No interest upon clearance of capital goods into DTA after use in bonded warehouse

We have an EOU for research & development (R&D) services. We import inputs like reagents duty free. We now want to provide R&D services to a special economic zone (SEZ) unit. Do we have to pay the duty on the inputs that we use for providing such services?

- SME CHATROOM TNC RAJAGOPALAN

Para 11 of notification 52/2003-Cus dated 31.3.003 says that 'nothing contained in this notification shall apply to the goods imported by a service sector export-oriented undertaking ... who does not directly export services out of India'. However, Para 3 of the notification requires you to reverse only the BCD on the inputs, 'notwithstanding anything contained in this notification'. Despite this exception, you may consider opting for safety by reversing the IGST also and taking input tax credit (ITC) of the same to avoid any audit objection later.