EXPORT PROMOTION CAPITAL GOODS SCHEME
AND IMPORTS THEREUNDER

Under the Export Promotion Capital Goods Scheme import of capital goods for pre production, production and post production (including CKD/SKD thereof as well as computer software systems) is allowed at 5% Customs duty subject to an export obligation equivalent to 8 times of duty saved on capital goods imported under EPCG scheme to be fulfilled over a period of 8 years reckoned from the date of issuance of Authorisation.  

The capital goods shall include spares, (including refurbished/ reconditioned spares) jigs, fixtures, dies and moulds. EPCG Authorisation may also be issued for import of components of such capital goods required for assembly or manufacturer of capital goods by the  Authorisation holder.  

Second hand capital goods without any restriction on age may also be imported under the EPCG scheme.

Spares (including refurbished/ reconditioned spares), tools, spare refractories, catalyst & consumable for the existing plant and machinery imported/to be imported under the Scheme shall also be allowed subject to an export obligation equivalent to 8 times of duty saved to be fulfilled over a period of 8 years reckoned from the date of issuance of Authorisation.

Import by Agro Units

In the case of agro units, import of capital goods at 5% Customs duty shall be allowed subject to a fulfillment of an export obligation equivalent to 6 times the duty saved (on capital goods imported under the Scheme) over a period of 12 years from the date of issue of Authorisation.

Import by SSI Units

However for SSI units, import of capital goods at 5% Customs duty shall be allowed subject to a fulfillment of an export obligation equivalent to 6 times the duty saved (on capital goods imported under the Scheme) over a period of 8 years from the date of issue of Authorisation provided the landed CIF value of such imported Capital Goods under the Scheme does not exceed Rs. Twenty Five Lakhs and the total investment in plant and machinery after such imports does not exceed the SSI limit.

However, in respect of EPCG Authorisations with a duty saved value of Rs. 100 crore or mote, the same export obligation shall be required to be fulfilled over a period of 12 years.

Other Provisions

In case CVD is paid in cash on imports under EPCG, the incidence of CVD would not be taken for computation of net duty saved provided the same is not CENVATed .

The capital goods shall include spares, (including refurbished/ reconditioned spares) jigs, fixtures, dies and moulds. EPCG Authorisation may also be issued for import of components of such capital goods required for assembly or manufacturer of capital goods by the  Authorisation holder.

Second hand capital goods without any restriction on age may also be imported under the EPCG scheme.

However, import of motor cars, sports utility vehicles/all purpose vehicles shall be allowed only to hotels, travel agents, tour operators or tour transport operators and companies owning/operating golf resorts whose total foreign exchange earning from the hotel, travel & tourism and golf tourism sectors in the current and preceding three Regional years is Rs 1.5 crores or more. The ‘duty saved’ amount on all EPCG Authorisations issued in a Regional year for import of motor cars, sports utility vehicles/all purpose vehicles shall not exceed 50% of the average foreign exchange earnings from the hotel, travel & tourism and golf tourism sectors in the preceding three Regional years. However, the parts of motor cars, sports utility vehicles/ all purpose vehicles such as chassis etc. cannot be imported under the EPCG Scheme.

Import of Restricted items of imports mentioned under ITC(HS) shall only be allowed to be imported under the Scheme after approval from the Import Licensing Committee.

Spares (including refurbished/ reconditioned spares), tools, spare refractories, catalyst & consumable for the existing plant and machinery may also be imported under the EPCG Scheme subject to an export obligation equivalent to 8 times of duty saved to be fulfilled over a period of 8 years reckoned from the date of issuance of Authorisation.

EPCG for Projects

An EPCG authorization can also be issued for import of capital goods for supply to projects notified by the Central Board of Excise and Customs under S.No 441 of Customs Exemption Notification No 21/2002 dated 01.03.2002 wherein the basic customs duty on imports is 10% with a CVD of 16%.

The export obligation for such EPCG Authorisations would be eight times the duty saved. The duty saved would be the difference between the effective duty under the aforesaid Customs Notification and the concessional duty under the EPCG Scheme

EPCG for Retail Sector

To create modern infrastructure in the retail sector, concessional duty benefits under EPCG scheme shall be extended for import of capital goods required by retailers having minimum area of 1000 sq meters.  The retailer shall fulfil the export obligation i.e. 8 times the duty saved in 8 years.

Eligibility

Manufacturer exporters with or without supporting manufacturer(s)/vendor(s), mer­chant exporters tied to supporting manufacturer(s) and service providers are eligible for the EPCG Scheme.

Conditions for import of Capital Goods

Import of capital goods shall be subject to Actual User condition till the export obligation is completed.

Export obligation

The following conditions shall apply to the fulfilment of the export obligation :­

(i)         The export obligation shall be fulfilled by the export of goods capable of being manufactured or pro­duced by the use of the capital goods imported under the scheme.

The export obligation may also be fulfilled by the export of same goods, for which EPCG Authorisation has been obtained, manufactured or produced in different manufacturing units of the Authorisation holder/specified supporting manufacturer (s).

When Capital Goods are imported for pre/ post- production or license is taken for import of spares, the license holder shall fulfill the export obligation by export of products manufactured from the plant / project to which the pre/ post- production capital goods/ spares are related.

The export obligation under the scheme shall be, over and above, the average level of exports achieved by him in the preceding three licensing years for same and similar products except for categories mentioned in Handbook (Vol.I).

Alternatively, export obligation may also be fulfilled by exports of other goods manufactured or service provided by the same firm/ company or group company which has the EPCG Authorisation.

However, in such cases, the additional export obligation im­posed under EPCG scheme shall be over and above the average exports achieved by the unit/ company / managed hotel in preceding three years for both the original and the substitute product(s) /service (s) even in cases where the average is exempt for the substitute product (s)/ service (s) as given in sub-para (vi) of paragraph “Condition of Fulfillment of Export Obligation” of this chapter.

The incremental exports to be fulfilled by the Authorisation holder for fulfilling the remaining export obligation can include any combination of exports of the original product/ service and the substitute product (s)/ service (s). The exporter of goods can opt to get the export obligation refixed for the export of services and vice versa.

The Authorisation holder can also opt for the re-fixation of the balance export obligation based on the 8 times of the duty saved amount for the CIF value in proportion to the balance Export obligation under the scheme.

The aforesaid facilities shall only be available to manufacturer exporters/service provider on all the Authorisations where export obligation period including extended export obligation period valid on the date of application. In this regard, exports made only on or after submission of application for alter­nate item and/ or re-fixation of the export obligation based on duty saved amount will be taken into account for fulfilment of export obligation.

(ii)        The export obligation under the scheme shall be, in addition to any other export obligation under­taken by the importer, except the export obligation for the same product under Advance Authorisation, DFRC, DEPB or Drawback scheme.

(iii)       The export obligation can also be fulfilled by the supply of ITA-1 items to the DTA provided the realization is in free foreign exchange.

(iv)        Exports shall be physical exports. However, deemed exports as specified in sub-paras (a), (b), (d), (f), (g) & (j) of paragraph “Categories of Supply” of chapter “Deemed Exports” of this book,  shall also be counted towards fulfilment of export obligation alongwith the usual benefits available under paragraph “Bebefits for Deemed Exports” of Chapter “Deemed Exports” of this book.

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.

Payments received against ‘Counter Sales’ in free foreign exchange through banking channels as per the RBI guidelines shall be counted for fulfillment of export obligation   under Para “EPCG for Retail Sector” above.                             

Provisions for BIFR Units

Any firm/company registered with BIFR or any firm! company acquiring a unit, which is under BIFR shall be allowed EO extension as per the rehabilitation package prepared by the operating agency subject to sub­sequent approval of BIFR. However, in cases where the rehabilitation package does not specify the EO ex­tension period, a time period up to 12 years reckoned from the date of issue of Authorisation would be permitted on merits of the case for fulfilment of export obligation.

Similarly, Small Scale units shall also be entitled for similar facility as per the rehabilitation scheme of the concerned State Government. However, in cases where the State rehabilitation scheme does not specify the EO extension period, a time period up to 12 years reckoned from the date of issue of Authorisation would be permitted on merits of the case for fulfilment of export obligation.

EPCG for Agro Units

In the case of EPCG Authorisations issued to agro units in the agri export zones, a period of 12 years reckoned from the date of issue of the Authorisation would be permitted for the fulfilment of export obligation.

The agro units in the agri export zones would also have the facility of moving the capital good (s) imported under the EPCG within the agri export zone.

An LUT/ Bond or a 15% BG (as the case may be)  may be given for EPCG Authorisation granted to units in the Agri Export Zones provided the EPCG Authorisation is taken for export of the primary agricultural product (s) notified in Appendix 8 of Handbook of Procedures or their value added variants.

Indigenous Sourcing of Capital Goods

A person holding an EPCG Authorisation may source the capital goods from a domestic manufacturer instead of importing them.

The domestic manufacturer supplying capital goods to EPCG Authorisation holders shall be eli­gible for following deemed export benefits –

(a) Advance Authorisation

(b) Deemed Export Drawback.

(c) Exemption from terminal excise duty where supplies are made against International Competitive Bidding. In other cases, refund of terminal excise duty will be given.

Benefits to Domestic Supplier

In the event of a firm contract between the EPCG Authorisation holder and domestic manufacturer for such sourc­ing, the domestic manufacturer may apply for the issuance of Advance Authorisation for deemed exports for the import of inputs including components required for the manufacturer of said capital goods.

The domestic manufacturer may also replenish the inputs including components after supply of capital goods to the EPCG Authorisation holders.

Fixation of Export Obligation

In case of direct imports, the export obligation relating to the EPCG lAuthorisation shall be reckoned with refer­ence to the duty saved value on the CIF value of capital goods (including spares, jigs, fixtures, dies and moulds) actually imported. In case of domestic sourcing, the export obligation relating to EPCG shall be reckoned with reference to the notional Customs duties saved on the FOR of capital goods (including spares, jigs, fixtures, dies and moulds).

Service provider in Agri export zone shall have the facility to move or shift the capital goods within the zone provided he maintains accurate record of such movements. However, such equipments shall not be sold or leased by the Authorisation holder.

Maintenance of Average exports under EPCG

As per the provisions of sub-para (i) of paragraph “Export Obligation” of this Chapter, the EPCG Authorisation holder would have to maintain the average level of exports equivalent to the average of the exports in the preceding three licencing years for the same and similar products except for exempted categories given in Handbook (Vol 1) during the entire period of export obligation.

Notwithstanding the above, the Authorisation holder shall maintain at least 75% of the average exports in any particular year (s) provided the same is offset by excess exports to fulfil the average in other year (s).

Technological Upgradation of existing EPCG machinery

EPCG Authorisation holders can opt for Technological Upgradation of the existing capital good imported under the EPCG Authorisation.

The conditions governing the Technological Upgradation of the existing capital good are as under:

(i)                 The minimum time period for applying for Technological Upgradation of the existing capital good imported under EPCG is 5 years from the date of issuance of the Authorisation.

(ii)               The minimum exports made under the old capital good must be 40% of the total export obligation imposed on the first EPCG Authorisation.

(iii)             The export obligation would be refixed such that the total export obligation mandated for both the capital goods would be the sum total of 6 times the duty saved on both the capital goods.

(iv)              The procedure governing the replacement of capital good is given in paragraph “Technological upgradation of Capital Goods” of this chapter.

(v)                The facility for technological upgradation shall be available only once and the minimum imports to be made shall be at least 10% of the existing investment in plant and machinery by the applicant firm.

Incentives for Fast Track Companies

To incentivise fast track companies with a view to accelerate exports under the Scheme, in cases where the Authorisation holder has fulfilled 75% or more of the export obligation under the Scheme (including average level of exports) in half or less than half the original export obligation period specified in the Authorisation, the remaining export obligation shall be condoned and the Authorisation redeemed by the regional authority concerned.

However no benefits of Export Obligation Shortfall discussed in this Chapter shall be available in such cases.

Application Form

An application for the grant of an Authorisation may be made to the Regional authority concerned in the form namely ‘Aayaat Niryaat Form’ along with documents prescribed therein.

Consideration of Applications

The applicant may apply for EPCG Authorisation wherein duty saved amount is Rs. 50 crores, to the Regional 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 RLA. In such cases, based on the recommendations of Headquarters EPCG Committee/ approval of competent authority the concerned RLAs will issue the EPCG Authorisation accordingly.

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 of Handbook of Procedures, issue the EPCG Authorisation and thereafter forward a copy of the EPCG Authorisation to the concerned Jurisdictional Central Excise Authority.

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.

The EPCG Authorisation shall be issued with a single port of registration mentioned in paragraph “Port of Registration” of chapter “Duty Exemption/Remission Scheme” of this book 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 the said para “Port of Registration”

(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 Authorisation 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 Authorisation.

(c)   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

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

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.

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.

The indigenous manufacturer intending to supply capital goods to the EPCG Authorisation holder may apply to the Regional authority in the Aayaat Niryaat Form for the issuance of Advance Authorisation for deemed exports 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

For the purpose of claiming benefit of deemed exports, the indigenous supplier of capital goods is required to 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 Authorisation holder in the form given in Appendix- 22B of Handbook of Procedures.

Leasing of Capital Goods

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

In addition to the conditions mentioned in paragraph “Export Obligation” above, the following conditions shall also be applicable for fulfilment of export obligation under the scheme :­

i)          The exports shall be direct exports in the name of the EPCG Authorisation holder. However, the export through third party(s) is also allowed 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.

ii)          Export proceeds shall be realised in freely convertible currency except for deemed exports under sub-para (iii) of paragraph “Condition for Fulfillment of Export Obligation” of this Chapter.  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.

iii)         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.

iv)         The supplies made to the Oil and Gas sector also may be counted towards discharge of export obligation against an EPCG Authorisation provided the authorisation 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.

v)          Wherever average level of export obligation was fixed taking into account the exports made to former USSR or to such countries as are 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 Authorisations, which have not been redeemed/regularised. However, exports made against any EPCG 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.

vi)         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 exports made under DEPB/DFRC/Replenishment Authorisations, the physical exports or deemed exports for categories mentioned in paragraph iii) above,  made under these schemes,  shall also be counted towards the discharge of the export obli­gation under EPCG scheme.

vii)        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 the paragraph “EPCG Scheme” above, but the Authorisation holder shall not be required to maintain the average level of exports as specified in paragraph “Export Obligation” above.

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 licencing years in respect of goods proposed to be exported for discharge of export obligation.

viii)       The Export Obligation shall be fulfilled as per conditions given in para “Export Obligation” above.

Fulfillment Of Export Obligation

The Authorisation holder under the EPCG scheme is required to fulfil the export obligation over the specified period in the following proportions:

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 :-

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.

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.

However, the licences/authorisations issued under the scheme upto 31.3.2000 shall be governed by provisions laid down in para “Maintenance of Accounts” of chapter “Export Oriented Units (EOUs), Electronic Hardware Technology Parks (EHTPs), Software Technology Parks (STPs) and Bio-Technology Parks (PTPs)” of this book. Notwithstanding the provisions in Handbook (Vol.1) (RE-99), the licence/authorisation holder shall not have to surrender Special Import Authorisation in case of valuewise shortfall.

Licences issued from 1^st April, 2000 upto 31^st 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 1^st April, 2002 upto 31^st August, 2004 shall be governed by the provisions of paragraph “Fulfillment of Export Obligation” of this chapter, 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 “Clubbing of EPCG Authorisations” below.

Maintenance of Average

The average exports under the EPCG Authorisation has to be maintained as per the provisions of sub-para (i) of paragraph “Export Obligation” and paragraph “Maintenance of Average Exports under EPCG” of this chapter.

Monitoring of Export Obligation

The Authorisation holder shall submit to the Regional authority by 30^th 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

If the Authorisation issued under the scheme has actually been utilized for import of a value in excess/deficit of 10% of the CIF value 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/deficit of 10% of the Authorisation value 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.

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

The concerned Regional authority, may consider one or morerequest 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 authorization 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.

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

The regional 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

As evidence of fulfillment of export obligation, the Authorisation holder shall furnish the following documents;

(a) 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..

 (b) For Deemed Exports:

(i)                 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;

(ii)               The Authorisation holder shall also furnish the evidence of having received the payment through normal banking channel in the form given in Appendix- 22B of Handbook of Procedures or a self certified copy of payment certificate issued by the Project authority concerned in the form given in Appendix-22 C of Handbook of Procedures..

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.

(c) For Services rendered:

Consolidated statement or individual statements (bank/authorised dealer wise) of services rendered duly certified by a Chartered Accountant and bank/ authorized 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 Bona fide Default

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. 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

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

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

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

In case of failure to fulfil 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 thereunder, the provisions of the Export and Import Policy and the Customs Act, 1962.

Clubbing of EPCG Authorisations

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 sub-paras of this para would be with reference to the export obligation period of the EPCG Authorisation.

The accountability of imports and exports shall be restricted to the items mentioned in the EPCG Authorisations to be clubbed.

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:

(a) The EPCG Authorisations have been issued during the same licensing year.

(b) The EPCG Authorisations have been issued under the

same Customs Notification,

(c) EPCG Authorisations must be for the export of the same product(s) or same services.

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. 

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.

The average export obligation to be maintained for the clubbed Authorisation would be the same average export obligation as was the case with the individual Authorisations prior to clubbing.

No clubbing would be permitted in the case of expired EPCG Authorisations. In case any specific (as against gen­eral extensions) export obligation extension has been given for any EPCG Authorisation, the same Authorisation cannot             be considered for clubbing.

Refixation of Export Obligation

a)     The EPCG Authorisation holder can apply for the refixation of export obligation as given in sub-para (i) of para “Export Obligation” of this Chapter in the Aayaat Niryaat Form.

b)     For all the EPCG Authorisations, the Authorisationholder 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: