Subsidiary may fulfil 50% of export obligation under EPCG scheme

We had cleared goods for export to Nepal under bond against foreign currency LC under provisions of Notification no. 45/2001 CE (NT) dated 26-6-2001. Due to certain reasons goods could not be exported within six months from the dispatch date. I was shocked to see that Notification 45/2001 does not contain any provision for extension of time limit if goods are not exported within six months, although corresponding notifications like 42/2001-CE (NT) and 20/2004-CE (NT ) dated 6-9-2004 do contain specific provision for extension. Our Assistant Commissioner (AC) did not consider our request for extension and has asked us to pay duty and interest from the dispatch date. Is there any way out? Can we utilise the Cenvat Credit balance for this duty payment? How to handle documentation? Can we get the duty back?
I am also surprised that there is no provision for extension. You must represent this matter to the Central Board of Excise and Customs (CBEC). Given the circumstances, you have no option but to pay the excise duty. You can pay the duty by utilising the Cenvat Credit, but you have to pay interest in cash. The way you can save duty is to get the duty-paid goods to your plant and take Credit under Rule 16 of Central Excise Rules, 2002 and then, clear again without duty payment. But that may not be very practical if the transportation costs are prohibitive or if the customer wants the goods urgently.

 

There are no instructions on how you can handle situations when you pay the duty. In case of goods cleared under ARE1 without duty payment but not exported, you can ask the AC to cancel ARE1 and issue a fresh excise invoice for diversion of goods for home consumption. I think you should ask for that option — i.e., to cancel old invoices (Nepal invoice and excise invoice) and issue fresh duty paid invoices. Of course, you won’t get rebate of that duty. The rebate will go to the Nepal government, but you may be able to explain that to the customer and see whether he can get the rebated duty amount from the Nepal government and give it to you.

We are a star export house engaged in the manufacture and export of tyres. Our fully-owned subsidiary company wants to import some machines for manufacturing textiles under the Export Promotion Capital Goods (EPCG) scheme. We want to know whether the export obligation can be fulfilled by us (parent company) only to the extent of 50 per cent, and if 50 per cent will have to be fulfilled by our subsidiary company?
Para 5.5 of the Foreign Trade Policy (FTP) says the export obligation shall be fulfilled by export of goods manufactured/services rendered by the applicant, and that up to 50 per cent of the export obligation may also be fulfilled by exports of other good(s) manufactured or service(s) provided by the same firm/company, or group company. So, in your case, at least 50 per cent of the obligation must be fulfilled by your subsidiary company by exporting textiles.