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Circular No. 1046/34/2016-CX
F. No. 268/01/2016-CX.8
Government of India
Ministry of Finance
Department of Revenue)
(Central Board of Excise & Customs)
New Delhi, the 16" September, 2016
To
The Chief Commissioners of Customs Central Excise & Service Tax (All);
The Chief Commissioners of Customs (All);
The Director Generals/Directors of Customs, Central Excise & Service Tax (All);
Webmaster, CBEC.
Subject: Supply of goods manufactured by EOUs without payment of Central Excise
Duty against Advance Licence/Authorisation- reg.
Madamn/Sir,
Representations have been received from trade and field formations regarding
applicability of second proviso to para 6 of notification no. 22/2003-CE dated 31.03.2003 as
amended, when goods manufactured by EOU are supplied to Advance Licence /Authorisation
holder in DTA. The said proviso seeks to deny the exemption from central excise duty on
inputs, in cases where goods cleared into DTA are either non-excisable or in case of imports
attract NIL rate of Customs duty and additional Customs duty. Identical proviso exists under
para 3 of notification 52/3003-Cus dated 31.03.2003 as amended to deny exemption from
customs duties on similar grounds. The said proviso reads as under,
“~ Provided further that where such articles (including rejects, waste, scrap and
remnants), are either non excisable or such articles (including rejects, waste, scrap
and remnants), if imported, are leviable to nil rate of duty of customs specified under
First Schedule to the Customs Tariff Act, 1975 and nil additional duty leviable under
section 3 of the said Customs Tariff Act, read with exemption notification in this
regard, if any, no exemption in respect of inputs utilized for the purpose of processing,
manufacture, production or packaging of such articles (including rejects, waste, scrap
and remnants) shall be available under this notification ”
2. The issue was discussed in the last Central Excise Tariff Conference wherein it was
decided that the same is required to be clarified by the Board.
3. The issue has been examined. It is seen that s.no. 22 of notification no. 23/2003-CE dated
31.03.2003 as amended, issued in respect of goods manufactured by EOUs and cleared in
DTA, specifically exempts Central Excise duty when such manufactured goods are supplied
to an Advance Licence/Authorisation Holder. In fact, clearance from EOU or DTA unit to
Advance Licence/Authorisation holder has been allowed without payment of Central Excise
duty, as both the cases are of “Import substitution.” In case of supply of goods to Advance
Licence/Authorisation holder, the export obligation is cast upon person holding Advance
Licence/Authorisation and in case of default in export obligation recovery from the person
holding Advance Licence/Authorisation is provided for in law.

4. Further, if the EOUs are made liable to pay back the amount availed as exemption on
the inputs in case of supplies to Advance Licence/ Authorisation Holder, with reference to the
said proviso under notification no. 22/2003-CE dated 31.03.2003, then the EOUs would be
placed in a disadvantageous position when compared to a DTA unit which supply
manufactured goods to Advance Licence Holder without payment of Central Excise duty in
terms of notification no 44/2001-CE(N.T.) dated 26.06.2001 and without reversal of the
CENVAT credit availed on inputs. This position has been clarified by Board vide circular
no. 785/18/2004-CX dated 17.05.2004.
5. Accordingly, it is clarified that the second proviso to para 6 of the notification no.
22/2003-CE dated 31.03.2003 and the proviso to para 3 of notification no. 52/2003-Cus dated
31.03.2003 (refer para 1 of the circular) would not be applicable, in case of supply of
manufactured goods by EOU to Advance Licence/Authorisation holder in DTA, without
payment of Central Excise duty.
6. Hindi version of the circular would follow. Difficulty, if any, in implementation of the
circular may be brought to the notice of the Board.
Nw
(Rohan)
Under Secretary to the Govt. of India