| Policy |
5.1 |
The Policy relating to Export Promotion Capital Goods (EPCG) Scheme
is given in Chapter 5 of the Policy. |
| Application Form |
5.2 |
An application for the grant of an Authorisation may be made to the
Regional authority concerned in the form given in ‘Aayaat Niryaat Form’
along with documents prescribed therein. |
| Consideration of Applications |
5.3 |
The applicant may apply for EPCG Authorisation wherein duty saved
amount is Rs. 50 crores, to the Regional Authority along with a
certificate from the independent chartered engineer on the proforma
annexed to ‘Aayaat Niryaat Form’ certifying the end use of capital goods
sought for import for its use at pre production, production or post
production stage for the product undertaken for export obligation.
For the cases wherein duty saved amount is above Rs. 50 crores, the
applicant may apply to DGFT Headquarters directly with a copy endorsed
to the concerned Regional Authority. In such cases, based on the
recommendations of Headquarters EPCG Committee/ approval of competent
authority the concerned Regional Authorities will issue the EPCG
Authorisation accordingly. |
|
5.3.1 |
The Regional Authority concerned shall, on the basis of the nexus
certificate from an Independent Chartered Engineer (CEC) submitted by
the applicant in Appendix 32A, issue the EPCG Authorisation and
thereafter forward a copy of the EPCG Authorisation to the concerned
Jurisdictional Central Excise Authority. |
|
5.3.2 |
The Authorisation holder shall produce to the concerned Regional
authority a certificate from the jurisdictional Central Excise authority
confirming installation of Capital goods at the factory/premises of the
Authorisation holder or his supporting manufacturer(s) vendor(s) within
six months from the date of completion of imports.
However, Authorisation holders who are not registered with Central
Excise Authorities and service providers can give a certificate either
from the jurisdictional excise authority or an independent Chartered
Engineer confirming installation of movable and immovable capital goods
at the premises of the Authorisation holder/supporting manufacturer. |
|
5.3.3 |
The EPCG Authorisation shall be issued with a single port of
registration mentioned in paragraph 4.19 of the Handbook of Procedure
for the purpose of imports. All imports shall be made from that
particular port unless the specific permission of the Customs
Authorities is obtained. However, exports can be made from any of the
ports specified in paragraph 4.19. |
|
5.3.4 |
- The applicant may also apply for import of spares including
refractory, catalyst and such consumables as are required for
installation and maintenance of capital
Goods imported/to be imported under the EPCG Scheme.
The application shall contain list of plant/ machinery installed in
the factory/ premises of applicant for which spares are required,
duly certified by Chartered Engineer or Jurisdictional Central
Excise Authorities.
In such cases EPCG Authorisation shall not specify the list of
spares but shall indicate:-
- Name of plant/machinery for which spares are required.
- Value of duty saved allowed under the
Authorisation.
- Description of product to be exported with value of export
obligation as per the Policy.
- The Regional Authority, after issue of EPCG Authorisation for
spare shall forward a copy of Authorisation to concerned
Jurisdictional Central Excise Authority.
- Further at the time of final redemption of export obligation
Authorisation holder shall submit certificate from the Independent
Chartered Engineer confirming the use of spares so imported in the
installed capital goods on the basis of stock & consumption register
maintained by Authorisation holder.
|
| EOU/ SEZ Units under EPCG Scheme |
5.4 |
An EOU/ SEZ unit may apply for an EPCG Authorisation in terms of
paragraph 6.18(d) of the Policy. Such application shall be made in the
form given in ‘Aayaat Niryaat Form’ alongwith the documents prescribed
therein. In addition, the applicant shall also furnish a copy of the `No
Objection Certificate’ from the Development Commissioner showing the
details of the capital goods imported/indigenously procured by the
applicant, its value at the time of import/sourcing and the depreciated
value for the purpose of assessment of duty under the scheme.
Such cases shall not be required to be forwarded to Headquarters EPCG
Committee. The concerned Regional authority shall issue EPCG
Authorisations based on the “No Objection Certificate” produced from the
concerned Development Commissioner. |
| Indigenous Sourcing of Capital Goods |
5.5 |
The EPCG Authorisation holder intending to source capital goods
indigenously, shall make a request to the Regional Authority for
invalidation of the EPCG Authorisation for direct import. The EPCG
Authorisation holder shall also give the name and address of the person
from whom he intends to source the capital goods. |
|
5.5.1 |
On receipt of such request, either at the time of issuance of
Authorisation or subsequently, the Regional Authority shall make the
Authorisation invalid for direct import and issue an invalidation
letter, in duplicate, to the EPCG Authorisation holder. The Regional
Authority shall simultaneously grant permission to the EPCG
Authorisation holder to procure the capital goods indigenously in lieu
of direct import. |
|
5.5.2 |
The indigenous manufacturer intending to supply capital goods to the
EPCG Authorisation holder may apply to the Regional Authority in the
form given in ‘Aayaat Niryaat Form’ for the issuance of Advance
Authorisation for import of inputs including components required for the
manufacture of capital goods to be supplied to the EPCG Authorisation
holder. |
| Benefits To indigenous supplier of Capital Goods |
5.5.3 |
For the purpose of claiming benefit of deemed exports, the
indigenous supplier of capital goods shall furnish:
- (Certificate from the respective Assistant Commissioner of
Customs and Central Excise Authorities having jurisdiction over the
factory/ premise as evidence of having supplied/ received the
manufactured capital goods and in case of service provider, a
certificate from independent Chartered Engineer confirming the
supplies/ receipt of the Capital Goods.
- Evidence of payments received through normal banking channel
from the EPCG Authorisation holder in the form given in Appendix-
22B.
|
| Leasing of Capital Goods |
5.6 |
An EPCG Authorisation holder may, on the basis of firm contract
between the parties, source the capital goods from a domestic leasing
company in accordance with paragraph 2.25 of the Policy. In such cases,
the Bill of Entry of imported capital goods or the commercial invoice of
indigenously procured capital goods, as the case may be, shall be signed
jointly by the EPCG Authorisation holder and the leasing company at the
time of import/local supply respectively. However, the EPCG
Authorisation holder shall alone be fully responsible for fulfillment of
export obligation. |
| Condition for Fulfilment of Export Obligation |
5.7 |
In addition to the conditions mentioned in paragraph 5.4 of the
Policy, the following conditions shall also be applicable for fulfilment
of export obligation under the scheme:- |
|
5.7.1 |
The exports shall be direct exports in the name of the EPCG
Authorisation holder. However, the export through third party(s) as
defined in Chapter 9 of the Policy is also permitted under the EPCG
scheme. If a merchant exporter is the importer, the name of the
supporting manufacturer shall also be indicated on the shipping bills.
At the time of export, the EPCG Authorisation No. and date shall be
endorsed on the shipping bills which are proposed to be presented
towards discharge of export obligation. |
|
5.7.2 |
Export proceeds shall be realised in freely convertible currency
except for deemed exports under paragraph 5.7.3. However, in case of
exports against irrevocable letter of credit or if the bill of exchange
is unconditionally Avalised/ Co- Accepted/ Guaranteed by a bank and the
same is confirmed by the exporters bank, realisation of export proceeds
need not be insisted for fulfillment of export obligation provided the
final receipts are in free foreign exchange. |
|
5.7.3 |
Exports made against the Government of India/EXIM Bank Line of
Credit and exports made under Deferred Payment/ Suppliers Line of Credit
Contract backed by ECGC Cover would also be counted for fulfillment of
export obligation under the Scheme. |
|
5.7.3.1 |
The supplies made to the Oil and Gas sector also may be counted
towards discharge of export obligation against an EPCG licence provided
the licence has been issued on or before 31.3.2000 and no benefit under
paragraph 8.3 of the Policy has been claimed on such supplies. |
|
5.7.4 |
Wherever average level of export obligation was fixed taking into
account the exports made to former USSR or to such countries as notified
by the Directorate General of Foreign Trade under this paragraph, the
average level of exports shall be reduced by excluding exports made to
such countries. This waiver shall be applicable to all EPCG licences,
which have not been redeemed/regularised.
However, exports made against any EPCG licence/ Authorisation, except
the EPCG licences/Authorisations which have been redeemed, shall not be
added up for calculating the average export performance for the purpose
of the subsequent EPCG Authorisation. |
|
5.7.5 |
Where the manufacturer exporter has obtained Authorisations for the
manufacture of the same export product both under EPCG and the Duty
Exemption or Diamond Imprest Authorisation Scheme or made exports under
DEPB/Advance Authorisation/ DFRC/DFIA/Replenishment Authorisations, the
physical exports or deemed exports for categories mentioned in paragraph
5.7.3 made under these schemes shall also be counted towards the
discharge of the export obligation under EPCG scheme. |
|
5.7.6 |
In case of export of goods relating to handicraft, handlooms,
cottage, tiny sector, agriculture, aqua-culture, animal husbandry,
floriculture, horticulture, pisciculture, viticulture, poultry,
sericulture and services, the export obligation shall be determined in
accordance with paragraph 5.1 of the Policy, but the Authorisation
holder shall not be required to maintain the average level of exports as
specified in paragraph 5.4 (i) and 5.9 of the Policy.
The goods excepting tools imported under EPCG scheme by such sectors
shall not be allowed to be transferred for a period of five years from
the date of imports even in cases where export obligation has been
fulfilled.
However, the transfer of capital goods would be permitted within the
group companies or managed hotels under intimation to the Regional
Authority and the jurisdictional Central Excise Authority in case of
manufacturer/merchant exporters and to the Regional Authority only in
the case of Service providers.
Moreover, in cases where the service provider wants to discharge export
obligation by export of goods also, he shall have to maintain the
average level of foreign exchange earning for the preceding three
licensing years in respect of goods proposed to be exported for
discharge of export obligation. |
|
5.7.7 |
The Export Obligation shall be fulfilled as per conditions given in
para 5.4 of the Policy. |
| Fulfillment Of Export Obligation |
5.8 |
The Authorisation holder under the EPCG scheme shall fulfill the
export obligation over the specified period. in the following
proportions:
| Period from the date of issue of Authorisation |
Minimum export obligation to be fulfilled |
| Block of 1st to 6th year |
50% |
| Block of 7th and 8th year |
50% |
|
|
5.8.1 |
In respect of Authorisations, on which the value of duty saved is
Rs.100 crore or more, the export obligation shall be fulfilled over a
period of 12 years in the following proportion:
| Period from the date of issue of Authorisation |
Minimum export obligation to be fulfilled |
| Block of 1st to 10th year |
50% |
| Block of 11th and 12th year |
50% |
|
|
5.8.2 |
However, the export obligation of a particular block of year may be
set off by the excess exports made in the preceding block of year. The
Authorisation holder would intimate the regional authority on the
fulfillment of the export obligation as well as average exports annually
by secured electronic filing using digital signatures |
|
5.8.3 |
Where export obligation of any particular block of years is not
fulfilled in terms of the above proportions, except in such cases where
the export obligation prescribed for a particular block of year is
extended by the competent authority, such Authorisation holder shall,
within 3 months from the expiry of the block of years, pay duties of
customs plus 15% interest of an amount equal to that proportion of the
duty leviable on the goods which bears the same proportion as the
unfulfilled portion of the export obligation bears to the total export
obligation. |
|
5.8.4 |
However, the licences issued under the scheme upto 31.3.2000 shall
be governed by provisions laid down in paragraph 6.11 as given in
Handbook (Vol.1) (RE-99). Notwithstanding the provisions in Handbook
(Vol.1) (RE-99), the licence holder shall not have to surrender Special
Import Licence in case of valuewise shortfall.
Licences issued from 1st April, 2000 upto 31st March, 2002 shall be
governed by the provisions of Chapter 6 of the Handbook (Vol 1) (RE-01)
as amended from time to time.
Licences issued from 1st April, 2002 upto 31st August, 2004 shall be
governed by the provisions of para 5.8 of the Handbook (Vol 1) (RE-02)
as amended from time to time. However, the provision of clubbing even in
case of old Authorisations would be as per the current provision of para
5.18 of this Handbook. |
| Maintenance of Average |
5.8.5 |
The average exports under the EPCG Authorisation has to be
maintained as per the provisions of para 5.4(i) and 5.9 of the Policy. |
| Monitoring of Export Obligation |
5.9.1 |
The Authorisation holder shall submit to the Regional authority by
30th April of every year, report on the progress made in fulfillment of
export obligation against the Authorisation issued as well as annual
average level of exports achieved. The report shall be submitted
electronically on the DGFT website. The Regional authority may issue
partial EO fulfilment certificate to the extent of EO fulfilled in a
particular year. |
| Automatic Reduction/ Enhancement upto 10% of CIF value and Prorata
Reduction/ Enhancement in Export Obligation |
5.10 |
If the Authorisation issued under the scheme has actually been
utilized for import of a value in excess of 10% of the CIF value/ duty
saved amount of the Authorisation, Authorisation shall be deemed to have
been enhanced by that proportion. The Customs shall automatically allow
the clearance of goods in excess upto 10% of the Authorisation
value/duty saved amount without endorsement by the Regional authority.
In such cases, the Authorisation holder shall furnish additional fee to
cover the excess imports effected in terms of CIF value/ duty saved
amount to the Regional authority within one month of the excess imports
taking place. The export obligation shall automatically stand enhanced
proportionately. |
|
5.10.1 |
Similarly, if the EPCG Authorisation holder has utilised the
Authorisation less than the value earmarked in the Authorisation, his
export obligation shall stand reduced on prorata basis with reference to
actual utilisation of Authorisation. |
| Extension of Export Obligation Period |
5.11 |
The concerned Regional authority, may consider one or more request
for grant of extension in export obligation period for a period of 2
years, on payment of a composition fee of 2% of the total duty saved
under the Authorisation or an enhancement in export obligation imposed
to the extent of 10% of the total export obligation imposed under the
Authorisation, as the case may be, at the choice of the exporter, for
each year of extension sought.
However extension in EO period beyond the two years period available
above, may be considered, for a further extension upto 2 years with a
condition that 50% of duty payable in proportion to the unfulfilled
export obligation is paid by the Authorisation holder to the Custom
authorities before an endorsement of extension is made on the EPCG
Authorisation by the Regional authorities. In such cases, no composition
fee is to be paid or additional EO is to be imposed as prescribed in the
Para above. In case the firm is still not able to complete the export
obligation the duty already deposited will be deducted from the total
duty plus interest to be paid for EO default.
The extension in export obligation period shall also be subject to such
terms and conditions as may be prescribed by the competent authority.
Wherever the export obligation period is extended, the Authorisation
holder shall be required to maintain average export obligation during
the extended period as well. Exports made on or after the date of
receipt of application for EO extension shall only qualify for discharge
of EO fulfillment under the Scheme. |
|
5.11.1 |
The firm/company or group company registered within the
original/extended E.O. period with the BIFR or state rehabilitation
Scheme for SSI unit as a sick unit or any firm/ company acquiring a
unit, which is under BIFR may apply for extension in export obligation
period for fulfillment of export obligation to Director General of
Foreign Trade.
The firm/company, which is applying for registration with BIFR/
Rehabilitation Department of State Government shall also intimate DGFT
with regard to relief sought for EPCG Licence/Authorisation, if any,
within 30 days of receipt of the application by agency concerned.
The DGFT, on receipt of intimation/notice received from the
BIFR/operating agency/ Rehabilitation Department of State Government
shall take up the matter with the agency concerned to safeguard
government interest on account of default in fulfillment of export
obligation imposed on EPCG licence/ Authorisation obtained by such firm.
DGFT may consider such application for grant of extension in the period
of export obligation upto 12 years or as per the rehabilitation package
prepared by operating agency and approved by BIFR board /state
authority, on its merit. |
| Export Obligation Shortfall |
5.12 |
The regional authority may also consider condonation of shortfall
upto 5% in the export obligation within the validity of the export
obligation period, subject to such terms and conditions as may be
prescribed by them. |
| Redemption |
5.13 |
As evidence of fulfillment of export obligation, the Authorisation
holder shall furnish the following documents:
- For Physical Exports:
A consolidated statement of exports made in the form given in ‘Aayaat
Niryaat Form’, duly certified by a Chartered Accountant and bank
evidencing exports and realisation in freely convertible currency or
statements of exports in the form given in ‘Aayaat Niryaat Form’ for
individual banks duly certified by a Chartered Accountant.
However in case of exports made under irrevocable letter of credit
or bill of exchange is unconditionally Avalised/ Co- Accepted/
Guaranteed by a bank and the same is confirmed by the exporters
bank, realization of export proceeds would not be insisted upon.
The EPCG Authorisation holder shall submit a copy of the irrevocable
letter of credit or the bill of exchange unconditionally Avalised/
Co-Accepted/ Guaranteed by a bank and confirmed by the exporters
bank for availing of the benefit of EPCG..
- For Deemed Exports:
- Copy of ARO/ Back to Back Inland letter of Credit or Advance
Authorisation for Intermediate Supplies
or
Supply invoices or ARE 3 duly certified by the Bond Office of
EOU concerned showing that supplies have been received;
- The Authorisation holder shall also furnish the evidence of
having received the payment through normal banking channel in
the form given in Appendix- 22B or a self certified copy of
payment certificate issued by the Project authority concerned in
the form given in Appendix-22 C.
However in case of exports made under irrevocable inland letter
of credit or the inland bill of exchange is unconditionally
Avalised/ Co- Accepted/ Guaranteed by a bank and the same is
confirmed by the exporters bank, realization of export proceeds
would not be insisted upon.
- Consolidated statement or individual statements (bank/
authorised dealer wise) of services rendered in the ‘Aayaat Niryaat
Form’, duly certified by a Chartered Accountant and bank/ authorised
dealer evidencing foreign exchange earning received through normal
banking channel.
On being satisfied, the Regional authority shall issue a certificate
of discharge of export obligation to the EPCG Authorisation holder and
send a copy of the same to the customs authorities with whom BG/LUT has
been executed.
|
| Regularisation of Bonafide Default |
5.14 |
In case, EPCG Authorisation holder fails to fulfill the prescribed
export obligation, he shall pay duties of Customs plus 15% interest per
annum to the Customs authority as per paragraph 5.8.3. This facility of
payment of interest @15% shall be available to all pending cases of
regularisation of EPCG Authorisations irrespective of the date of its
issuance. |
| Maintenance of Records |
5.15 |
Every EPCG Authorisation holder shall maintain, for a period of 3
years from the date of redemption, a true and proper account of the
exports/supplies made and services rendered towards fulfilment of export
obligation under the scheme. |
| Re-Export of Capital Goods Imported Under EPCG Scheme |
5.16 |
Capital Goods imported under the EPCG scheme, which are found
defective or unfit for use, may be re-exported back to the foreign
supplier within three years from the date of payment of duty on
importation thereof with the permission of the Regional/Customs
Authority. However, in such cases the Authorisation holder shall fulfill
the balance export obligation under the Authorisation from export of
alternate products/ services or the Authorisation holder shall pay duty
equivalent to a proportionate amount of duty saved to the unfulfilled
export obligation under the Authorisation. |
| Replacement of Capital Goods |
5.16.1 |
The Capital Goods imported under the scheme and found defective or
otherwise unfit for use may be exported and Capital Goods in replacement
thereof be imported under the scheme. In such cases, while allowing
export , the Customs shall credit the duty benefit availed which can be
debited again at the time of import of such replaced Capital Goods. |
| Penal Action |
5.17 |
In case of failure to fulfill the export obligation or any other
condition of the Authorisation, the Authorisation holder shall be liable
for action under the Foreign Trade (Development & Regulation) Act, 1992,
the Orders and Rules made there under, the provisions of the Policy and
the Customs Act, 1962. |
| Clubbing of EPCG Authorisations |
5.18 |
The clubbing of two or more EPCG Authorisations of the same
Authorisation holder would be permitted as per the provisions given
herewith. The expiry period mentioned in the subparas of this para would
be with reference to the export obligation period of the EPCG
Authorisation. |
|
5.18.1 |
The accountability of imports and exports shall be restricted to the
items mentioned in the EPCG Authorisations to be clubbed. |
|
5.18.2 |
An application for clubbing can be made only to the regional
authority under whose jurisdiction the Authorisation is issued in ‘Aayaat
Niryaat Form’. Clubbing shall not be permitted in case the
Authorisations are issued by different Regional Authorities. The
concerned Regional Authority would consider the request for clubbing
only on the fulfillment of the following conditions:
- The EPCG Authorisations have been issued during the same
licensing year.
- The EPCG Authorisations have been issued under the same Customs
Notification.
- EPCG Authorisations must be for the export of the same
product(s) or same services.
|
|
5.18.3 |
The total export obligation for the Authorisations so clubbed would
be refixed taking into account the total duty saved or total CIF value
of imports as the case may be of the clubbed Authorisations.
The export obligation period of the clubbed Authorisation would be as
per the policy applicable for the clubbed CIF value/ clubbed duty saved
amount, as the case may be. In case of any discrepancy in the export
obligation periods of the two Authorisations, clubbing would not be
permitted. |
|
5.18.4 |
On clubbing, the Authorisations for all purposes shall be deemed to
be a single EPCG Authorisation issued under the said Customs
Notification and the export obligation period for the clubbed
Authorisation shall be reckoned from the date of issuance of the first
Authorisation. However, in cases where the clubbed CIF/duty saved value
exceeds Rs 100 crore, no corresponding benefit of increase in export
obligation period shall be admissible. |
|
5.18.5 |
The average export obligation to be maintained for the clubbed
Authorisation would be the highest of the average export obligations
endorsed on the individual Authorisations put up for clubbing. |
|
5.18.6 |
No clubbing would be permitted in the case of expired EPCG
Authorisations. In case any specific (as against general extensions
under Para 5.11) export obligation extension has been given for any EPCG
Authorisation, the same Authorisation cannot be considered for clubbing. |
| Refixation of Export Obligation |
5.19 |
- The EPCG Authorisation holder can apply for the refixation of
export obligation as given in para 5.4 (i) of the Policy in the ‘Aayaat
Niryaat Form’.
- Deleted.
- For all the EPCG Authorisations, the Authorisation holder should
have fulfilled the mandated (original or amended, as the case may
be) block wise export obligation at the end of the previous block in
which the application is made. This facility is extended to the
applications made in the extended export obligation period as well.
However, in such cases, extended export obligation period would be
treated as the last block for the purpose of EO re-fixation. In all
such cases, the refixed export obligation would be computed as
under:
(% export obligation unfulfilled) x (8) x (duty saved on the date of
issuance of the Authorisation)
- In cases where the remaining original export obligation period
(and not the extended export obligation period) of the EPCG
Authorisation is less than two years on the date of application for
refixation, and the mandated (original or amended, as the case may
be) block-wise export obligation has been fulfilled, the export
obligation would be refixed at two times the duty saved on the date
of issuance of Authorisation.
- There would be no change in average export obligation fixed or
the export obligation period of the original Authorisation.
- An application under ‘Aayaat Niryaat Form’ can also be made if
the EPCG Authorisation holder has got his average and EPCG export
obligation refixed on account of the change in product/ service as
per the provisions of para 5.4 (i) of the Policy.
|
| Technological Upgradation of Capital Goods |
5.20 |
The EPCG Authorisation holders can opt for the Technological
upgradation of the capital goods imported under the EPCG Scheme as per
the provisions of Para 5.10 of the Policy.
In case an EPCG Authorisation holder wants to upgrade the existing
capital goods imported under the EPCG scheme ,he can opt for the
Technological upgradation subject to the following conditions:
- The capital goods to be imported must be new and technologically
superior to the earlier capital goods. It must be used for the
manufacture of the similar product for which the original EPCG
Authorisation was issued.
- The export obligation for the new capital goods would be the
difference of the sum total of 6 times the duty saved on both the
capital goods and the exports already made under the old capital
goods.
- The export obligation period would be 8 years from the date of
issuance of the new Authorisation.
- The block wise export obligation fulfillment would be as per
Para 5.8 of this Handbook.
- The average export obligation for the upgraded capital goods
would be the same as that of the capital goods being replaced.
The application for technological upgradation of the capital goods
would be made in ‘Aayaat Niryaat Form’.
|
| Import of Refurbished/ Reconditioned Spares and Tools |
5.21 |
The import of refurbished spares as mentioned in paras 5.1 and 5.1A
of the Policy shall be permitted under the EPCG Scheme.
However such refurbished / reconditioned spares must have a residual
life not less than 80% of the life of the original spare which would be
certified by the EPCG Authorisation holder.
The tools imported under the EPCG Scheme may be transferred to any of
the units or group companies of the applicant.
|
| |
5.22 |
Revalidation of Authorisations issued under EPCG scheme shall not be
allowed. |