I am directed to refer to the provisions of Notification No. 56/98-Cus dated 1.8.98 (earlier Notification No. 29/98 dated 2.6.98 and 34/98 dated 13.6.98). In terms of serial no. 12 of the table annexed to this notification and mutates mutandis, under the corresponding entries in the earlier notifications, all the goods falling within the first schedule to the Customs Tariff Act which are imported for sale as such, other than by way of high sea sale, and in respect of which the importer, at the time of importation or at the time of clearance of warehoused goods for home consumption under section 68 of the Customs Act, makes the prescribed declaration are fully exempted from Special Additional Customs Duty (SAD). In short, the goods, which are imported for actual use by the importer, attract the SAD of 4% (8% till 13.6.98.

2.     The aforesaid exemption is being allowed both to the trader importers as well as actual user importers on the strength of prescribed declaration that the particular consignment is for trading. It has been reported that keeping track of whether the condition of the notification is being complied with is not possible. Therefore, it is quite possible that some of the actual user importers may be abusing this exemption.

3.     The matter has been examined. It has been declared that Range Officers shall check, at the time of allowing Modvat credit on the strength of a Bill of Entry, whether the particular consignment has suffered SAD of Customs or not. Wherever it is found that the Bill of Entry does not indicate payment of SAD, the Range Officer must report to the Commissioner of Customs at port of importation with a copy of Bill of Entry for taking necessary recovery action along with penal proceedings as deemed fit.

4.     The necessary instructions may also be issued to the Audit Wing of the Commissionerate for checking any possible misuse of the above-mentioned Customs Exemption Notification.