| 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 a licence may be made
to the licensing authority concerned in the form given in Appendix-9
along with documents prescribed therein. |
| Consideration of Applications |
5.3 |
The applicant may apply for EPCG licence wherein duty
saved amount is Rs. 50 crores, to the Regional Licensing Authority
along with a certificate from the independent chartered engineer on
the proforma annexed to Appendix 9 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 RLA. In such cases, based on the recommendations
of Headquarters EPCG Committee/ approval of competent authority
the concerned RLAs will issue the EPCG licence accordingly. |
|
5.3.1 |
After issuance of an EPCG License wherein duty
saved amount is upto Rs. 50 crores, a Committee of officers of the
RLA, headed by the Head of Office, and the EPCG Committee in the Headquarters
where duty saved amount is more than Rs. 50 Crores, shall finalize
the nexus within the stipulated period of two months on the basis
of the Chartered Engineer’s certificate and on the basis of EPCG nexus
norms maintained by them. While finalizing the nexus, the provisions
contained in the existing Policy/Procedures will be taken into account.
In case, the Committee of officers at RLA fails to finalize the
nexus within two months from the date of issuance of license the
nexus as applied for shall be treated as final.
However, where the application for fixation of nexus is rejected
on account of non-furnishing of documents/information, the license
holder shall be liable to pay customs duty as applicable together
with 15% interest thereon. |
|
5.3.2 |
The licence holder (whether registered with Central
Excise Authority or not) shall produce to the concerned licensing
authority a certificate from the jurisdictional Central Excise authority
confirming installation of capital goods at the factory/ premises
of the licence holder or his supporting manufacture(s)/vendor(s) within
six months from the date of completion of imports However,
service providers, can give a certificate either from the jurisdictional
Excise authority or from an independent chartered engineer confirming
installation of movable and immovable capital goods at the premises
of the service provider. |
|
5.3.3 |
The EPCG licence 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 |
| (i) |
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 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 licence shall
not specify the list of spares but shall indicate:- |
|
| (a) |
Name of plant/machinery for which spares
are required. |
| (b) |
Value of duty saved allowed under the licence. |
| (c) |
Description of product to be exported
with value of export obligation as per the Policy. |
|
| (ii) |
The licensing authority, after issue of EPCG licence
for spare shall forward a copy of licence to concerned Jurisdictional
Central Excise Authority. |
| (iii) |
In case of import of spares for capital
goods, the licence holder (whether registered with Central Excise
Authority or not) shall produce to the licensing authority a
certificate by the jurisdictional central excise authorities
confirming the inventory of spares taken in the records of the
licence holder within one month of the date of completion of
each import. Further at the time of final redemption
of export obligation licence 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 licence
holder. |
|
|
|
However, the service providers, can give a certificate
either from the jurisdictional Excise authority or from an independent
chartered engineer confirming the inventory of spares taken in record
of the licence holder within six months from the date of completion
of imports. |
| EOU/ SEZ Units under EPCG Scheme |
5.4 |
An EOU/ SEZ unit may apply for an EPCG licence
in terms of paragraph 6.20(d) of the Policy. Such application shall
be made in the form given in Appendix-9 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 licensing authority shall issue EPCG
licences based on the "No Objection Certificate" produced from the
concerned Development Commissioner. |
| Indigenous Sourcing of Capital Goods |
5.5 |
The EPCG licence holder intending to source capital
goods indigenously, shall make a request to the licensing authority
for invalidation of the EPCG licence for direct import. The EPCG licence
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 licence or subsequently, the licensing authority shall make the
licence invalid for direct import and issue an invalidation letter,
in duplicate, to the EPCG licence holder. The licensing authority
shall simultaneously grant permission to the EPCG licence 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 licence holder may apply to the licensing
authority in the form given in Appendix-10B for the issuance of Advance
licence for deemed exports for import of inputs including components
required for the manufacture of capital goods to be supplied to the
EPCG licence 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:
| (a) |
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. |
| (b) |
Evidence of payments received through normal banking
channel from the EPCG licence holder in the form given in Appendix-
22A . |
|
| Leasing of Capital Goods |
5.6 |
An EPCG licence 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 licence holder and the leasing company
at the time of import/local supply respectively. However, the EPCG
licence 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 licence 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 licence 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 shall be physical exports. However, deemed
exports as specified in paragraph 8.2 (a), (b), (d), (f), (g) &
(j) of Policy shall also be counted towards fulfillment of export
obligation along with the usual benefits available under paragraph
8.3 of the Policy. Royalty payments received in freely convertible
currency and foreign exchange received for R& D services shall
also be counted for discharge under the EPCG scheme.
Payment received in rupee terms for the port handling services
in terms of Chapter 9 of the Foreign Trade Policy shall also be
counted for export obligation discharge 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, except the EPCG
licences which have been redeemed, shall not be added up for calculating
the average export performance for the purpose of the subsequent
EPCG licence. |
|
5.7.5 |
Where the manufacturer exporter has obtained licences
for the manufacture of the same export product both under EPCG and
the Duty Exemption or Diamond Imprest Licence Scheme or made exports
under DEPB/ DFRC/ Replenishment licences, 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
licence 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 to the
group companies or managed hotels under intimation to the Regional
Licencing Authority.
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 licencing 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 licence holder under the EPCG scheme shall fulfil
the export obligation over the specified period in the following proportions: |
|
|
| Period from the date of issue of
licence |
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 licences, 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
licence |
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 licence holder would intimate the regional licencing
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 licence
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 licences
would be as per the current provision of para 5.18 of this Handbook.However,
wherever Customs duty is to be paid under EPCG scheme, on account
of shortfall in export obligation for regularisation for bonafide
default, the same shall be paid alongwith interest @15% per annum
thereon. This facility shall be available to all pending cases of
regularisation of EPCG licences irrespective of the date of its
issuance". |
| Maintenance of Average |
5.8.5 |
The average exports under the EPCG licence has
to be maintained as per the provisions of para 5.4(i) and 5.9 of the
Policy. However, in case of any shortfall in maintenance of the average
exports below the 75% threshold as given in para 5.9 of the Policy
, the licence holder shall intimate the regional office of the same
at the end of the year of the shortfall giving a valid justification. |
| Monitoring of Export Obligation |
5.9.1 |
The licence holder shall submit to the licensing authority,
report on the progress made in fulfillment of export obligation against
the licence issued to him. The report shall be submitted in the form
given in Appendix-9A. The periodicity of the report shall be yearwise.
The licensing 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 licence issued under the scheme
has actually been utilized for import of a value in excess/deficit
of 10% of the CIF value of the licence, licence shall be deemed to
have been enhanced by that proportion. The Customs shall automatically
allow the clearance of goods in excess/deficit of 10% of the licence
value without endorsement by the licensing authority.
In such cases, the licence holder shall furnish additional fee
to cover the excess CIF value of imports effected subsequently.
The export obligation shall automatically stand enhanced proportionately. |
|
5.10.1 |
Similarly, if the EPCG licence holder has utilised
the licence less than the value earmarked in the licence, his export
obligation shall stand reduced on prorata basis with reference to
actual utilisation of licence. |
| Extension of Export Obligation Period |
5.11 |
The regional licencing authority, on merits may consider
one or more request for extension in export obligation period, including
extension for year(s) or a block of year(s), for fulfilment of export
obligation subject to the condition that extension of export obligation
shall not exceed a total period of one /two year as per relevant Customs
notifications from the date of expiry of the export obligation period.
The extension in export obligation period shall be subject to
such terms and conditions as may be prescribed by the competent
authority. Wherever the export obligation period is extended, the
licence holder shall be required to maintain average export obligation
during the extended period as well. |
|
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, 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 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 licencing authority may also consider
condonation of shortfall upto 5% in the export obligation subject
to such terms and conditions as may be prescribed by them. |
| Redemption |
5.13 |
As evidence of fulfillment of export obligation, the
licence holder shall furnish the following documents; |
|
|
| (a) |
For Physical Exports:
A consolidated statement of exports made in the form given
in Appendix-9A, 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 Appendix-9A
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 licence 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. |
| (b) |
For Deemed Exports: |
|
| (i) |
Copy of ARO/ Back to Back Inland letter
of Credit or Advance Licence for Intermediate Supplies
or Supply invoices or ARE 3 duly certified by the Bond
Office of EOU concerned showing that supplies have been
received; |
| (ii) |
The licensee shall also furnish the evidence
of having received the payment through normal banking
channel in the form given in Appendix- 22A or a self certified
copy of payment certificate issued by the Project authority
concerned in the form given in Appendix-12A. |
|
| (c) |
For Services rendered:
Consolidated statement or individual statements (bank/authorised
dealer wise) of services rendered in the form given in Appendix-9B,
duly certified by a Chartered Accountant and bank/ authorised
dealer evidencing foreign exchange earning received through
normal banking channel. |
|
|
|
On being satisfied, the licensing authority shall issue
a certificate of discharge of export obligation to the EPCG Licence
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 licence holder fails to fulfil
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. |
| Maintenance of Records |
5.15 |
Every EPCG licence 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 Licensing/Customs
Authority |
| Replacement of Capital Goods |
5.16.1 |
The Capital Goods imported under the scheme and found
defective or otherwise unfit for use may be re-exported and Capital
Goods in replacement thereof be imported under the scheme. In such
cases, while allowing re-export, the Customs shall recredit 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 fulfil the export obligation
or any other condition of the licence, the licence holder shall be
liable for action under the Foreign Trade (Development & Regulation)
Act, 1992, the Orders and Rules made thereunder, the provisions of
the Policy and the Customs Act, 1962. |
| Clubbing of EPCG licences |
5.18 |
The clubbing of two or more EPCG licences of the same
licence 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 licence. |
|
5.18.1 |
The accountability of imports and exports shall
be restricted to the items mentioned in the EPCG licences to be clubbed. |
|
5.18.2 |
An application for clubbing can be made only to the
regional licencing authority under whose jurisdiction the licence
is issued in Appendix 9-C. Clubbing shall not be permitted in case
the licences are issued by different RLA’s. The concerned RLA would
consider the request for clubbing only on the fulfillment of the following
conditions: |
|
|
| (a) |
The EPCG licences have been issued during the
same licencing year, |
| (b) |
The EPCG licences have been issued under the
same Customs Notification, |
| (c) |
The EPCG licences must be for the export of the
same product(s) or same services . |
|
|
5.18.3 |
The total export obligation for the licences 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 licences.
The export obligation period of the clubbed licence 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 licences, clubbing would
not be permitted. |
|
5.18.4 |
On clubbing, the licences for all purposes shall be
deemed to be a single EPCG licence issued under the said Customs Notification
and the export obligation period for the clubbed licence shall be
reckoned from the date of issuance of the first licence. |
|
5.18.5 |
The average export obligation to be maintained for
the clubbed licence would be the highest of the average export obligations
endorsed on the individual licences put up for clubbing. |
|
5.18.6 |
No clubbing would be permitted in the case of
expired EPCG licences. In case any specific (as against general extensions)
export obligation extension has been given for any EPCG licence, the
same licence cannot be considered for clubbing . |
| Refixation of Export Obligation |
5.19 |
| (a) |
The EPCG licence holder can apply for the refixation
of export obligation as given in para 5.4 (i) of the Policy
in the form at Appendix 9 D . |
| (b) |
In case of all EPCG licences where the application
is made for re-fixation within two years of its issuance, the
export obligation shall be automatically refixed based on 8
times the duty saved on the date of issuance of licence. |
| (c) |
For all other EPCG licences, the licence holder
should have fulfilled the mandated blockwise export obligation
at the end of the particular block in which the application
is made. For example if the licence holder applies in the 3rd-4th
year block for an EPCG licence with an export obligation period
of 8 years, he should have fulfilled 15% of the original export
obligation . In 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 licence) |
| (d) |
In cases where the remaining export obligation
period of the EPCG licence is less than 2 years on the date
of application for refixation, and the mandated blockwise export
obligation has been fulfilled, the export obligation would be
refixed at two times the duty saved on the date of issuance
of licence. |
| (e) |
There would be no change in average export obligation
fixed or the export obligation period of the original licence. |
| (f) |
An application under Appendix 9 D can also
be made if the EPCG licence 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 licence holders can opt for the Technological
Up gradation of the capital goods imported under the EPCG Scheme as
per the provisions of Para 5.10 of the Policy.
In case an EPCG licence holder wants to upgrade the existing capital
goods imported under the EPCG scheme ,he can opt for the Technological
Up gradation subject to the following conditions: |
|
|
| (i) |
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 licence was issued. |
| (ii) |
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. |
| (iii) |
The export obligation period would be 8 years
from the date of issuance of the new licence. |
| (iv) |
The block wise export obligation fulfillment
would be as per Para 5.8 of this Handbook. |
| (v) |
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 Appendix 9 E of the Handbook (Vol 1). |
| 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 licence holder.
The tools imported under the EPCG Scheme may be transferred to
any of the units or group companies of the applicant . |
