Export-oriented units (EOU) manufacturing solar photovoltaic modules have a problem. They have to pay back the duty exemption availed on inputs if they sell their final products in domestic tariff area (DTA), whereas their counterparts in DTA or special economic zone (SEZ) do not have to do so. Photosensitive semiconductor devices, including photovoltaic cells whether or not assembled into modules or made up into panels falling under the classification 854140 in the Harmonised System of Classification are covered in the list of products mentioned in the Information Technology Agreement (ITA-1) at the World Trade Organization. As a signatory to this plurilateral agreement, India has brought down the basic customs duty on this item to zero. S. No. 23 of the Customs exemption notification No. 24/2005-Cus dated March 1, 2005 prescribes zero duty on all goods falling under the heading 8541. All goods required for manufacture of this item, but for a few specified exceptions, also attract nil basic customs duty under S .No. 39 of the same notification, provided the prescribed procedures are followed.
Similarly, S.No. 133A, 187C, 215A, 215B, 332 and 332A of notification No. 12/2012-CE dated 17.3.2012 prescribe nil duty for solar photovoltaic module and panel (mentioned at S.No. 11 of list 8 annexed to that notification) and, specified raw materials and parts for their manufacture, subject to following the prescribed procedures. This notification is available for DTA manufacturers. EOUs are barred from using this notification. They have to necessarily procure their inputs under the notification 22/2003-CE dated 31.3.2003. Thus, DTA manufacturers of solar photovoltaic modules do not pay excise duty or customs duty on the parts or raw materials they import or procure domestically for the manufacture of the specified goods. There is no excise duty or customs duty on the finished product – that is, solar photovoltaic modules. So, the DTA units that import or procure domestically their inputs for manufacture of solar photovoltaic modules do not pay duty either on the said parts or raw materials or on their final product.
The EOUs import or procure indigenously the inputs required for manufacture of solar photovoltaic modules without duty payment under notifications 52/2003-Cus and 22/2012-CE both dated March 31, 2003. Their final products do not attract any excise duty leviable under proviso to Section 3 of the Central Excise Act, 1944 read with the notification 23/2003-CE dated 31.3.2003 and the notifications 24/2005-Cus and 12/2012-CE mentioned above. However, a condition in the said notifications 52/2003-Cus and 22/2003-CE says that if the items they manufacture and clear in DTA are fully exempted from all duties, then the benefit of the exemption under the said notifications will not be available. The only exception to this condition is ships covered under certain specified entries in the Customs Tariff.
Now, the situation is that EOUs manufacturing solar photovoltaic modules, whenever they clear their final products in DTA, have to forego the duty on the imported or indigenously procured inputs they use in the manufacture of the final products. On the other hand, such DTA units or SEZ units do not have to contend with any such liability. The Ministry of New and Renewable Energy (MNRE) and the commerce ministry have already brought this inconsistency to the attention of the finance ministry. The discrimination against the EOUs must end, says MNRE.