Introduction, Conditions and procedures, Procurement of material, Removal of materials or partially processed, Material for Processing. Procedure for Export, Accounts & Returns, Checks by Customs Officers.


Introduction
Conditions and procedures
Procurement of material
Removal of materials or partially processed material for processing
Procedure for export
Accounts & Returns
Checks by Customs Officers

Part-VI
Manufacture of export goods in bond

  1. Introduction

    1.1 The Board has, by Notification No. 43/2001-Central Excise (N.T.) dated 26.6.2001 [hereinafter referred to as the ‘said notification’] notified the conditions, safeguards and procedures for procurement of the excisable without payment of duty for the purpose of use in the manufacture or processing of export goods and their exportation out of India, to any country except Nepal and Bhutan.

    1.2 It may be noted that in rule 19 of the said Rules and in said notification, expression ‘export goods’ has been used. This refers to excisable goods (dutiable or exempted) as well as non-excisable goods. Thus, the benefit of input stage rebate can be claimed on export of all finished goods whether excisable or not.

    1.3 It may be also noted that materials, as defined in the said rule 19 may be used for manufacture or processing. In other words, any processing not amounting to manufacture (such as packing, blending etc.) will also be eligible for the benefit under said notification.

    1.4 Removal without payment of duty of equipment and machinery in the nature of capital goods used in relation to manufacture or process of finished goods shall not be allowed.
  2. Conditions and procedures

    2.1 The conditions and procedure for manufacture of export goods in bond shall be, as follows:
    1. The manufacturer or the processor intending to avail benefit of this notification shall register himself under rule 9 of the said Rules; and
    2. The procedure specified in the Central Excise (Removal of Goods at Concessional Rate of Duty for Manufacture of Excisable Goods) Rules, 2001 shall be followed, mutatis mutandis. It is clarified that there is no need for any separate exemption notification for applying this rule.
    3. The manufacturer or processor shall file a declaration with the Deputy/Assistant Commissioner of Central Excise having jurisdiction over the factory of manufacture under the Central Excise (Removal of Goods at Concessional Rate of Duty for Manufacture of Excisable Goods) Rules, 2001, and also declare ratio of input and output and rate of duty payable on excisable goods to be procured without payment of duty. Where there are more than one export product, separate statement of the input-output ratios may be furnished for each export product. The consumption should be net of recycled materials. Where recoverable wastage are generated but not recycled but sold on account of its unsuitability, the same should be clearly reflected in the declaration. The declarant should also enclose, in case of a new product or in case where the manufacturer is not regularly manufacturing the export goods and clearing for home consumption or export, a write up of manufacturing process.

    2.2 Verification of Input–output ratio and grant of permission

    2.2.1 The Deputy/Assistant Commissioner of Central Excise shall verify the correctness of the ratio of input and output mentioned in the declaration filed before commencement of export of such goods, if necessary, by calling for samples of finished goods or by inspecting such goods in the factory of manufacture or process. If, after such verification, the Deputy/Assistant Commissioner of Central Excise is also satisfied that there is no likelihood of evasion of duty, he may grant permission to the applicant for manufacture or processing and export of finished goods and countersign the application in the manner specified in the Central Excise (Removal of Goods at Concessional Rate of Duty for Manufacture of Excisable Goods) Rules, 2001;

    2.2.2 It is clarified that for the sake of convenience and transparency, input output norms notified under the Export Import Policy may be accepted by the Department unless there are specific reasons for variation. However, in case, the input output norms notified under the Export Import Policy does not include all the materials used in export goods, the claim under this scheme should not be denied merely on that ground.

    2.3 If for any reason the Deputy/Assistant Commissioner of Central Excise is not satisfied with reference to the correctness of the consumption norms claimed by the applicant, especially where the product is being manufactured for the first time in his jurisdiction, he may permit the manufacturing operations and the verification of the consumption norms should be completed while the process of manufacture is on. The verification should be completed before allowing the export of the goods as the manufacturer working under this Scheme is expected to declare the raw materials costumed in ARE-2.

    2.4 The permission granted by the Deputy/Assistant Commissioner of Central Excise can be withdrawn at any time if any glaring misuse resulting into loss of revenue comes to his notice.

    2.5 Any change in the consumption ratio [input-output ratio] should be promptly intimated by the manufacturer to the deputy/Assistant Commissioner of Central Excise and the jurisdictional Range Superintendent giving reference of the permission granted. If necessary, the Deputy/Assistant Commissioner of Central Excise may order fresh verification.
  3. Procurement of material

    3.1 The procedure of procurement of material required for the manufacture shall be governed by the provisions of the Central Excise (Removal of Goods at Concessional Rate of Duty for Manufacture of Excisable Goods) Rules, 2001.
  4. Removal of materials or partially processed material for processing

    4.1 The Deputy/Assistant Commissioner of Central Excise may permit a manufacturer to remove the materials as such or after the said materials have been partially processed during the course of manufacture or processing of finished goods to a place outside the factory -
    1. for the purposes of test, repairs, refining, reconditioning or carrying out any other operation necessary for the manufacture of the finished goods and return the same to his factory without payment of duty for further use in the manufacture of finished goods or remove the same without payment of duty in bond for export, provided that the waste, if any, arising in the course of such operation is also returned to the said factory of the manufacture or process; or
    2. for the purpose of manufacture of intermediate products necessary for the manufacture or processing of finished goods and return the said intermediate products to his factory for further use in the manufacture or process of finished goods without payment of duty or remove the same, without payment of duty for export, provided that the waste, if any, arising in the course of such operation is also returned to the factory of manufacturer or processor;
    3. Any waste arising from the processing of materials may be removed on payment of duty as if such waste is manufactured or processed in the factory of the manufacturer or processor;
  5. Procedure for export

    5.1 The goods shall be exported on the application in Form A.R.E. 2 specified in the Annexure-23 and the procedures specified in the Notification No. 42/2001-Central Excise dated 26th June, 2001 shall be followed. It is mentioned that in such cases, fresh A.R.E.1 is not required because export will be effected on A.R.E.2 itself. But the procedure specified in the aforementioned notifications relating to removals, distribution of documents at the place of despatch and place of export, acceptance of proof of export etc. shall be followed mutatis mutandis.

    5.2 The Deputy/Assistant Commissioner of Central Excise should point out deficiency, if any within 15 days of filing of A.R.E.1 duly certified by Customs indicating actual export. Queries/ deficiencies shall be pointed out at one go and piecemeal queries should be avoided.

    5.3 Only a manufacture or processor of finished goods who exports the goods can claim benefit of input stage rebate. This facility shall not be extended where export are through merchant exporters.

    5.4 The benefit of input stage rebate cannot be claimed in any of the following situations:
    1. where the finished goods are exported under Claim for Duty Drawback
    2. where the finished goods are exported in discharge of export obligations under a Value Advance Licence or a Quantity Based Advance Licence issued before 31.03.95.
    3. where facility of input stage credit is availed under CENVAT Credit Rules, 2001
  6. Accounts & Returns

    6.1 The manufacturer shall maintain register of duty free materials brought to the factory for manufacture of finished goods for export and the account for finished goods manufactured and exported. Any officer duly empowered by the Deputy/Assistant Commissioner of Central Excise in this behalf shall have access at all reasonable times to any premises indicated in the application. The applicant shall also permit the officer of Central Excise access to any records relating to the production, storage and export of goods.

    6.2 The colour coding of A.R.E.2 will be as follows:-
    Original
    Duplicate
    Triplicate
    Quadruplicate
    Quintuplicate
    White
    Buff
    Pink
    Green
    Blue
  7. Checks by Customs Officers

    7.1 Samples will be invariably drawn by the Customs Officers for testing at the place of export in case the export goods are of sensitive nature considering that they are made from materials bearing high Central Excise Duty.

    7.2 Customs officer responsible for making endorsement in A.R.E.2 shall carefully check that exports are not covered under any of the following:
    - The Duty Drawback Scheme
    - A Value Based Advance Licence issued prior to 31.03.95
    - A Quantity Based Advance Licence issued prior to 31.03.95
  8. The Deputy/Assistant Commissioner sanctioning rebate shall ensure that the relevant transport copies (duplicate copies) of Duty paying document have been suitably defaced before payment is made.
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