EOUs cannot do third-party jobs

MUMBAI: In a major decision to check the evasion of duty, the Union commerce and industry ministry has decided to ban any sub-contracting or third-party exports by 100% polyester yarn EOUs.
At the same time, the Union finance ministry has decided to streamline the procedure for other EOUs for sub-contracting and job work in domestic tariff areas as well as third-party exports.
The Union commerce ministry, in the case of 100% polyester yarn EOUs has decided that "no sub-contracting at any stage, whether through other 100% EOUs or a DTA unit will be allowed for a unit with yarn as input raw materials. Such units have to carry out all their operations themselves."
Further, no third-party exports are to be permitted for such units since cases of third-party exports diversion and evasion have been reported, the ministry added. These decisions follow various irregularities allegedly found out by the authorities during recent massive raids on Indo Rama, Nova Petro and many other polyester yarn units near Surat and Ahmedabad.
Taking a cue, the Union finance ministry has also tightened the procedure for allowing job work or sub-contracting by other EOUs as well.
In the case of gem and jewellery units in SEZ, however, it has allowed to take out gold, silver or platinum for job work in DTA and bring back jewellery finished or semi-finished including studded jewellery containing quanitity and purity equal to the precious metals taken out within the period of 30 days from the date of such taking out.
"No diamonds, precious stones or semi-precious stones, however, shall be allowed to be taken out of SEZ," the ministry points out.
In the case of other EOUs , exports of finished goods directly from the job worker’s premises may be permitted provided the job worker is a Central excise registrant. "However, export of finished goods from the job worker’s premises will not be allowed through third parties."
The EOUs will be required to take a permission for the required job work or processing by other units and the authorities will carry out surprise check at such units carrying out job work, sub-contracting or processing. They will also ensure that the raw material sent out by EOUs is used by the job worker in the value-added product received by EOU.
"This is necessary to ensure that the finished products are manufactured out of raw materials imported/procured duty free by the units and there is no substitution/diversion of duty free goods in the DTA."
There is also a provision for seeking 100% bank guarantee for units sending out imported or domestically procured raw materials, components as it is i.e. without being subjected to any processing in the unit for job work in the DTA. Units with unblemished record may be exempt from such requirement.
Such guarantee may be 50% for units sending out semi-processed product for job work. The goods sent out for job work in DTA will be required to be returned to EOU within 30 days from the date of removal.