No duty, if EOU destroys goods within or outside EOU, says expert

We have an EOU. Goods exported by us were rejected by a customer due to a defect, which cannot be repaired. Hence we need to destroy them after re-import. What options are available to us?

As per Para 6.15 (b) of FTP, “no duty shall be payable other than the applicable taxes under GST laws in case capital goods, raw material consumables, spares, goods manufactured, processed or packaged, and scrap/waste/remnants/ rejects are destroyed within unit after intimation to Customs authorities or destroyed outside unit with permission of Customs authorities”. Reverse any ITC, if taken in accordance with Section 17(5)(h) of CGST Act, 2017.

In our EPCG authorisation issued under FTP 2011-12, as per the prevalent Policy, we obtained the JDGFT’s permission to fulfill 50 per cent EO through exports of a group company. Our group company exported the goods but failed to mention the EPCG number and date on the shipping bill. Can we take advantage of Policy Circular no. 7/2002 dated July 11, 2002, for condonation of procedural lapse of not mentioning the EPCG licence no. and date on the shipping bills? 

That circular is still valid but now S.No. III of CA certificate for redemption of EPCG authorisation (Appendix-5C of HBP) does not permit that condonation procedure for free shipping bills and third party exports. Exports by a group company are not third party exports. So, you can resort to that procedure provided the shipping bills are not free shipping bills.

One of our clients has advance authorisation for import of raw materials against supplies to EOUs. I would like to know the impact of GST on imports.

If the authorisation is issued under notification 21/2015-Cus dated April 1, 2015, you cannot get IGST exemption. If it is issued under the notification 18/2015-Cus dated April 1, 2015, you can claim IGST exemption. You may go through the conditions in the said notifications and ensure that you are compliant. 

We had taken 3 per cent EPCG authorisation in 2010 but could not fulfill EO and so, took two years’ extension, by taking up additional EO. Thereafter, we took further two years’ extension, as per Para 5.11(b) of HBP 2009-2014, by paying 50 per cent of duty payable in proportion to the unfulfilled EO. Can we take ITC or claim refund of the CVD and SAD portion of the amount so deposited?

The FTP is silent on this matter. Para 5.11(b) uses the words “duty paid” as well as “duty deposited”. It is better you seek a clarification from DGFT as to whether it amounts to duty payment or duty deposit.

What are the reasons for placing import items in appendix 4J? Please take the example of import item ITC (HS) code 7219 or 7220, which was placed in appendix 4-J through public notice no. 30/2015-20, October 8, 2017, and deleted on March 6, 2019, through public notice no. 77/2015-20.

I guess the DGFT places certain items under Appendix 4-J whenever they (i.e. the inputs) are considered sensitive items.