Exit norms for EOUs eased

Firms can opt out by furnishing an undertaking

The government has widened the exit route for companies to opt out of the Export Oriented Unit (EOU) schemes. Firms can now opt out of the schemes by furnishing an undertaking.

The expansion in the scope of the exit route was necessary as the Mini-Exim Policy, announced on Wednesday, has practically made it redundant for companies to opt for the EOU facility.

The relaxed norms for exiting the EOU scheme will be applicable for the firms in electronic hardware technology parks and software technology parks. A circular issued by the Central Board of Excise and Customs says: "Units may be allowed to exit the EOU schemes even if there are revenue demands pending against them."

The circular also adds that an EOU normally requests an exit option if the unit finds it uneconomical to continue operation under the scheme or if its letter of permission from the government expires.

As a safeguard, the CBEC has asked the field formations to take some precautions, like asking a unit to give an undertaking on stamp paper that it will not dispose of its land, building, capital goods till the show-cause notice is adjudicated. It adds that the undertaking can be backed by a bank-guarantee of 10 per cent of the amount involved in the show-cause notice.

But the mere existence of a pending revenue demand should not be a reason to deny the exit route.

The CBEC says that if the debonding permission is denied to the company, the unit will have no other option but to close down. Therefore "Whatever revenue the government would have got from an operating unit, would be lost".

In another circular it has said that no service based EOUs should be allowed to extend their period of operation beyond the initial permission of three years' mandate, as services are not supposed to part of the scheme (except for R&D, software and IT enabled services).