L.B. Singhal
Director General

Sub :Applicability of duties on DTA sale by EOUs, Circular No. 01/2004-Cus dated 5-1-2004 and reporting in the Financial Express on 7-1-2004

Financial Express today has reported that all sale by the 100% EOUs into DTA shall attract full import duty. This has created a panic situation and anxiety among 100% EOUs. I have received a number of telephone calls from 100% EOUs since morning. This has created the impression as if the facility of sale in DTA @50% of duty to the extent of 50% of the FOB value of exports and the facility of selling in the DTA on payment of excise duty, if the raw material is indigenously procured, has been withdrawn.

In this context I would like to clarify that the facility of sale in DTA @50% of duty to the extent of 50% of the FOB value of exports, as illustrated in the Central Excise notification No. 23/2003 dated 31-3-2003, has not been discontinued in any manner. Similarly the facility of sale in DTA on payment of excise duty or 30% of the customs duty as notified and illustrated vide Notification No. 23/2003-Central Excise dated 31-3-2003 has not been withdrawn or altered. Notification No. 23/2003-Central Excise dated 31-3-2003 has not been withdrawn or altered in any way.

This confusion probably has been created because of Customs Circular No. 01/2004-Cus dated 5-1-2004 issued by the Department of Revenue. Basically this circular has been issued in the context of the decision of larger bench of CESTAT in the case of M/s Himalaya International Ltd V/s Commissioner of Central Excise, Chandigarh. This circular basically clarifies that for sale in DTA by EOUs, the duties are chargeable as per the proviso to Section 3 (1) of the Central Excise Act, 1944. Duties are not chargeable under Section 3 (1) of the Central Excise Act, 1944. The specific notification for payment of duty is notification No. 23/2003-Central Excise dated 31-3-2003 and this notification has not been rescinded /altered in any way by this circular.

This is for your information please.