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AIFSC/AM/04/2008

23.06.2008

To
Shri P.C.JHA
The Chairman,
Central Board of Excise & Customs,
North Block, New Delhi – 110 002.

Sub: Objection to the proposal of handing over of Administrative control of 100% EOU to Central Excise - reg.

Respected Sir,

It is a well settled matter that the control of the 100% EOUs within the jurisdictional limits of Commissioner of Customs of Port city is vested on the Commissioner of Customs and this arrangement, which is found to the satisfaction of trade, is working smoothly.

The issue of administrative control of 100% EOUs has again been brought to forefront to consider the handing over of all the EOUs including the ones within the port city to Central Excise in the context of duty evasion cases detected in this sector. Your kind attention is invited to the letter F.No. 296/59/2007-CX-9 dated 12-05-2008.

Your kind attention is further drawn to the draft performance audit report 2005-06 and the audit report no. 07 of 2007 (indirect taxes) wherein the irregularities reported in those 100% EOUs, which were mostly under the control of Central Excise. Moreover, the irregularities leading to duty evasion and loss of revenue were committed mainly by those 100% EOUs which are manufacturing units and have physical exports. Thus it may be mentioned here that the STPI units who are in software development/ service provider and export the product online or by way of providing services on line in the form of Call Centres etc. , generally have performed to satisfy the need of the law.

From the reference received from the Directorate of Export promotion on the subject issue it appears that the issue concern largely of the EOU’s under Mumbai and Chennai Custom Houses. It is submitted that out of 585 100% EOUs controlled by Mumbai Custom House, only 29 are engaged in physical manufacturing units and 556 are STPI units , none of whom were reported for any irregularities. It may be reiterated that STPI units do not require any physical supervision of Customs or Central Excise over their software development / services. The physical control of their Capital Goods needs to be exercised, which can be best done by the Customs officers, who clear those on importation.

Therefore, the duty evasion cases detected in 100% EOUs, which were under the control of Central Excise, cannot be taken as a reason to bring 100% EOU under one umbrella i.e. Central Excise in the pretext of requirement of SINGLE administrative control over 100% EOUs, removing the efficient Custom Officers. A close study of the said audit reports will indicate that the irregularities detected were due to individual negligence and not due to failure of the existing laid down procedures and administrative control of Customs Commissionerate.

Further, the issue of DUAL control of EOUs as has been projected that “customs have jurisdiction over the EOUs in port cities while other units are under Central Excise at the remaining places is not good”. It is submitted that while assessing and clearance work at the port cities of the imports made by the EOU’s the functions of the Custom Officers can not be replaced with the officers of Central Excise since the clearances are to be done through the Custom Houses where the EDI system and RMS are in place for filing Bills of Entries and clearances thereof. The EOU’s in the port cities are under the control of the Customs Commissinerates and the EOU’s outside the port cities are under the control of Central Excise Commissionerates. In fact there is no Dual Control over the functioning of any EOU by the Customs and Central Excise.

In view of above, it is requested that such proposal of putting all EOU’s under Central Excise may be shelved immediately and the control of all the EOU’s within the port cities must be retained with the respective Customs Commissionerates for efficient and better working , without unsettling the long settled position.

Thanking you,

Yours Faithfully,

(ANUPAM MAJUMDAR)
PRESIDENT

Copy To: 1. Member (Customs), CBEC, Min of Finance, North Block, New Delhi.

2. Chief Commissioner of Customs, Zone-I, New Custom House, Mumbai.

3. Chief Commissioner of Customs, (P), Custom House, 33 Raja Salai, Chennai – 600 001.

4. Commissioner of Customs (EP), New Custom House, Mumbai.

5. Commissioner of Customs (EP), Custom House, 33 Raja Salai, Chennai – 600 001.