Circular No. 45 dated 28^th August 1996

In supersession of all earlier instructions contained in: Circular Nos. 52/ 95-Cus. dated 25.5.95, 97/ 95 dated 14.9.95, 123/ 95 dated 4.12.95 & telex F.No. 605/ 75/ 95-DBK dated 25.8.95, the following guidelines are hereby issued for execution of Bonds and Bank Guarantee:

I.       Bond under Duty Exemption Scheme

2.1    Bonds under DEEC Scheme should cover the duty ordinarily leviable on the goods but for the exemption (i.e. basic duty and additional duty leviable on the goods on merits minus additional duty actually paid). For example, if basic duty on the imported goods is 50% and additional duty is 20%, the effective duty recoverable on imports shall be 50% plus 20% on 50% i.e., 80% of assessable value. Since additional duty will actually be recoverable only at the rate of 20% of assessable value (basic Customs duty being exempt), the bond to be executed shall be for the difference between 80% and 20% i.e. 60% of the assessable value. Surety with the Bond should be in the form of Bank Guarantee or Cash Security. A guarantee from a financial institution like, IDBI, ICICI, UTI etc. may also be accepted in lieu of Bank Guarantee.

2.2    The following norms have been fixed for quantum of Bank Guarantee for different categories of importer:

2.3    In individual cases where Commissioner is satisfied that a higher Bank Guarantee is justified on account of the risks to revenue and past record of licence, he may ask for a higher Bank guarantee after recording the reasons therefor on the file. For example, a higher Bank Guarantee may be justified in a case where the party has large amounts of duty etc., outstanding against it or has repeatedly been found guilty of evading duties through deliberate acts of omission or commission.

II.      Bond under E.P.C.G. Scheme

3.1    Under E.P.C.G. Scheme Bond should be for the difference between the duty leviable on Capital goods on merits and the duty actually paid on importation. The Bank Guarantee/ Cash Security or a guarantee by IDBI, ICICI, UTI etc. may be accepted as per Table below:

3.2    In cases where lower Bank Guarantee is fixed in respect of Category (b) of exporters by the COS/ EPCG Committee the Commissioner of Customs if finds that the importer has committed serious violation of Customs Act or is guilty of evasion of duty, he may refer the case to the licensing authority for reconsideration. Such cases may also be brought to the notice of the Ministry.

3.3    Where an importer so requests, a Bank Guarantee may be taken even consignment- wise under E.P.C.G. Scheme the same may be acceptable but only at the Port of Registration of the licence.

3.4    A bond should not be for less than a period of two years, with an undertaking to keep the Bank Guarantee alive for the entire period of the export obligation viz. 4+1=5, or 8+1=9 years as the case may be. Under zero duty EPCG Scheme, Bank Guarantee may be taken either consignment wise or consolidated for initial period of four years with an under taking in the Bond to renew the Bank Guarantee. Where Bank Guarantees are not renewed by the importers before the expiry of the existing Bank Guarantee action should be taken to enforce the Bank Guarantee for realisation of the Government dues. Customs House should initiate action to get Bank Guarantee renewed well in time.

4.      Where, however, the EPCG Committee/ Committee of Secretaries or ALC indicates a higher Bank Guarantee for a particular Licence, the Bank Guarantee should be taken for such higher amount.

5.      In the case of subsidiary Company of a parent Company of a recognised status, it has been decided to extend the benefit of joint bond (both by the parent company as well as the subsidiary company holding the licence) along with B.G./ Cash Security/ any other guarantee from financial institutions like IDBI, ICICI and UTI etc. The facility, however, will be subject to the following condition:

(i)      The parent company should necessarily have more than 50% share holding in the subsidiary company.

(ii)     The bond shall be jointly signed by the parent company as well as the subsidiary company and shall be executed along with BG/ Cash security/ or Guarantee from financial institutions like IDBI, ICICI and UTI etc. wherever applicable in terms of criterion laid down. The guaranteeshall be in relation to terms and conditions of the Joint Bond.

(iii)    The parent company shall stand surety for the subsidiary company that in the eventsubsidiary company fails to fulfil the export obligation and defaults on payment of CustomsDuty and interest, the parent company shall make goods the Government revenue and the interest. In other words the parent company will be severally and jointly liable for the actionin terms of the bond/ B.G. jointly executed by them.

(iv)    This facility should be extended only to those companies, which have proven track record and reputation.

6.      The above guidelines would apply in respect of goods to be imported in future and in respect of consignments, which have arrived and are yet to be cleared from the Customs.