Unnecessary explanations adding to avoidable litigation

At the outset I thank the author for bringing out such a wonderful article with detailed analysis.

There are three type of situations:
1. DTA units supplies to SEZ/EOU under Notification No. 22/2003. There is an option available to the recipient to ask the supplier to supply under exemption or supply under payment of duty. If duty is paid they can take CENVAT credit and claim refund.
2. EOU unit supplies to SEZ OR another EOU for further manufacture and export. The scenario is worse. They do not have any legal support to get the refund claim. They have to adhere to the notification giving exemption as the conditions in the notification are in procedural nature and not material aspect.
3. Parent SEZ/EOU procures the material and treat the EOU as job worker. Here the duty element can be taken as credit and also they claim the refund. But the job worker EOU cannot discharge their export obligation and loose their status.

EOUs are making in India and earning Free Foreign Exchange, either it is a deemed export or a physical export. It is a team work of the EOUs who make the Inter unit transfer of the goods for use for export. Mostly the inter unit transfer unit of EOUs are sister concerns in order to achieve their export targets and also supply to other units in abroad in order to achieve their economical production. In reality they add value to India and carrying on the basic policy of the present Government "MAKE IN INDIA".

By bringing the small clarification the Government is defeating the very purpose of the EOU and pave way for unwanted litigation.

Further, if the EOU add the value of the input/input service tax credit to their value to other EOU, then the duty and taxes will be added to their export product of the ultimate exporter. This is against the article 286 of The constitution of India.

r vaidyanathan
Consultant - Indirect Taxation
Bangalore

Ramadoss Vaidyanathan 11/03/2015