Zero duty EPCG scheme allows import of capital goods for preproduction, production and post production (including

CKD/SKD thereof as well as computer software systems) at zero Customs duty, subject to an export obligation equivalent to 6 times of duty saved on capital goods imported under EPCG scheme, to be fulfilled in 6 years reckoned from Authorization issue-date. The scheme will be available for exporters of engineering & electronic products, basic chemicals & pharmaceuticals, apparels & textiles, plastics, handicrafts, chemicals & allied products, leather & leather products, paper & paperboard and articles thereof, ceramic products, refractories, glass & glassware, rubber & articles thereof, plywood and allied products, marine products, sports goods and toys subject to exclusions as provided in HBP Vol. I. Validity period for import of capital goods and provision for extension in export obligation period will be as separately provided in the HBP Vol. I. All other provisions pertaining to concessional 3% duty EPCG scheme under this Chapter, to the extent they are not inconsistent with the above provisions of

Concessional 3% Duty EPCG 5.2 Scheme

zero duty EPCG scheme, shall be applicable to the zero duty EPCG scheme also. The zero duty EPCG scheme will be in operation till 31.3.2012. Concessional 3% duty EPCG scheme allows import of capital goods for pre-production, production and post production (including CKD/SKD thereof as well as computer software systems) at 3% Customs duty, subject to an export obligation equivalent to 8 times of duty saved on capital goods imported under EPCG scheme, to be fulfilled in 8 years reckoned from Authorization issue-date. In case of agro units, and units in cottage or tiny sector, import of capital goods at 3% Customs duty shall be allowed subject to fulfillment of export obligation equivalent to 6 times of duty saved on capital goods imported, in 12 years from Authorization issue-date. For SSI units, import of capital goods at 3% Customs duty shall be allowed, subject to fulfillment of export obligation equivalent to 6 times of duty saved on capital goods, in 8 years from Authorization issue- date, provided the landed cif value of such imported capital goods under the scheme does not exceed Rs. 50 lakhs and total investment in plant and machinery after such imports does not exceed SSI limit. However, in respect of EPCG Authorization with a duty saved amount of Rs. 100 crores or more, export obligation shall be fulfilled in 12 years. In case CVD is paid in cash on imports under EPCG, incidence of CVD would not be taken for computation of net duty saved, provided the same is not CENVATed. Capital goods shall include spares (including refurbished/reconditioned spares), tools, jigs, fixtures, dies and moulds. Second hand capital goods, without any restriction on age, may also be imported under 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, subject to the condition that: 1. total foreign exchange earning from hotel, travel &

tourism and golf tourism sectors in current and preceding three licensing years is Rs. 1.5 crores or more. 2. duty saved amount on all EPCG Authorizations issued in a licensing year for import of motor cars, sports utility vehicles/ all purpose vehicles shall not exceed 50% of average foreign exchange earnings from hotel, travel & tourism and golf tourism sectors in preceding three licensing years. 3. vehicles imported shall be so registered that the vehicle is used for tourist purpose only. A copy of the Registration certificate should be submitted to concerned RA as a confirmation of import of vehicle. However, 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 under EPCG Scheme after approval from EFC at Headquarters.

EPCG for Projects

Spares (including refurbished/reconditioned spares), moulds, dies, jigs, fixtures, tools, refractory for initial lining and catalyst for initial charge; for existing plant and machinery (imported earlier, under EPCG or otherwise), shall be allowed to be imported under the EPCG scheme subject to an export obligation equivalent to 50% of the normal export obligation prescribed in para 5.1 and 5.2 above (for import of capital 5.2A goods), to be fulfilled in 8 years (6 years for zero duty EPCG scheme), reckoned from Authorization issue date. This would however be subject to the condition that the c.i.f. value of import of the above spares etc. will be limited to 10% of the value of plant and machinery imported under the EPCG scheme. In case of plant and machinery not imported under the EPCG scheme, c.i.f. value of import of the spares etc. will be limited to 10% of the book value of the plant and machinery. An EPCG Authorization can also be issued for import of capital goods under Scheme for project Imports notified by the Central Board of Excise and Customs under S.No.441 of Customs Exemption Notification No. 21/2002 dated 01.03.2002 5.2B Export obligation for such EPCG Authorizations would be eight times (6 times for zero duty EPCG scheme) of duty saved. Duty saved would be difference between the effective duty under aforesaid Customs Notification and concessional duty under the

EPCG Scheme. To create modern infrastructure in retail sector,concessional duty benefits under EPCG scheme shall be extended for import EPCG for 5.2C of capital goods required by retailers having minimum area of 1 Retail Sector 000 sq. meters. Such retailer shall fulfill export obligation i.e. 8 times of duty saved, in 8 years. EPCG Authorization can also be issued for annual requirement to Status Certificate Holders and all other categories of EPCG exporters having past export performance (in preceding two Authorization 5.2D years), both under zero duty and 3% duty Schemes. The annual for Annual entitlement in terms of duty saved amount shall be upto 50% of Requirement FOB value of Physical Export and / or FOR value of Deemed Export, in preceding licensing year. EPCG scheme covers manufacturer exporters with or without supporting manufacturer(s)/ vendor(s), merchant exporters tied to supporting manufacturer(s) and service providers. Export Promotion Capital Goods (EPCG) Scheme also covers a service provider who is designated / certified as a Common Service Provider (CSP) by the DGFT, Department of Commerce or State Industrial Infrastructural Corporation in a Town of Export Excellence subject to provisions of Foreign Trade Policy/Handbook of Procedures with the following conditions:1. EPCG licence to be given to the CSP should have a clear endorsement giving the details of the users and the quantum of Export Obligation (EO) which each user would fulfill; 2. Such exports will not count towards fulfillment of other specific export obligations ; and 3. Each one of the users of the CSP apart from the CSP should furnish 100% Bank Guarantee (BG) equivalent to their portion of duty foregone apportioned in terms of quantum of EO to be discharged by them and the B.G. will be enforced in the event of the obligation not being fulfilled

Eligibility

5.3

Conditions for import of 5.4 Capital Goods Export 5.5 obligation

Import of capital goods shall be subject to Actual User condition till export obligation is completed. Following conditions shall apply to the fulfillment of the export obligation:-

1. Export Obligation shall be fulfilled by export of goods manufactured/services rendered by the applicant. 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 the same and similar products within the overall export obligation period including extended period, if any; except for categories mentioned in paragraph 5 .7.6 of HBP v1. Such average would be the arithmetic mean of export performance in the last three years for the same and similar products provided that Premier Trading House (PTH) shall have option of fixing average level of exports based on arithmetic mean of export performance in the last five years instead of three years. Upto 50% Export Obligation may also be fulfilled by exports of other good(s) manufactured or service(s) provided by the same firm / company, or group company / managed hotel, which has the EPCG authorization. However, EPCG authorization issued prior to 1 .4.2008 will be governed by earlier policy provisions. However, in such cases, additional export obligation imposed shall be over and above average exports achieved by the unit / company / group company /managed hotel in preceding three years for both the original and the substitute product(s) / service(s), despite exemptions in Para 5.7.6 of HBP v1. 2. Shipments under Advance Authorization, DFRC,DFIA, DEPB or Drawback scheme, or incentive schemes under Chapter 3 of FTP; would also count for fulfillment of EPCG export obligation. 3. Export obligation can also be fulfilled by the supply ITA-I items to DTA, provided realization is in free foreign exchange. 4. Exports shall be physical exports. However, deemed exports as specified in paragraph 8.2 (a), (b), (d) (f), (g) & (j) of FTP shall also be counted towards fulfillment of export obligation, alongwith usual benefits available under paragraph 8.3 of FTP. Royalty payments received in freely convertible currency and foreign exchange received for R&D services shall also

be counted for discharge under EPCG. Payment received in rupee terms for port handling services, in terms of Chapter 9 of FTP shall also be counted for export obligation discharge.

Provision for BIFR units

Any firm/ company registered with BIFR or any firm/ company acquiring a unit, which is under BIFR, may be allowed EO extension, as per rehabilitation package prepared by operating agency and approved by BIFR/Rehabilitation Department of 5.5.1 State Government, upto 12 years if not specified.

Above provisions apply also to SSI units as per rehabilitation scheme of concerned State government. LUT/Bond or 15 % BG ( as applicable) may be given for EPCG Authorization granted to units in Agri Export Zones provided EPCG for agro 5.5.2 units EPCG Authorization is taken for export of primary agricultural product(s) notified in Appendix 8 or their value added variants. Indigenous A person holding an EPCG Authorization may source capital Sourcing of goods from a domestic manufacturer. Such domestic Capital Goods manufacturer shall be eligible for deemed export benefit under and 5.6 paragraph 8.3 of FTP. Such domestic sourcing shall also be benefits to permitted from EOUs and these supplies shall be counted for purpose of fulfillment of positive NFE by said EOU as provided Domestic Supplier in Para 6.9 (a) of FTP. Fixation of Export Obligation In case of direct imports, export obligation shall be reckoned with reference to actual duty saved amount. In case of domestic sourcing, export obligation shall be reckoned with reference to notional Customs duties saved on FOR value. EPCG Authorization holders can opt for Technological Upgradation of existing capital good imported under EPCG Authorization. Conditions governing Technological Up-gradation of existing capital goods are as under: Technological Upgradation of existing 5.8 EPCG machinery 1. Minimum time period for applying for Technological Upgradation of existing capital goods imported under EPCG is 5 years from Authorization issue date. 2. Minimum exports made under old capital goods must be 4 0% of total export obligation imposed on first EPCG Authorization. 3. Export obligation would be re-fixed such that total export obligation mandated for both capital goods would be sum total of 6 times of duty saved on both the capital

5.7

goods, to be fulfilled in 8 years from new authorization issue-date. 4. Facility for technological up-gradation shall be available only once and the minimum imports to be made shall be at least 1 0% of the existing investment in plant and machinery by applicant. 5. Capital Goods to be imported must be new and technologically superior to earlier CG. To incentivize fast track companies with a view to accelerate exports, in cases where Authorization holder has fulfilled 75% or more of specific export obligation and 100% of Average Export Obligation till date, if any, in half or less than half the original export obligation period specified, remaining export obligation shall be condoned and the Authorization redeemed by RA concerned. However no benefits under Para 5.12 of HBP Vol. I shall be available in such cases.

Incentives for Fast 5.9 Track Companies

EPCG terms

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 subpara (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. 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. 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.

(iii) (iv)

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. The minimum exports made under the old capital good must be 40% of the total export obligation imposed on the first EPCG Authorisation. 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. The procedure governing the replacement of capital good is given in paragraph Technological upgradation of Capital Goods of this chapter. 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.

(ii)

(iii)

(iv)

(v)

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. 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. 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. 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. 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. 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. 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

ii)

iii) iv)

v)

vi)

vii)

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: Period from the date of issue of Authorisation st th Block of 1 to 6 year th th Block of 7 and 8 year Minimum export obligation to be fulfilled 50% 50%

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 Block of 1st to 10th year th th Block of 11 and 12 year Minimum export obligation to be fulfilled 50% 50%

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 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 1 April, 2002 upto 31 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
st st

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 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 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) (ii)

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 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. 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:

b)

(% export obligation unfulfilled) x (8) x (duty saved on the date of issuance of the Authorisation)
c) In cases where the remaining original export obligation period (and not the extended export obligation period) of the EPCG Authorisation is less than 2 years on the date of application for refixation, and the mandated(original or amended, as the case may be) blockwise 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.

d)

e)

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 sub-para (i) of paragraph Export Obligation of this Chapter. Technological Upgradation of Capital Goods The EPCG Authorisation holders can opt for the Technological Up gradation of the capital goods imported under the EPCG Scheme as per the provisions of Para Technological Upgradation of existing EPCG Machinery of this chapter. In case an EPCG Authorisation 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 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 Fulfillment of Export Obligation of this Chapter.

(ii)

(iii)

(iv)

(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 Aayaat Niryaat Form. Import of Refurbished/ Reconditioned Spares and Tools The import of refurbished spares 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.
Revalidation of Authorisations issued under EPCG scheme shall not be allowed.

Who are eligible to avail of the EPCG Scheme?

A.

The manufacturers, Exporters and Merchant Exporters are eligible to avail of this Scheme.

Q.2

How to obtain an Import Licence under the EPCG Scheme?

A.

The eligible persons who desire to operate under the EPCG Scheme should make an application in the form given in Appendix 10 A of the Hand Book alongwith documents prescribed therein too the Director General of foreign Trade (DGFT) or to the regional Licensing authorities along with necessary information/documents to obtain an Import licence. Licences are issued, under this scheme by the director general of foreign trade or his regional officers depending upon the value of the licence subject to execution of legal undertaking and bank guarantee by them undertaking among other things to fulfill their export obligation within the specified period. The import licences issued under this scheme shall be deemed to be valid for the goods already shipped/ arrived provided, the customs duty has not been paid for the goods have not been cleared from the customs.

Q.3

What are the duty concessions available and Export obligation to be fulfilled under the EPCG scheme?

Customs Duty

Export Obligation FOB Basis NFE Basis

Period

10%

4 times cif value of CG Not applicable

5 years

il duty (in case CIF value is 6 times cif value of CG 5 times cif value of 8 years Rs.20 crore or more) CG (a) Nil duty in case CIF Value is Rs.1 crore or 6 times cif value of CG 6 years more for electronics, food 6 times cif value of processing, textiles, CG plastics, leather, sports goods, gem & jewellery sectors and produce and products of agriculture, aquaculture, animal husbandry, floriculture, horticulture, piscculture, viticulture, poultry and sericulture, biotechnology sector, the following sub-sectors of Engineering sectors: Machine tools, parts and accessories; thereof automotive components and accessories, bicycle parts and accessories, handtools, cutting and small tools; castings and forgings (ferrous and non-ferrous) all sorts; pumps, electric motors and parts thereof; fasteners all types (ferrous and non-ferrous) bright bars and shafting; scientific and surgical instruments and the following sub-sectors of chemicals; organic chemicals; Hotels, Travel agents tour operators or tourist transport operators who are recognized as Export House, Trading House, Star Trading House and Super Star

Trading House or Service Export House, International Service Export House, International Star Service Export House, International Super Star Services Export House. (b) Nil duty incase CIF value is Rs.10 lakh or more for software sector

6 times cif value of CG 5 times cif value of CG

6 years

Q.4

What are the conditions for import of capital goods under EPCG scheme? Can second hand goods be imported under this scheme?

A. Import of capital goods under this scheme shall be subject to actual used condition till the export obligation is completed. Both new an second hand capital good may be imported. Second hand capital goods at permitted subject to the condition that such goods have a minimum of residual life of 5 years and the importer furnishing to the customs at the time of clearance of goods a self declaration to the effect that the second hand capital goods being imported have a minimum residual life of five years in the prescribed form. In case the value of the second hand capital goods imported is rupees one crore or more the importers shall also furnish to the customs at the time of clearance of goods a certificate from the Inspection and certification agency to the effect that the purchase price is reasonable. In case of imports at zero duty the minimum residual life of the second hand goods shall be ten years. The concessional assessment is extended only to the goods covered by an licence issued under the EPCG Scheme.

Q.5

Is the Import of components and goods in SKD/CKD condition allowed under this Scheme?

A.

An eligible person may apply for a licence under the EPCG scheme t import the capital goods in SKD/CKD condition or components of the capital goods in SKD/CKD condition or components of such capital goods and may assemble or manufacture, as the case may be the capital goods. This facility shall not be available for replacement of parts.

Q.6

What are the conditions and obligations under EPCG Scheme?

A.

The following are the conditions and obligations; (i) The export obligation shall be fulfilled by the export of goods manufactured or produced by the use of the capital goods imported under the scheme; The exports shall be direct exports in the name of the importer. However, the importer may export through a third party provided the name of the importer/licence holder is also indicated in the Shipping Bill. If a merchant exporter is the importer the name of the manufacturer shall be indicated in the Shipping Bill; Export proceeds shall be realized in freely convertible Currency; Exports shall be physical exports. Deemed exports shall also be taken into consideration for fulfillment of export obligation but the licencee shall not be entitled to claim any benefit of Deemed Exports; The export obligation shall be in addition to any other export obligation undertaken by the importer and shall be over and above the average level of exports of the same product achieved by him in the preceding three licensing years. If the exporter achieves an export of 75 per cent of the annual value of the production of the relevant export product, the export obligation under this scheme

(ii)

(iii) (iv)

(v)

shall be subsumed under that export provided, however, that the aggravate value of such exports during the specified period shall not be less than the aggregate value of the export obligation fixed. (vi) Where the manufacturer exporter has obtained licences for the manufacture of the same export product both under this scheme and the Duty Exemption Scheme,, the physical exports made under the Duty exemption Scheme shall also be counted towards the discharge of th4e export obligation under this scheme; and In the case of export of computer software, the export obligation shall be determined in accordance with policy but the conditions that exports hall be over and above the average level of exports in the preceding three licensing years shall not apply.

(vii)

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 subpara (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. 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. 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.

(iii) (iv)

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. The minimum exports made under the old capital good must be 40% of the total export obligation imposed on the first EPCG Authorisation. 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. The procedure governing the replacement of capital good is given in paragraph Technological upgradation of Capital Goods of this chapter. 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.

(ii)

(iii)

(iv)

(v)

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. 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. 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. 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. 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. 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. 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

ii)

iii) iv)

v)

vi)

vii)

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: Period from the date of issue of Authorisation st th Block of 1 to 6 year th th Block of 7 and 8 year Minimum export obligation to be fulfilled 50% 50%

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 Block of 1st to 10th year th th Block of 11 and 12 year Minimum export obligation to be fulfilled 50% 50%

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 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 1 April, 2002 upto 31 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
st st

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 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 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) (ii)

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 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. 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:

b)

(% export obligation unfulfilled) x (8) x (duty saved on the date of issuance of the Authorisation)
c) In cases where the remaining original export obligation period (and not the extended export obligation period) of the EPCG Authorisation is less than 2 years on the date of application for refixation, and the mandated(original or amended, as the case may be) blockwise 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.

d)

e)

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 sub-para (i) of paragraph Export Obligation of this Chapter. Technological Upgradation of Capital Goods The EPCG Authorisation holders can opt for the Technological Up gradation of the capital goods imported under the EPCG Scheme as per the provisions of Para Technological Upgradation of existing EPCG Machinery of this chapter. In case an EPCG Authorisation 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 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 Fulfillment of Export Obligation of this Chapter.

(ii)

(iii)

(iv)

(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 Aayaat Niryaat Form. Import of Refurbished/ Reconditioned Spares and Tools The import of refurbished spares 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.
Revalidation of Authorisations issued under EPCG scheme shall not be allowed.