L.B. Singhal
Director General

I) Department of Revenue Circular No. 6/2004-Cus dated 27-1-2004 regarding duty free import/ procurement by EOUs in Trading Sector

ii) CBEC Circular No. 8/2004-Cus dated 28-1-2004 regarding de-bonding of EOUs/EHTP/STP Units

i) Please refer to our EPCES Circular No. 29, dated 6-1-2004 wherein it was informed that Department of Revenue had issued Notification No. 1/2004-Cus and 1/2004-CE both dated 2-1-2004, permitting duty free import in respect of those trading EOUs which were in existence prior to 31-3-2002 and have a valid LOP as on date to continue under EOU Scheme. Department of Revenue has now issued Circular No. 6/2004-Cus dated 27-1-2004 elaborating these notifications further. In this Circular, it has been clarified that since under the present Policy, trading units are not allowed to be set up under the EOU Scheme, trading units which were in existence prior to 31-3-2002 should not be given any further extension of LOP and would not be allowed to operate under EOU Scheme once validity of the LOP has expired. Department of Revenue has asked its field formulation that before allowing CT3/procurement certificate to the trading units for procurement or import of goods under the amended notification it may be verified if the unit was in existence prior to 31-3-2002 and has a valid LOP even to operate under EOU Scheme as on 2-1-2004. It has been clarified by the Department of Revenue, through this Circular, that the benefit of exemption to the trading units has been allowed for a limited period only and would not be available in any case where extension of LOP has been granted any time after 31-3-2002.

This Circular has further clarified that amendment from the Department of Revenue is not necessary for EPZs since all existing EPZs have been converted into SEZs and trading activity is already permitted under the SEZ Scheme.

ii) Department of Revenue has issued Circular No. 8/2004-Cus dated 28-1-2004 regarding debonding of EOU/EHTP/STP units. This Circular has clarified that an EOU should not be denied permission to debond merely because some show cause notices or confirmed due is pending against the unit. The Commissioners have been advised to take an overview on the matter and after taking adequate safeguards, permission may be granted to the unit to debond. For recovery of confirmed dues, the normal procedure under law would continue to be taken even after debonding.

This Circular has been issued because certain instances had been reported that EOU having desired to debond or exit out of the EOU Scheme had been denied permission simply on the ground that some Show Cause Notices or demands are pending against the unit. It has been advised that even in such cases, EOU could be allowed to debond, after taking some precautions to safeguard revenue. EOUs could be asked to give an undertaking on stamped paper to the effect that it would not dispose off its land, building, capital goods etc, till such time the show cause notice is adjudicated and the amount confirmed, if any, paid. This undertaking could be backed by a bank guarantee of, say, 10% of the amount involved in the show cause notices.

iii) Both the circulars are placed on our website www.eouindia.gov.in . When you open this website, on the righthand side, you will find an icon of Notifications and Circulars. Under this icon, notifications and circulars, relating to DGFT, CBEC, DBDT and RBI have been placed. You are requested to read the complete circulars.

This is for your information please.