Sub-Contracting
41.
Sub-Contracting.- (1) A Unit, may subcontract a part of its
production or any production process, to a unit(s) in the Domestic Tariff Area
or in a Special Economic Zone or Export Oriented Unit or a unit in Electronic
Hardware Technology Park unit or Software Technology Park unit or Bio-technology
Park unit with prior permission of the Specified Officer to be given on an
annual basis and subject to following conditions, namely: -
(a) the finished goods requiring further processing or semi-finished goods
including studded jewellery, taken outside the Special Economic Zone for
sub-contracting shall be brought back into Unit within one hundred and twenty
days or within such period as may be extended by the Specified Officer for
reasons to be recorded in writing for grant of such extension;
(b) cut and polished diamonds and precious and semi-precious stones (except
rough diamonds, precious or semi-precious stones having zero duty) shall not be
allowed to be taken outside the Special Economic Zone for sub-contracting;
(c) a gem and jewellery Unit may receive plain gold or silver or platinum
jewellery from the Domestic Tariff Area or from an Export Oriented Unit or from
a Unit in the same or another Special Economic Zone in exchange of equivalent
content of gold or silver or platinum contained in the said jewellery after
adjusting permissible wastage or manufacturing loss allowed under the provisions
of the Foreign Trade Policy read with the Handbook of Procedures;
(d) in sub-contracting or exchange, wastage shall be permitted as per the
wastage norms admissible under the Foreign Trade Policy read with the Handbook
of Procedures:
Provided that the total wastage of the Unit, including the wastage of the
subcontractor or the supplier of Jewellery on exchange basis, shall not in any
case exceed the wastage permissible under the Foreign Trade Policy read with the
Handbook of Procedures;
(e) the Domestic Tariff Area Unit undertaking sub-contracting or supplying
jewellery against exchange of gold or silver or platinum shall not be entitled
to export entitlements;
(f) the value of the sub-contracted production of a Unit in any financial year
shall not exceed the value of goods produced by the Unit within its own premises
in the immediately preceding financial year:
Provided that a Unit, sub-contracting part of the production or production
process to other Unit in the same Special Economic Zone shall not require the
permission of the Specified Officer provided that both the supplying and
receiving Units shall maintain proper account of the goods involved in the
subcontracting.
Explanation: For removal of doubts it is clarified that the expression
subcontracting of a part of its production under this rule shall mean sub-
contracting all the production processes for conversion of raw material into
finished products but only for a part of the quantity of the finished products
exported during the year or in the first year of production, the value of the
goods subcontracted shall not exceed the value of goods produced by the unit in
its own premises during the first year of production.
(g) a Unit engaged in trading or warehousing shall not be allowed the facility
of subcontracting of production or production process in the domestic tariff
area;
(h) a Unit may remove, with the permission of Specified Officer, moulds or jigs
or tools or fixtures or tackles or instruments or hangers and patterns and
drawings to the premises of sub-contractor(s), subject to the condition that
these shall be brought back to the premises of the Unit immediately on expiry of
such sub-contracting arrangement and submission of a quarterly verification
report from the Central Excise Officer having jurisdiction over the
sub-contractor that such goods are lying in the sub-contractor s premises and
are being used for production of goods on account of the Unit;
(i) raw materials, components and consumables excluding fuel may be sent along
with these goods, or separately.
(2) The Development Commissioner may also permit subcontracting of part of the
production process abroad and in such cases, the goods may be exported from the
sub-contractor s premises abroad subject to following conditions, namely:-
(a) sub-contracting charges shall be declared in the export declaration forms
and invoices and other related documents;
(b) the export proceeds shall be fully repatriated in favour of the Unit.