Relief for export obligation defaulters

Updated: Jan 17 2014, 08:45am hrs
We are manufacturers of medical equipment in Delhi. We also had a manufacturing facility in Manesar, Haryana, which was closed in January 2009. During the operations of the factory in Manesar, the company had obtained an EPCG Licence from the office of the Directorate General of Foreign Trade (DGFT). However, the export obligation for the same could not be fulfilled. We now wish to close this EPCG licence by paying the customs duty short-paid along with interest and penalty. Kindly let us know the procedure for the same. Further, is there any way that penalty could be waived off.

Generally, the cases of default in export obligation may be closed by depositing the duty saved at the time of import, along with interest till the date of payment of duty and penalty.

However, recently, Public Notice No. 22(RE-2013)/ 2009-2014 dated 12 August 2013 and Policy Circular No. 8 /2009-2014 (RE 2013) dated 25 October 2013 have been issued by the DGFT regarding closure of EPCG licences in respect of which export obligation not met, without payment of penalty and limiting the amount of interest up to the customs duty payable.

For availing the benefit under this scheme, the defaulter of EPCG licence needs to deposit the duty saved at the time of import, along with interest. Further, the interest component to be so paid shall not exceed the amount of customs duty payable for this default.

Subsequently, a closure application needs to be filed with the regional DGFT authorities along with the duty payment challan. If satisfied, the regional authority would issue the closure certificate. This option to close the cases of non-fulfilment of export obligation, as per the public notice, is available only till 31 March 2014.

Importer as first stage dealer

We are engaged in the import and sale of drilling machines in Maharashtra. We resell the imported goods and issue invoices to our customers. Recently there has been some changes in rules about passing of Cenvat credit of countervailing duty in lieu of excise to the customers by the importers . Kindly advice.

Till date, Central Excise law read with Cenvat Credit Rules did not specifically require an importer engaged in reselling of imported products to obtain registration to be able to transfer credit to its customers. However, recently, Notifications No. 17/2013-Central Excise (N.T.) and 18/2013-Central Excise (N.T.) dated 31 December 2013 have been issued, amending the law in this regard. The amended provisions now mandatorily require an importer who issues an invoice on which Cenvat credit can be taken to obtain registration under Central Excise law as a first stage dealer. This amendment shall come into force from 1 March 2014.

With effect from 1 March 2014, you would be required to obtain registration as a first stage dealer to be able to transfer the credit of additional customs duty in lieu of excise paid on imported goods to your customers.

The replies do not constitute professional advice. Neither EY nor FE is liable for any action taken on the basis of these replies. Readers may mail their queries to