SEPTEMBER 27, 2015

By C T Krishna Murthy, Advocate

I. At present the Central Excise and Customs Department is insisting for payment of duty for the clearances of Anti-Retroviral drugs made from their EOU to NACO which require the attention of GOI to bring about necessary amendments to the relevant Notifications so that the said life saving drugs do not suffer duty.

II. From Clause (ii) of the proviso under sub-section (1) of Section 3 of Central Excise Act, 1944, it is seen that when goods are cleared by a 100% EOU to DTA, the duty payable shall be an amount equal to the aggregate of the duties of customs which would be leviable under the Customs Act, 1962 on like goods produced or manufactured outside India if imported into India.

III. For the goods manufactured outside India and if imported into India, the applicable Customs Notification is 37/2015-Cus dated 10.06.2015 (earlier Notification No. 23/2014-CusDt.11.07.2014) as amended which exempts both BCD and CVD.

Therefore in terms of the wording contained in clause (ii) under proviso to Section3(1) of the CE Act, 1944, for the purpose of computing duty for the clearances made from EOU to NACO, the Notification No. 37/2015-Cus dated 10.06.2015 as amended has to be made applicable. This Notification exempts both BCD and CVD for the Anti-Retroviral Drugs. But the department is insisting for payment of applicable duties for the clearances from EOU to DTA as per Para 3 of Notification No. 52/2003-Cus Dt. 31.03.2003, since Notification No. 37/2015-Cus is not listed therein.

IV. Though Ministry of Health and Family Welfare, GOI issued Excise Duty Exemption Certificate in terms of Notification No. 108/95-CE Dt. 28.08.1995/ Customs Duty Exemption Certificate in terms of Notification No. 84/97-Cus Dt. 11.11.1997for procurement and supply of ARV Drugs through RITES to National AIDS Control Project (NACO) funded by Global Fund to Fight AIDS, Tuberculosis and Malaria (GFATM), assessee is made to pay duty for the clearances made to them NACO from EOU raising the following objections :

A. With regard to Notification No. 108/95-CE Dt. 28.08.1995, it is the objection of the department that the exemption envisaged therein is not applicable to a 100% EOU as the said Notification is issued under Section 5A of the Central Excise Act, 1944 as it does not mention its applicability to EOU.

Moreover, Notification No. 108/95-CE dated 28.08.1995 exempts goods from Central Excise Duty subject to production of certificate from an officer not below the rank of Deputy Secretary to the Government of India, in the Ministry of finance (Department of Economic Affairs) that the said goods are required for the execution of the said project and that the said project has duly been approved by the Government Of India;

The Notification provides exemption -

• for the supplies made to the following agencies which are listed in the Annexure to Notification No. 108/95-CE Dt. 28.08.1995:

1. United Nations Development Programme

2. United Nations International Childrens' Fund,

3. Food and Agricultural Organization,

4. International Labour Organization,

5. World Health Organization

6. United Nations Population Fund.

7. United Nations World Food Programme

8. United Nations Industrial Development Organization

or

• for the Supplies to a project that has been approved by the Government of India and financed (whether by a loan or a grant) by an international organization listed in the Annexure to the Notification Dt. 28.08.1995.

B. With regard to Notification No. 84/97-CusDt. 11.11.97 for the purpose of computation of Basic Customs Duty component in terms of Notification23/2003-CE dated 31.03.2003, it is the objection of the department that in terms of the said Notification, goods imported by

1. United Nations Development Programme

2. United Nations International Childrens' Fund,

3. Food and Agricultural Organization,

4. International Labour Organization,

5. World Health Organization

6. United Nations Population Fund.

7. United Nations World Food Programme

8. United Nations Industrial Development Organization

or

imported for use in a project that has been approved by the Government of India and financed (whether by a loan or a grant) by an international organization listed in the Annexure to the Notification Dt. 11.11.1997

are exempted from payment of customs duty subject to production of certificate from an officer not below the rank of Deputy Secretary to the Government of India, in the Ministry of Finance (Department of Economic Affairs) that the said goods are required for the execution of the said project and that the said project has duly been approved by the Government of India.

C. It is the plea of the department that, since the subject project is funded by GFATM and Neither NACO, which procured the materials nor the agency which funded the projects viz, GFATM is listed in the Notifications, these agencies do not qualify to be international organizations and therefore clearances made to them are not covered under the exemption envisaged in the Notification No. 84/97 Customs dated 11.11.97 or Notification No. 108/95-CE Dt. 28.08.1995.

D. Subsequently, though Ministry of Finance, GOI issued Notification No. 23/2014-Cus Dt. 11.07.2014 valid till 31.03.2015 (now 37/2015-Cus Dt. 10.06.2015 valid till 31.03.2016) granting exemption to Anti-Retrovirals when imported into India from BCD and CVD subject to the condition that the importer produces a certificate from an officer not below the rank of Deputy Secretary to the Government of India in the Ministry of Health and Family Welfare to the effect that the said drugs are required for the National AIDS Control Programme funded by Global Fund to fight AIDS, TB and Malaria (GFATM).

It is the objection of the department that, in terms of Notification No. 52/2003-Cus Dt. 31.03.2003, exemption is provided to specified goods imported or procured by EOUs for specified purpose .

However, the exemption envisaged in the Notification No. 52/2003-Cus Dt. 31.03.2003 Dt. 31.03.2003 shall also apply to drugs which on importation into India or procured, are used in the manufacture of finished goods and such finished goods even if not exported, are allowed to be sold in the Domestic Tariff Area subject to such other limitations and conditions as may be specified in this behalf by Development Commissioner, or the Board of Approval as the case may be

on payment of applicable duty of excise leviable thereon under section 3 of the Central Excise Act, 1944

or

cleared to organizations which are entitled for duty free import of such goods in terms of the following exemption notifications-

a. No. 106/58-Customs dated the 29th March, 1958

b. No. 152/94-Customs dated the 13th July, 1994

c. No. 39/96-Customs dated the 23rd July, 1996

d. No. 50/96-Customs dated the 23rd July, 1996

e. No. 84/97-Customs dated the 11th November, 1997

issued by the Ministry of Finance in pursuance of clause (e) of paragraph 6.9 of the Foreign Trade Policy, without payment of duty

Since Notification No. 23/2014-Cus Dt. 11.07.2014 issued by GOI is not listed under Notification No. 52/2003-CusDt. 31.03.2003, department insisted the assessee to clear the goods on payment of duty denying exemption for BCD and CVD.

E. The objection of the department in not allowing the goods to be cleared without payment of duty from EOU to NACO or to RITES Ltd (agency of NACO) can be met by making an amendment to Notification No. 84/97-Cus and108/95-CEby including GFATM in the Annexures to the said Notifications.