Policy

5.1

The Policy relating to Export Promotion Capital Goods (EPCG) Scheme is given in Chapter 5 of the Policy.

Application Form

5.2

An application for the grant of a licence may be made to the licensing authority concerned in the form given in Appendix-9 along with documents prescribed therein.

Consideration of Applications

5.3

The applicant may apply for EPCG licence wherein duty saved amount is Rs. 50 crores, to the Regional Licensing Authority along with a certificate from the independent chartered engineer on the proforma annexed to Appendix 9 certifying the end use of capital goods sought for import for its use at pre production, production or post production stage for the product undertaken for export obligation. 

For the cases wherein duty saved amount is above Rs. 50 crores, the applicant may apply to DGFT Headquarters directly with a copy endorsed to the concerned RLA. In such cases, based on the recommendations of Headquarters EPCG Committee/ approval of competent authority the concerned RLAs will issue the EPCG licence accordingly.

5.3.1

After issuance of an EPCG License wherein duty saved amount is upto Rs. 50 crores, a Committee of officers of the RLA, headed by the Head of Office, and the EPCG Committee in the Headquarters where duty saved amount is more than Rs. 50 Crores, shall finalize the nexus within the stipulated period of two months on the basis of the Chartered Engineer’s certificate and on the basis of EPCG nexus norms maintained by them. While finalizing the nexus, the provisions contained in the existing Policy/Procedures will be taken into account.

In case, the Committee of officers at RLA fails to finalize the nexus within two months from the date of issuance of license the nexus as applied for shall be treated as final.

However, where the application for fixation of nexus is rejected on account of non-furnishing of documents/information, the license holder shall be liable to pay customs duty as applicable together with 15% interest thereon.

5.3.3

The EPCG licence shall be issued with a single port of registration mentioned in paragraph 4.19 of the Handbook of Procedure for the purpose of imports. All imports shall be made from that particular port unless the specific permission of the Customs authorities is obtained. However, exports can be made from any of the ports specified in paragraph 4.19.

5.3.4

(i)

The applicant may also apply for import of spares including refractory, catalyst and such consumables as are required for installation and maintenance of capital Goods under the EPCG Scheme .

The application shall contain list of plant/ machinery installed in the factory/ premises of applicant for which spares are required, duly certified by Chartered Engineer or Jurisdictional Central Excise authorities.

In such cases EPCG licence shall not specify the list of spares but shall indicate:-

(a)

Name of plant/machinery for which spares are required.

(b)

Value of duty saved allowed under the licence.

(c)

Description of product to be exported with value of export obligation as per the Policy.

(ii)

The licensing authority, after issue of EPCG licence for spare shall forward a copy of licence to concerned Jurisdictional Central Excise Authority.

(iii)

In case of import of spares for capital goods, the licence holder (whether registered with Central Excise Authority or not) shall produce to the licensing authority a certificate by the jurisdictional central excise authorities confirming the inventory of spares taken in the records of the licence holder within one month of the date of completion of each import.

Further at the time of final redemption of export obligation licence holder shall submit certificate from the Independent Chartered Engineer confirming the use of spares so imported in the installed capital goods on the basis of stock & consumption register maintained by licence holder.

However, the service providers, can give a certificate either from the jurisdictional Excise authority or from an independent chartered engineer confirming the inventory of spares taken in record of the licence holder within six months from the date of completion of imports.

 EOU/ SEZ Units under EPCG Scheme

5.4

An EOU/ SEZ unit may apply for an EPCG licence in terms of paragraph 6.20(d) of the Policy. Such application shall be made in the form given in Appendix-9 alongwith the documents prescribed therein. In addition, the applicant shall also furnish a copy of the `No Objection Certificate’ from the Development Commissioner showing the details of the capital goods imported/indigenously procured by the applicant, its value at the time of import/sourcing and the depreciated value for the purpose of assessment of duty under the scheme.

Such cases shall not be required to be forwarded to Headquarters EPCG Committee. The concerned licensing authority shall issue EPCG licences based on the "No Objection Certificate" produced from the concerned Development Commissioner.

 Indigenous Sourcing of Capital Goods

5.5

The EPCG licence holder intending to source capital goods indigenously, shall make a request to the licensing authority for invalidation of the EPCG licence for direct import. The EPCG licence holder shall also give the name and address of the person from whom he intends to source the capital goods.

5.5.1

On receipt of such request, either at the time of issuance of licence or subsequently, the licensing authority shall make the licence invalid for direct import and issue an invalidation letter, in duplicate, to the EPCG licence holder. The licensing authority shall simultaneously grant permission to the EPCG licence holder to procure the capital goods indigenously in lieu of direct import.

5.5.2

The indigenous manufacturer intending to supply capital goods to the EPCG licence holder may apply to the licensing authority in the form given in Appendix-10B for the issuance of Advance licence for deemed exports for import of inputs including components required for the manufacture of capital goods to be supplied to the EPCG licence holder.

Benefits To indigenous supplier of Capital Goods

5.5.3

For the purpose of claiming benefit of deemed exports, the indigenous supplier of capital goods shall furnish:

(a)

Certificate from the respective Assistant Commissioner of Customs and Central Excise Authorities having jurisdiction over the factory/ premise as evidence of having supplied/ received the manufactured capital goods and in case of service provider, a certificate from independent Chartered Engineer confirming the supplies/ receipt of the Capital Goods.

(b)

Evidence of payments received through normal banking channel from the EPCG licence holder in the form given in Appendix- 22A .

Leasing of Capital Goods

5.6

An EPCG licence holder may, on the basis of firm contract between the parties, source the capital goods from a domestic leasing company in accordance with paragraph 2.25 of the Policy. In such cases, the Bill of Entry of imported capital goods or the commercial invoice of indigenously procured capital goods, as the case may be, shall be signed jointly by the EPCG licence holder and the leasing company at the time of import/local supply respectively. However, the EPCG licence holder shall alone be fully responsible for fulfillment of export obligation.

Condition for Fulfilment of Export Obligation

5.7

In addition to the conditions mentioned in paragraph 5.4 of the Policy, the following conditions shall also be applicable for fulfilment of export obligation under the scheme:-

5.7.1

The exports shall be direct exports in the name of the EPCG licence holder. However, the export through third party(s) as defined in Chapter 9 of the Policy is also permitted under the EPCG scheme. If a merchant exporter is the importer, the name of the supporting manufacturer shall also be indicated on the shipping bills. At the time of export, the EPCG licence No. and date shall be endorsed on the shipping bills which are proposed to be presented towards discharge of export obligation.

5.7.2

Export proceeds shall be realised in freely convertible currency except for deemed exports under paragraph 5.7.3. However, in case of exports against irrevocable letter of credit or if the bill of exchange is unconditionally Avalised/ Co- Accepted/ Guaranteed by a bank and the same is confirmed by the exporters bank, realisation of export proceeds need not be insisted for fulfillment of export obligation provided the final receipts are in free foreign exchange.

5.7.3

Exports shall be physical exports. However, deemed exports as specified in paragraph 8.2 (a), (b), (d), (f), (g) & (j) of Policy shall also be counted towards fulfilment of export obligation along with the usual benefits available under paragraph 8.3 of the Policy.

Royalty payments received in freely convertible currency and foreign exchange received for R& D services shall also be counted for discharge under the EPCG scheme.

Payment received in rupee terms for the port handling services in terms of Chapter 9 of the Foreign Trade Policy shall also be counted for export obligation discharge under the Scheme.

5.7.3.1

The supplies made to the Oil and Gas sector also may be counted towards discharge of export obligation against an EPCG licence provided the licence has been issued on or before 31.3.2000 and no benefit under paragraph 8.3 of the Policy has been claimed on such supplies.

5.7.4

Wherever average level of export obligation was fixed taking into account the exports made to former USSR or to such countries as notified by the Directorate General of Foreign Trade under this paragraph, the average level of exports shall be reduced by excluding exports made to such countries. This waiver shall be applicable to all EPCG licences, which have not been redeemed/regularised.

However, exports made against any EPCG licence, except the EPCG licences which have been redeemed, shall not be added up for calculating the average export performance for the purpose of the subsequent EPCG licence.

5.7.5

Where the manufacturer exporter has obtained licences for the manufacture of the same export product both under EPCG and the Duty Exemption or Diamond Imprest Licence Scheme or made exports under DEPB/ DFRC/ Replenishment licences, the physical exports or deemed exports for categories mentioned in paragraph 5.7.3 made under these schemes shall also be counted towards the discharge of the export obligation under EPCG scheme.

5.7.6

In case of export of goods relating to handicraft, handlooms, cottage, tiny sector, agriculture, aqua-culture, animal husbandry, floriculture, horticulture, pisciculture, viticulture, poultry, sericulture and services, the export obligation shall be determined in accordance with paragraph 5.1 of the Policy, but the licence holder shall not be required to maintain the average level of exports as specified in paragraph 5.4 (i) and 5.9 of the Policy.

The goods excepting tools imported under EPCG scheme by such sectors shall not be allowed to be transferred for a period of five years from the date of imports even in cases where export obligation has been fulfilled.

However, the transfer of capital goods would be permitted to the group companies or managed hotels under intimation to the Regional Licencing Authority.

Moreover, in cases where the service provider wants to discharge export obligation by export of goods also , he shall have to maintain the average level of foreign exchange earning for the preceding three licencing years in respect of goods proposed to be exported for discharge of export obligation.

5.7.7

The Export Obligation shall be fulfilled as per conditions given in para 5.4 of the Policy.