L.B. Singhal
Director General

SUB : COMMENTS ON THE DRAFT CIRCULAR TO BE ISSUED BY DEPARTMENT OF REVENUE ON DEBONDING BY EOUs/ EHTP/STP UNITS

EPCES had organized an Open House in Kandla, Gujarat on 10-5-04. In this Open House, an EOU of this region had raised an issue regarding debonding of EOUs. In this case, raised in the Open House, EOU had won the case against the orders of the Central Excise Authorities and the Department had gone in appeal against this decision. Inspite of the fact that the unit had won the case, the unit was being asked to give 10% bank guarantee before debonding. It was requested in this Open House that in such cases the units should not be asked to give bank guarantee as the unit's pleas has already been upheld. This Open House was chaired by Shri G. K. Pillai, Additional Secretary, Ministry of Commerce and Shri Jayant Dasgupta, Joint Secretary, Ministry of Commerce, Shri A. K. Prasad, Director (Customs), were also present. Shri A. K. Prasad, Director (Customs) had agreed on the request of the unit that in such cases the 10% bank guarantee should not be insisted upon.

Accordingly, Department of Revenue intends to issue a circular on this subject. A copy of this draft Circular, proposed to be issued, is enclosed alongwith. You are requested to go through this draft Circular and send your comments immediately so that if you have any amendment/suggestions in this circular, the same could be informed to Department of Revenue. I request you to send your comments immediately, latest by August 30, 2004.
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Government of India
Ministry of Finance & Company Affairs
Department of Revenue
Central Board of Excise & Customs (FTT Section)

It is proposed to issue a circular. All persons who have any comments or observation to make , may do so within two weeks of the publication of this notice i.e upto September 8th 2004 to Sh Ranjit Kumar, STO( FTT), Room No 229A, CBEC, North Block, New Delhi-110001. Telefax-23093859, fax-23092173, E-Mail address- stoftt@ hotmail.com

Draft Circular


Sub:- Debonding by EOU/EHTP/STP Units.

Sir,
I am directed to invite your attention to Board's Circular No. 8/2004-Customs, dated 28-1-2004 on the above subject. where under it has been provided that EOUs against whom any show cause notice for demand of duty is pending may be allowed to be debonded on furnishing undertaking on the stamp paper along with Bank Guarantee of 10% of the amount involved in the show cause notices.

2. Clarification has been sought as to whether 10% Bank Guarantee is to be insisted upon in the case of those show cause notices also where the show cause notice has been decided in favour of the party and department has preferred appeal against such decision. The issue has been considered in the Board. Since the decision of the adjudication authority/ Tribunal is in the favour of the assessee, strictly speaking , no duty is payable, notwithstanding the fact that Department has preferred appeal. Therefore, in all such cases where the Department has lost in Customs Excise Service Tax Appellate Tribunal ( CESTAT) or before Commissioner ( Appeal), the amount involved in demand under question including pending/ protective demand should not be taken into consideration for computing 10% Bank Guarantee amount even if the department has preferred appeal (and no stay has been obtained).

3. The EOU/EHTP/STP units are required to excute B-17 Bond at the time of commencement of the unit. The units are also required either to furnish surety or security along with the B-17 bond. On cases where security has been furnished in form of Bank Guarantee along with the bond and the assessee requests to adjust 10% of duty as required to be furnished in terms of Circular 8/2004-Cus out of the said Bank Guarantee, such requests of the unit may be considered. However, before acceding to such request it may please be ensured that the Bank Guarantee is valid.

4. Clarification has also been sought as to whether part duty deposited earlier by the assessee during the course of investigation can be adjusted towards 10% duty reequired to be paid at the time of debonding in terms of Circular 8/2004. The matter has been considered. The intention of the Circular 8/2004- Cus is to take 10% bank guarantee of the duty demanded at the time of debonding. Therefore, the duty paid earlier during the course of investigation has no bearing or relation with the 10% bank guarantee of the duty demanded to be furnished at the time of debonding along with undertaking.

5. Wide publicity may please be given to the above said instruction by way of issuance of Public Notice.

6. Hindi version follows.

( Ranjit Kumar)
Sr. Technical Officer (FTT)
Telephone No 23093859