for other cases.

(v) EOUs have to maintain a proper account of the imports, consumption and utilization of all imported materials and exports made by the unit; These accounts will be submitted periodically to the Development Commissioner. Wherever an existing industrial unit is operating both as a domestic unit as well as an approved 100 per cent EOU, it should have two distinct identities with separate accounts.

(vi) EOUs are permited to sell part of the production in the domestic tariff area subject to certain limits

(viii) the f.o.b. value of exports of an EOU can be clubbed with the f.o.b. value of exports of its parent company in the domestic tariff area to attain export house, trading house or star trading house status for the parent company;

(ix) supplies produced in the domestic tariff area under global tender conditions, against payment in foreign exchange, against advance licenses and other import licenses, and to other EOUs with the permission of the Development Commissioner, will be counted towards the fulfillment of export obligations.

On completion of the bonding period, it shall be open to the unit to continue under the scheme or to opt out of the scheme. Debonding will, however, be subject to the industrial policy in force at the time the option is exercised.

Where debonding is sought before the stipulated export obligation period of 5 to 10 years, or where EOUs are unable to fulfill their export commitments out of various

reasons, it is considered premature debonding. This is subject to payment of all leviable duties without the benefit of depreciation, and also subject to penalties and other conditions as decided by the Board of Approvals for 100 per cent EOUs. Customs duties on capital goods as well as customs dutes on unused raw materials, components, consumables and spares are leviable on debonding after the export period

*****FINANCE FOR EXPORT ORIENTED UNITS

Term Finance (For Exporting Companies) Project Finance Equipment Finance Import of Technology & Related Services Domestic Acquisitions of

businesses/companies/brands Export Product Development/ Research &

Development General Corporate Finance

Working Capital Finance (For Exporting Companies)

Funded o Working Capital Term Loans [< 2 years] o Long Term Working Capital [upto 5 years] o Export Bills Discounting o Export Packing Credit o Cash Flow financing

Non-Funded o Letter of Credit Limits o Guarantee Limits

Working Capital Finance (For Non- Exporting Companies) Bulk Import of Raw Material

Term Finance (For Non- Exporting Companies) Import of Equipment

Export Finance Pre-shipment Credit Post Shipment Credit Buyers' Credit Suppliers' Credit [including deferred payment credit] Bills Discounting Export Receivables Financing Warehousing Finance

Export Lines of Credit (Non-recourse finance)

Equity Participation (In Indian Exporting Companies) To part finance project expenditure(Project, inter alia, includes new project/ expansion/

acquisition of business/company/ brands/research & development)

Note:- a. Exim Financing is available in Indian Rupees and in Foreign Currencyb. Term finance, except for long term working capital, is available for periods up to 10 years [in select cases 15 year finance can also be made available]c. Interest: Fixed & Floating options [Benchmarks for floating rates - LIBOR/G-Sec/MIBOR] d. Repayments: Amortizing/ Ballooning/ Bullet [As per cash flows]

List of documents required to be furnished are as follows:

1. Application for grant of licence u/s 58 & 65 of Customs Act, 1962 (Refer to format)2. FORM B-17 Bond …….. (Refer to B - 17 bond format)3. Bank Guarantee …… (Refer to B.G. format)4. Insurance Policy for Fire & Burglary …… (For capital goods)5. Supplementary Terms and Conditions6. Affidavit with respect to non envolvement in Customs & Central Excise Cases (Refer to format given)7. DoE/STPI letter of approval vide ref. no. ………………………..8. List of proposed plant, machinery & capital goods9. Agreement with STPI / SEEPZ for Export Commitment10. Process of Manufacture 11. Green Card No……………………………………………………12. Self Removal Procedure approval request letter13. Solvency Certificate14. List of Board of Directors15. Lease Agreement of premises16. Ground Plan of premises17. IEC Certificate18. PAN19. Memorandum & Articles of Association

The specimen form for B-17 Bond and Bank Guarantee to be submitted by unit & its Banker are given as annexures ‘A’ & ‘B’.

For the purpose of renewal of licence, only following documents are required to be furnished -

1. Application for renewal in the prescribed Performa.2. Solvency Certificate.3. Export Statement.

4. B-17 Bond on Rs. 100/- Stamp Paper duly notarized irrespective of the fact whether the unit intended to make any import or not (if any enhancement of capital / indigenous goods limit or change of address)5. Bank Guarantee (if earlier expired)6. Supplementary terms and conditions duly accepted on Rs.100/- stamp paper duly notarized.7. Lease Agreement duly registered with the area sub - register. (Stamps)8. Declaration for customs.9. Insurance Policy (for Fire / Burglary)

For the import of duty free capital goods or raw materials, unit has to make an application to Customs alongwith copy of invoice duly attested, packing list, Import certificate from STPI in case of STP, HTPI units, IGMS & Airway Bill or Bill of lading. The department will issue a serial numbered Procurement Certificate for duty free imported goods.

For procurement of duty free indigenous goods, purchase order & import certificate from STPI (in case of STP, HTPL units) is to be produced. The department will issue a CT-3 form to enable duty free procurement of indigenous goods.

     

100% EOU OF THE COMMISSIONERATE

Sr.No. Name of the Unit Address

1 M/s. R.V.R. Technologies, Plot No. 4, New Industrial Area, Mandideep,

Mandideep Bhopal

2M/s. Lupin Ltd. (100%

EOU - ORAL) Mandideep

198 (Part), New Industrial Area, Mandideep,

Bhopal

3M/s. Lupin Ltd. (100%

EOU - PRIL) Mandideep

200-201 (New Part), New Industrial Area,

Mandideep, Bhopal

4 M/s HEG Ltd., MandideepPlot No. 41, 43-A &B, Sector'B',  Industrial Area,

Mandideep, Bhopal Consultancy

5 M/s R.F. Network, BhopalPlot No. 221, First Floor, Zone-I, M.P. Nagar,

Bhopal

6M/s S.K.B. Accounting,

Bhopal144, Sector-A, Indrapuri, Bhopal Service Unit

7M/s Fortune Stones Ltd.,

Chhatarpur, SagarVillage Kathera, Teh. Laundi, Dist. Chhattarpur

 

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About >> Major Industries

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Major Industries in Bhopal

The city of Bhopal and its surrounding area is considered to be one of the most important industrial regions of the country of India. There are some of the most important industrial hubs of the country located in this region. The major indu

stries in Bhopal are engaged in producing cotton textile, jute and electrical products. Power generation is also very important to this city.

One of the most important industries of Bhopal is the Anant Spinning Mills. Located in the New Industrial Area of Bhopal the industry

is engaged in producing Yarns, Acrylic fiber, sewing threads, etc. This is a unit of the Vardhaman Group. This group is presently the largest exporter of cotton in India.

Apart from the Anant Spinning Mills there are many other companies engaged in the

producing cotton textiles here. The New Bhopal Textile Mills is one among them.

The industry related to the production of electrical goods in Bhopal is ruled by the Bharat Heavy Electricals Limited. BHEL, Bhopal is engaged mainly in producing industrial machines.

The other important functions of this company are generation and transmission of power. They also produce transportation equipments, hydro turbines, hydro generators and heat exchangers. They also produce power transmission products like transformers, switchgears and large

current rectifiers. The Bhopal Switchgears Private Limited is among the other important suppliers of electrical goods in the city of Bhopal.

The other important industries in Bhopal are related to the manufacturing of jute and steel products.

Recently the tourism indu

stry is also being counted among the major industries in Bhopal.

Electrical Industry

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