Chatroom: Practical guidance on interest, EOU exemption and EPCG reporting

TNC Rajagopalan answers readers' SME queries related to GST, export and import matters

We refer to various provisions under the Customs Act, 1962 where interest is payable up to the date of payment of duty. For computing such interest, should the date of payment be included or excluded?

 

The date of payment should be included. CBEC Circular No. 48/2002-Cus., dated 9 August 2002, clarifies that, where interest is payable for delayed payment of customs duty, the date on which the duty is actually paid is to be included while calculating the period of delay. The circular also quotes from the legal opinion of the Ministry of Law supporting this view.

 

We are an EOU. Our raw material is covered by Notification No. 12/2026-Cus., dated 1 April 2026, granting full BCD exemption on specified items up to 30 June 2026. Can we avail this exemption? If yes, would we be required to debit the B-17 bond account and follow the procedure of Customs (Import of Goods at Concessional Rate of Duty or for Specified End Use) Rules, 2022 (known as IGCSR Rules, 2022)?

 

Para 6 of Annexure III to D.O.F. No. 334/7/2017-TRU, dated 1 February 2017, clarifies that EOUs are eligible to import or procure inputs at concessional or nil BCD/CVD/SAD, as applicable, provided all conditions of the relevant exemption notification are fulfilled. This clarification is not available as any CBEC Circular but as part of a DO letter of the Tariff Research Unit at the CBEC explaining the changes in the Union Budget 2017. As per this DO letter you may avail the benefit of the said notification no. 12/2026-Cus., which, incidentally, grants unconditional exemption. You need not debit the B-17 bond or follow the IGCSR Rules, 2022 because the said notification 12/2026-Cus does not prescribe any condition to do so.

 

Under Para 4.49 of HBP, for regularisation of bona fide default in fulfilment of export obligation, customs duty is payable on unutilised duty-free material along with interest at the rate prescribed by the Department of Revenue.

 

Is such interest simple or compound?

 

DGFT Policy Circular No. 25/97-98, dated 17 November 1997, specifically states that, in such cases, simple interest is payable. Further, Para 4.49 of HBP 2023 refers only to interest at the rate prescribed by the Department of Revenue and does not indicate any levy of compound interest.

 

Para 5.14 of HBP 2023 requires the authorisation holder to submit a report on fulfilment of export obligation online after expiry of the first block period of four years and continuously till expiry of the valid EO period. What does “continuously” mean?

 

 That is not defined or clear. In the given context it just means ‘regularly’. Prior to amendment of the said Para 5.14 through DGFT Public Notice no. 24 dated 20.09.2024, the reporting requirement was annual, by 30th June each year. Even after the amendment, DGFT’s EPCG online utility reflects annual reporting. So, as a practical compliance approach, you may file the report every year by 30th June. However, DGFT should clarify this matter.

 

---

Business Standard invites readers’ SME queries related to GST, export and import matters. You can write to us at smechat@bsmail.in