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19. Letter of Approval to a Unit.— (1) On approval of a proposal under rules 18 and 19, Development Commissioner shall issue a Letter of Approval in Form G, for setting up of the Unit. (2) The Letter of Approval shall specify the items of manufacture or particulars of service activity, including trading or warehousing, projected annual export and Net Foreign Exchange Earning for the first five years of operations, limitations, if any on Domestic Tariff Area sale of finished goods, by-products and rejects and other terms and conditions, if any, stipulated by the Board or Approval Committee:
Provided that the Approval Committee may also approve proposals for broad-banding, diversification, enhancement of capacity production, change in the items of manufacture or service activity, if it meets the requirement of rule 18
Provided further that no such approval shall be granted by the Approval Committee in those cases which fall within the competence of the Board of Approval.
Provided also that the Approval Committee may also approve change of the entrepreneur of an approved unit, if the incoming
entrepreneur undertakes to take over the assets and liabilities of the existing Unit.
(3) An entrepreneur holding Letter of Approval issued under sub-rule (1) shall only be entitled to set up a Unit in processing area of the
Special Economic Zone or Free Trade and Warehousing Zone, as the case may be:
Provided that a proposal for setting up of a Unit in a Special Economic Zone or Free Trade Warehousing Zone shall be entertained only after the processing area of the Special Economic Zone or Free Trade Warehousing Zone has been demarcated under rule 11.
(4) The Letter of Approval shall be valid for one year within which period the Unit shall commence production or service or trading or Free
Trade and Warehousing activity and the Unit shall intimate date of commencement of production or activity to Development Commissioner:
Provided that upon a request by the entrepreneur, further extension may be granted by the Development Commissioner for valid reasons to be recorded in writing for a further period not exceeding two years:
Provided further that the Development Commissioner may grant further extension of one year subject to the condition that two-thirds of
activities including construction, relating to the setting up of the Unit is complete and a chartered engineer’s certificate to this effect is submitted by the entrepreneur.
(5) If the Unit has not commenced production or service activity within the validity period or the extended validity period under sub-rule (4), the Letter of Approval shall be deemed to have been lapsed with effect from the date on which its validity expired.
(6) The Letter of Approval shall be valid for five years from the date of commencement of production or service activity and it shall be construed as a licence for all purposes related to authorized operations, and, after the completion of five years from the date of commencement of production, the Development Commissioner may, at the request of the Unit, extend validity of the Letter of Approval for a further period of five years, at a time.
(7) If an enterprise is operating both as a Domestic Tariff Area unit as well as a Special Economic Zone Unit, it shall have two distinct identities with separate books of accounts, but it shall not be necessary for the Special Economic Zone unit to be a separate legal entity:
Provided that foreign companies can also set up manufacturing units as their branch operations in the Special Economic
Zones in accordance with the provisions of Foreign Exchange Management (Establishment in India of branch or office or other place of
business) Regulations, 2000 as amended from time to time.
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