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Regarding Admissibility of DEPB Credit and Market Verification for
Ascertaining the Present Market Value under DEPB Scheme
Customs
Circular No. 77 dated 27th November 2002
Attention
is invited to Board�s Circulars No. 26/ 2001-Cus dated 24.4.2001, 56/2002-Cus
dated 9.9.2002 and 63/2002-Cus dated 27.9.2002. These circulars were issued in
the wake of various cases of over-valuation under the DEPB scheme reported by
the DRI and field formations. It was brought to the notice of the Board that
many unscrupulous exporters had been deliberately resorting to the artificial
inflation of the FOB values of their exports to avail unintended DEPB benefits.
In order to curb such practice, Government through these circulars laid down
that wherever, the declared f.o.b. value is more than the present market value (PMV)
as declared by the exporter or as ascertained by the Customs authorities, the
present market value shall be the basis for granting DEPB credit.
2.
Trade have represented at various fora that the above instructions have
led to harassment in the field formations with consequent adverse impact on the
exports. It has been represented that each and every export consignment is being
subjected to market verification, which results in delay in meeting the export
commitments. Further, it has also been stated that in all those cases where the
PMV declared is less than the FOB value, the DEPB benefit is being allowed only
on the PMV. It has been argued by the export promotion bodies that high value
added products are bound to have FOB values higher than the PMV and therefore,
the principle of granting DEPB credit on the PMV in every case is not correct.
3.
The issue has been examined in consultation with the Directorate General
of Foreign Trade. It has been decided in modification of the instructions
contained in the above referred circulars that as a general rule, FOB value of
the exports shall remain the basis for extending the DEPB credit since FOB value
is recognised as the basis of export transactions both in the EXIM Policy as
well as in the Customs Act, 1962.
4.
However, in cases of specific intelligence that the FOB declared is
inflated or there is evidence confirming such over-valuation, the field
formations should resort to market verification to ascertain the correct market
price of the goods. In addition to above, market verification can also be
initiated on receipt of intelligence or where the intelligence is gathered in
respect of consignments entered for export to sensitive destinations and/or
where the goods are sub-standard and it appears that the acceptance of the
declared value would result in accrual of substantial unintended DEPB benefits.
But all such cases should be taken up for investigation only with the express
written approval of the Commissioner of Customs.
5.
In those cases where it is conclusively proved through the investigations
that the FOB value had been artificially inflated/ manipulated by the exporter
to avail of unintended higher DEPB benefits, the DEPB credit entitlement shall
be worked out only on the PMV and not FOB value.
6.
This should be ensured that the market verifications are not resorted to
in a routine manner and should be undertaken only on the basis of intelligence
and concrete evidence. Administrative authorities should also ensure that market
verifications are expeditiously concluded and no harassment is caused to the
trade nor are any exports held up.
7.
Suitable public notices for information of the trade and standing orders
for guidance of the staff may kindly be issued accordingly.
8.
The receipt of this Circular may kindly be acknowledged.
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