Philips India, a subsidiary of the Dutch multinational, will now have to cough up the entire import duty that was waived under the scheme in 1992 and an additional annual interest of 24 per cent till 1998, said top-level DGFT sources. The import duty waiver and interest liability slapped by DGFT works out to about Rs 10 crore.

Additionally, DGFT has asked Philips to surrender the special import licences (SIL) awarded to it by the department. This will compound the companys financial liability further, as the company will have to buy the SIL's from the market.

The company, in 1992, had imported capital goods for which it had to meet a certain export obligation. While the cost insurance freight (CIF) value of the imported goods was Rs 5.96 crore, the export obligation arrived at was $8.8million.

Under the scheme, Philips was awarded concessional duty rate of 25 per cent on the import value against the export obligation. Philips India has failed even to export 10 per cent of the goods produced thereof.

Philips had to export various types of lamps, lamp components, consumer electronics equipment electric filament, discharge lamps and fluorescent lamps within a span of four years under the EPCG scheme.

In April this year when The Financial Express

carried a report on possible penalties to be imposed by DGFT, Philips officials had said: "the company had experienced serious problems in establishing the required stable manufacturing processes as the manufacture of the slim version of lamps consumes less energy and the manufacturing know-how and the processes are different and involves a higher level of specialisation. But, we are determined to fulfill our export obligations."

The export obligation, in value, was computed as the aggregate of three times of the freight on board (FOB)value of the imported capital goods and four times the average of the FOB value of the annual exports, which came to an aggregate of $8.88 million. A legal undertaking to that extent was given by the company.

When the export obligation period expired in December 1996 Philips Central Impex division manager AJ Orpe had written a letter to DGFT asking for an extension in its export obligation period against the captioned EPCG up to December 31, 1999. But, DGFT refused to extend the period.

The list of capital goods that were sought to be imported from Holland under the EPCG scheme were four 10-fold up-flush vessels, a 224-fold drying belt, a tube loader, a sintering machine with radiant panel, horizontal wiping machine, 28-head stem making machine, 18-head mounting machine with TC coil feeder, a 1152 fold soldering burning and flashing machine with wire-upreader and control unit, a 32-head sealing machine, 48-head pumping machine with control unit, three 2-stage vacuum pumps, a 10 stage vacuum pump,automatic capfiller, a 50-head capping machine, a 6-fold measuring table (inspection bench) and a hot-cut-flare machine.

When companies are allowed to import capital goods under the EPCG scheme, import duties are waived provided that all the goods so produced would be exported so that the government can get back the duty concessions offered to the company.