Bond Accepting Authority, Security or surety with Bond, Procedure for Clearance from the Factory or Warehouse Sealing of Goods and Examination at place of Despatch, Distribution of ARE-1.

Introduction
Conditions
Forms to be used
Bond Accepting Authority
Security or surety with bond
Procedure for clearance from the factory or warehouse
Sealing of goods and examination at place of despatch
Distribution of ARE.1 in the case of export from the factory or warehouse
Distribution of ARE.1 in the case of export from other than factory or warehouse
Despatch of goods by self-sealing and self-certification
Export by parcel post
Examination of goods at the place of export
Procedure relating proof of export and to re-credit against such proof
Functioning of Deputy/Assistant Commissioner of Central Excise (Export)

Part-II
Export to all countries except Nepal and Bhutan

1. Introduction
   
   1.1 Procedures and conditions for export to all countries except Nepal and Bhutan are specified in notification No. 42/2001-CE(N.T.) dated 26.6.2001. The details are mentioned in this part.
   
2. Conditions
   
   2.1 An exporter shall furnish bond in Form B-1 and obtain certificate in Form CT-1. A manufacturer-exporter may furnish annual Letter of Undertaking (no CT-1 is required in this case). The export shall be subject to the following conditions"
   1. The goods shall be exported within six months from the date on which these were cleared for export from the factory of the production or the manufacture or warehouse or other approved premises within such extended period as the Deputy/Assistant Commissioner of Central Excise or Maritime Commissioner may in any particular case allow;
   2. When the export is from a place other than registered factory or warehouse, the excisable goods are in original packed condition and identifiable as to their origin;
   3. The exports of mineral oil products falling under Chapter 27 of the First Schedule to the Central Excise Tariff Act, 1985 (5 of 1986) as stores for consumption on board of an aircraft on foreign run shall be subject to conditions and limitations, to be applied mutatis mutandis, as notified in the Notification No.40/2001-Central Excise (N.T.) dated 26th June, 2001 issued under rule 18 of the said Rules.
      
3. Forms to be used
   
   3.1 ARE.1 is the export document for export clearance (Annexure-14), which shall be prepared in quintuplicate (5 copies). This is similar to the erstwhile AR.4. This document shall bear running serial number beginning from the first day of the financial year. During this year, for the sake of continuity, the serial number, as started from 1.4.2001, may continue. The stationary for AR.4 Form may be used with modified name "ARE.1" during this financial year. On A.R.E.1, certain declarations are required to be given by the exporter. These should be signed by the exporter or his authorised agent. The different copies of ARE.1 forms should be of different colours indicated below:
   Original White
   Duplicate Buff
   Triplicate Pink
   Quadruplicate Green
   Quintuplicate Blue
   
   3.2 It will be sufficient if the copies of ARE.1 contain a color band on the top or right hand corner in accordance with above color scheme.
   
   3.2 An invoice shall also be prepared in terms of rule 11 of the said Rules. It should be prominently mentioned on top "FOR EXPORT WITHOUT PAYMENT OF DUTY".
   
   3.3 The Letter of Undertaking is to be furnished in the Form UT-1 specified in Annexure-15 to Notification No. 42/2001-Central Excise (N.T.), supra. Any manufacturer, who is an assessee for the purposes of the Central Excise (No.2) Rules, 2001, shall furnish a Letter of Undertaking only to the Deputy/Assistant Commissioner of Central Excise having jurisdiction over his factory from which he intends to export. The Letter of Undertaking should not be furnished to the Maritime Commissioner or any other officer authorised by the Board. A ‘Letter of Undertaking’ shall be valid for twelve calendar months provided the exporter complies with the conditions of the Letter of Undertaking, especially the procedure for ‘acceptance of proof of export’ under this instruction. In case of persistent defaults or non-compliance causing threat to revenue, the manufacturer-exporter may be asked to furnish bond with security/surety. For the sake of clarification, it is mentioned that this Letter of Undertaking should not be taken for each consignment of export.
   
   3.4 The obligation of the manufacturer flows from statutory requirement of exporting the goods within six months or such extended period as the Deputy/Assistant Commissioner of Central Excise may allow. Failing this, the exporter is required to deposit the requisite sum (duty and interest) suo moto, considering that the manufacturer has to do ‘self-assessment’. Any non-payment within 15 days of expiry of the stipulated time period, shall be treated as arrears of revenue and the Department will proceed to recover the same as ‘sum due to Government’. Suo moto payment within 15 days of expiry of the stipulated time period will not be treated as ‘default’.
   
   3.5 On repeated failure of the manufacturer-exporter to comply with the conditions of the Letter of Undertaking or the procedure for ‘acceptance of proof of export’ under this instruction, the Deputy/Assistant Commissioner of Central Excise may direct him in writing that the letter of undertaking is not valid and he should furnish B-1 Bond with sufficient security/surety.
   
   3.6 The Letter of Undertaking shall not be discharged unless the goods are duly exported, to the satisfaction of the Assistant Commissioner of Central Excise or the Deputy Commissioner of Central Excise within the time allowed for such export or are otherwise accounted for to the satisfaction of such officer, or until the full duty due upon any deficiency of goods, not accounted so, and interest, if any, has been paid.
   
   3.7 Though any exporter (Manufacturer-exporter or merchant-exporter) can furnish bond, the merchant-exporters are necessarily required to furnish bond in the B-1 Form specified in Annexure-16 of notification no. 42/2001-Central Excise (N.T.), supra with such security or surety as may be specified by the concerned bond accepting authority. The bond shall be in a sum equal at least to the duty chargeable on the goods for the due arrival of export goods at the place of export and their export therefrom under Customs or as the case may be postal supervision. The officer who will accept the bond, will also be responsible for discharging that bond upon furnishing proof of export by the exporter.
   
   3.8 The bond shall not be discharged unless the goods are duly exported, to the satisfaction of the Deputy/Assistant Commissioner of Central Excise or Maritime Commissioner or such other officer as may be authorised by the Board on this behalf within the time allowed for such export or are otherwise accounted for to the satisfaction of such officer, or until the full duty due upon any deficiency of goods, not accounted so, and interest, if any, has been paid
   
   3.9 Certificate ‘CT-1", as specified in Annexure-17 have to be obtained by merchant-exporters for procuring goods from a factory or warehouse. Such certificates need not be obtained for each consignment but will be given in lot of 25.
   
4. Bond Accepting Authority
   
   4.1 Bond may be accepted by any of the following officers: -
   1. The Deputy/Assistant Commissioner of Central Excise having jurisdiction over the factory or warehouse or any other premises approved by the Commissioner for storing non-duty paid goods;
   2. Maritime Commissioners at Mumbai, Chennai, Kolkata, Paradeep, Kandla, Tuticorin, Visakhapatnam and Cochin.
   3. The Deputy/Assistant Commissioner of Central Excise(Export) as officers authorised by the Board for this purpose.
      
      
   4.2 Exporters are required to clearly indicate on the ARE.1 the complete postal address of the authority before whom the bond is executed and to whom the documents are to be submitted/ transmitted for admission of proof of export.
   
   
5. Security or surety with bond
   
   5.1 Wherever bond is taken, sufficient security or surety is also required as the per the notifications issued under rule 19 of the said Rules. In 1996, Board had taken a decision that in respect of exporters having good track record may be allowed to furnish bond with nil security or surety. The Board in Circular No.284/118/96 dated 31.12.1996 issued an instruction. Now, since the manufacturer-exporters, who are also assessee of the Central Excise Department, have an option to furnish ‘Letter of Undertaking" (without any security or surety), the question of furnishing of ‘security or surety’ is mainly relate to merchant-exporters who are not assessees of the Central Excise Department. In this scenario, the Board has decided that security (Bank Guarantee or Cash Guarantee or Cash Security) or surety need not be insisted upon from Super Star Trading Houses, Star Trading Houses, Trading Houses and Export Houses provided that –
   1. the exporter has not come to adverse notice of the Central Excise or Customs Department in last three years from the date under consideration;
   2. all the formalities required under Central Excise Act and rules made thereunder are regularly complied with by the exporter, especially regarding timely submission of proof of export and deposit of duty with interest in time where proof of export is not received within stipulated time frame;
   3. A self-attested copy of the proof of Status (Super Star Trading Houses, Star Trading Houses, Trading Houses and Export Houses) from concerned authority (Ministry of Commerce and Industry – Directorate General of Foreign Trade) is submitted.
      
      
   5.2 Other exporters shall be required to furnish surety equal to full bond amount or security equal to twenty five percent. (25%) of the bond amount, along with the bond.
   
   5.3 The bond shall be furnished on non-judicial stamp paper of the value as applicable in the State in which bond is being furnished.
   
   5.4 Where export is effected by merchant-exporter, the bond has to be necessarily furnished. It is open for the manufacturer to furnish bond on behalf of the merchant-exporter. It is clarified that in such cases, the manufacturer will not take a stand that since he is responsible for the duty liability, the export should be allowed on the basis of the ‘Letter of Undertaking’, which he has already furnished to the Department. In such circumstances, the application in Form ARE.1 will be in the name of the manufacturer who executes the Bond. All other procedures for admission of the proof of export would be the same as in the case of manufacturer-exporters.
   
   5.5 It should be noted that once a manufacturer furnished bond for exports by merchant exporters, it would be his responsibility to account for the export goods.
   
   5.6 It may be noticed that only General bond (B-1) has been specified. Even where bond is required for only one consignment, the Form will remain the same. The exporter may get the bond redeemed immediately after he completes the exports and obtains the proof of export.
   
   5.7 In case of B-1 general bond a running bond account in proforma of Annexure-18 shall be maintained by the exporter because he is responsible for debit the bond before preparation of ‘certificate’ for obtaining goods for export. He shall also take self-credit in the manner specified in this instruction.
   
   5.8 For the sake of clarity it is informed that the concept of ‘Block Transfer’ has lost its relevance in the context of self-debit and self-credit of bond and the new system of acceptance of proof of export [to be explained in subsequent paragraphs] by the exporter.
   
   5.9 It is further mentioned that where the merchant exporter executes bond, it shall be necessary that both the merchant-exporter and the manufacturer sign the ARE.1.
   
   
6. Procedure for clearance from the factory or warehouse
   
   6.1 A Manufacturer-exporter who has furnished a Letter of Undertaking will prepare the export documents (A.R.E.1 and invoice under rule 11) for clearance from his factory of production.
   
   6.2 A Merchant-exporter who has furnished a bond shall be provided sufficient number of certificates (CT-1), duly signed/certified, in multiples of 25 copies, normally covering a period of one to three months, depending upon the track record of compliance by the exporter. The ‘bond accepting authority’ shall be responsible for verifying and accepting the proof of export and in case of any defaults by the exporter, to recover the sum and enforcing the bond. The certificate should be provided according to the volume of exports projected by the exporter (which should also reflect in the amount of bond). The compliance of the exporter in submitting the requisite documents towards ‘proof of export’ shall be another criterion.
   
   6.2.1 The second part of CT-1 is very important. The exporter shall determine the description of goods for procurement from a particular factory or warehouse or an approved place of storage, quantum, value of procurement (provisional figures) and duty involved therein (provisional figures – but based on correct rate of duty and contracted transaction value). This ‘duty’ element will be debited provisionally. The exporter shall ensure that at the time of debit, sufficient credit is available at that point of time to cover the said debit. The provisional debit shall be converted into final debit within a period of seven days form the date of removal of goods on A.R.E.1, based on the ‘duty payable’ in goods cleared for export reflected in the said A.R.E.1 and invoice.
   
   6.2.2 The manufacturer shall record the clearance in his Daily Stock Account indicating, inter alia, the invoice number/date, A.R.E.1 number/date and duty payable but foregone under rule 19.
   
   6.3 The exporter has two optional procedures regarding the manner in which he may clear the export consignments from the factory or warehouse or any other approved premises, namely: -
   1. Examination and sealing of goods at the place of despatch by a Central Excise Officer
   2. Under self-sealing and self-certification
      
      
7. Sealing of goods and examination at place of despatch
   
   7.1 The exporter is required to prepare five copies of application in the Form ARE-1. The Form is specified in Annexure-I to notification No. 42/2001-Central Excise (N.T.) dated 26.6.2001. The goods shall be assessed to duty in the same manner as the goods for home consumption, though duty is not required to be paid considering clearance is meant for export without payment of duty. The classification and rate of duty should be in terms of Central Excise Tariff Act, 1985 read with any exemption notification and/or the said Rules. The value shall be the "transaction value" and should conform to section 4 or section 4A, as the case may be, of the Central Excise Act, 1944. It is clarified that this value may be less than, equal to or more than the F.O.B. value indicated by the exporter on the Shipping Bill.
   
   7.2 The duty payable shall be determined on the ARE.1 and invoice and recorded in the Daily Stock Account as "duty foregone on account of export under rule 19".
   
   7.3 The exporter may request the Superintendent or Inspector of Central Excise having jurisdiction over the factory of production or manufacture, warehouse or approved premises for examination and sealing at the place of despatch 24 hours in advance, or such shorter period as may be mutually agreed upon, about the intended time of removal so that arrangements can be made for necessary examination and sealing.
   
   7.4 In case of exports under Duty Exemption Entitlement Certificate Scheme (DEEC), Duty Exemption Pass Book Scheme (DEPB) and claim for Drawback, the Superintendent of Central Excise shall also examine and seal the consignment and sign the documents in token of having done so. In exceptional cases, where the exporter has unblemished track record of compliance (Central Excise) and where there is non-availability of Superintendent of Central Excise due to leave, vacant post or other reasonable causes, the jurisdictional Deputy/Assistant Commissioner of Central Excise may permit examination and sealing by Inspector. All other types of export may be examined and sealed by the Inspector of Central Excise.
   
   7.5 The Superintendent or Inspector of Central Excise, as the case may be, will verify the identity of goods mentioned in the application and also verify whether the duty self-assessed is appropriate and that the particulars of the duty payable has been has recorded in the Daily Stock Account. If he finds that the declaration in ARE.1 and the invoices are correct from the point of view of identity of goods and its assessment to duty, he shall seal each package or the container ensuring that the goods cannot be tampered with after the examination. Normally, individual packages should be sealed by using wire and lead seals and an all-sides-closed container by using numbered One time Lock/Bottle seals or in such other manner as may be specified by the Commissioner of Central Excise by a special or general written order. Thereafter, the said officer shall endorse and sign each copy of the application in token of having such examination done and put his stamp with his name and designation below his signature;
   
   
8. Distribution of ARE.1 in the case of export from the factory or warehouse
   Original (First Copy) The said Superintendent or Inspector of Central Excise shall return to the exporter immediately after endorsements and signature
   Duplicate (Second Copy) The said Superintendent or Inspector of Central Excise shall return to the exporter immediately after endorsements and signature.
   Triplicate (Third Copy) Sent to the bond sanctioning authority, either by post or by handing over to the exporter in a tamper proof sealed cover after posting the particulars in official records.
   Quadruplicate (Fourth Copy) Retain for official records
   Quintuplicate (Fifth Copy) Optional copy - The said Superintendent or Inspector of Central Excise shall return to the exporter immediately after endorsements and signature.
   
   
9. Distribution of ARE.1 in the case of export from other than factory or warehouse
   
   9.1 Where goods are not exported directly from the factory of manufacture or warehouse, the distribution of A.R.E.1 will be same as above except that the triplicate copy of application shall be sent by the Superintendent having jurisdiction over the factory of manufacture or warehouse who shall, after verification forward the triplicate copy in the manner specified above.
   
   
10. Despatch of goods by self-sealing and self-certification
    
    10.1 Self-sealing and self-certification is a procedure by which the exporter who is a manufacturer or owner of a warehouse, may remove the goods for export from his factory or warehouse without examination by a Central Excise Officer. This procedure will also be permitted in the cases where a merchant-exporter procures the goods directly from a factory or warehouse. In both cases, the manufacturer of the export goods or owner of the warehouse shall take the responsibility of sealing and certification. For this purpose the owner, the working partner, the Managing Director or the Company Secretary, of the manufacturing unit of the goods or the owner of warehouse or a person (who should be permanent employee of the said manufacturer or owner of the warehouse holding reasonably high position) duly authorised by such owner, working partner or the Board of Directors of such Company, as the case may be, shall certify on all the copies of the application (A.R.E. 1) that the goods have been sealed in his presence. The exporter shall distribute of the copies of A.R.E. 1 in the following manner:
    Original (First copy) and Duplicate (Second copy) Send to the place of export along with the goods
    Triplicate (Third copy) and Quadruplicate (Fourth copy) Superintendent or Inspector of Central Excise having jurisdiction over the factory or warehouse within twenty four hours of removal of the goods
    Quintuplicate (Fifth copy) Optional copy - Send to the place of export along with the goods
    
    10.2 The said Superintendent and Inspector of Central Excise shall verify the particulars of assessment, the correctness of the amount of duty paid or duty payable, its entry in the Daily Stock Account maintained under rule 10 of the Central Excise (No.2) Rules, 2001 (the manufacturer or warehouse owner will be required to present proof in this regard), corresponding invoice issued under rule 11. If he is satisfied with the particulars, he will endorse the relevant A.R.E. 1 and append their signatures at specified places in token of having done the verification. In case of any discrepancy, he will take up the matter with the assessee for rectification and also inform the jurisdictional Assistant/Deputy Commissioner. Once verification is complete and the A.R.E. 1 is in order, he shall distribute the documents (A.R.E. 1) in the following manner:
    Triplicate (Third copy) Send to the bond accepting authority, either by post or by handing over to the exporter in a tamper proof sealed cover after posting the particulars in official records. Where manufacturer has given LUT, triplicate shall be retained and will be forwarded to the Deputy/Assistant Commissioner of the Division along with Statement, after matching them with original copies of A.R.E.1s.
    Quadruplicate (Fourth copy) Retain for Range records (The notification does not specify this distribution of this copy)
    
    
11. Export by parcel post
    
    11.1 In case of export by parcel post after the goods intended for export has been sealed, the exporter shall affix to the duplicate application sufficient postage stamps to cover postal charges and shall present the documents, together with the package or packages to which it refers, to the postmaster at the Office of booking.
    
    
12. Examination of goods at the place of export
    
    12.1 The place of export may be a port, airport, Inland Container Depot, Customs Freight Station or Land Customs Station.
    
    12.2 The exporter shall present together with original, duplicate and quintuplicate (optional) copies of the application (A.R.E. 1) to the Commissioner of Customs or other duly appointed officer – normally goods are presented in the designated export shed.
    
    12.3 The goods are examined by the Customs for the purposes of Central Excise to establish the identity and quantity, i.e. the goods brought in the Customs area for export on an A.R.E. 1 are the same which were cleared from the factory. The Customs authorities also examine the goods for Customs purposes such as verifying for certain export incentives such as drawback, DEEC, DEPB or for determining exportability of the goods.
    
    12.4 For Central Excise purposes, the Officers of Customs at the place of export shall examine the consignments with the particulars as cited in the application (A.R.E. 1) and if he finds that the same are correct and the goods are exportable in accordance with the laws for the time being in force (for example, they are not prohibited or restricted from being exported), shall allow export thereof. Thereafter, he will certify on the copies of the A.R.E. 1 that the goods have been duly exported citing the shipping bill number and date and other particulars of export and distribute in the following manner:
    1. The officer of customs shall return the original and quintuplicate (optional copy for exporter) copies of application to the exporter and forward the duplicate copy of application either by post or by handing over to the exporter in a tamper proof sealed cover to the officer specified in the application, from whom exporter wants to claim rebate.
    2. Quintuplicate A.R.E. 1 is the Export Promotion Copy and the exporter shall use this copy for the purposes of claiming any other export incentive.
       
       
13. Procedure relating proof of export and to re-credit against such proof
    
    13.1 The procedure relating to acceptance of proof of export or the ‘validation’ of actual export has been simplified. The original and duplicate copies of A.R.E. 1 are presented to the Customs authorities at the place of export [with option for exporter to also present quintuplicate copy]. The Customs authority certify the actual export on these documents and distributes the copies as specified.
    
    13.2 The exporter shall submit a Statement, at least once in a month, in Form specified in Annexure-19 along with the Original copies of A.R.E. 1 with due certification of export (Pass for Shipment Order) by Customs authorities at the place of export to the Divisional office (through Range)or in the office of the bond-accepting authority. Other supporting documents shall also be furnished, namely, Self-attested photocopy of Bill of Lading and Self-attested photocopy of Shipping Bill (Export Promotion Copy). The Range office or the Office of the bond-accepting authority immediately on receipt shall acknowledge the Statement.
    
    13.3 The exporter is permitted to take credit in his running bond account on the basis of copy of the Statement referred to above, duly acknowledged the Range office or the office of the bond-accepting authority
    
    13.4 It shall be the responsibility of the Range Office and Division Office or the other bond-accepting authority to verify the correctness of Statement and A.R.E.1 furnished by the exporter within the shortest possible time. The Statement and A.R.E.1 will be tallied by the Range Officers with the triplicate copies of A.R.E.1 already with them and the A.R.E.1 or its summary received directly from the place of export (hard copies or electronic summary or e-mail) within 15 days of the receipt. The Divisional Officer shall accept the proof of export or initiate necessary action in case of any discrepancy.
    
    13.5 In case of other bond-accepting authority, their office will do this work. The bond-accepting authority shall accept the proof of export or initiate necessary action in case of any discrepancy. He will also intimate about the acceptance of proof of export or any other action to the Deputy/Assistant Commissioner of Central Excise from whose jurisdiction goods were cleared for export.
    
    13.6 In case of non-export within the six month from the date of clearance for export (or such extended period, if any, as may be permitted by the Deputy/Assistant Commissioner of Central Excise or the bond-accepting authority) or discrepancy, the exporter shall himself deposit the excise duties along with interest on his own immediately on completion of the statutory time period or within ten days of the Memorandum given to him by the Range/Division office or the Office of the bond-accepting authority. Otherwise necessary action can be initiated to recover the excise duties along with interest and fine/penalty. Failing this, the amount shall be recovered from the manufacturer-exporter along with interest in terms of the Letter of Undertaking furnished by the manufacturer. In case where the exporter has furnished bond, the said bond shall be enforced and proceedings to recover duty and interest shall be initiated against the exporter.
    
    13.7 In case of any loss of document, the Divisional Officer or the bond accepting authority may get the matter verified from the Customs authorities at the place of export or may call for collateral evidences such as remittance certificate, Mate’s receipt etc. to satisfy himself that the goods have actually been exported.
    
    
14. Functioning of Deputy/Assistant Commissioner of Central Excise (Export)
    
    14.1 Under the normal export procedure, the merchant-exporters including those manufacturer-exporters (Project-exporters who have to export bought out goods) have to procure the excisable goods for export under bond manufactured in different parts of the country. For this purpose, they have to have to furnish either several bonds with the Deputy/Assistant Commissioner of Central Excise of the supplier's area and submit proof of exports for discharge of such bonds or furnish a bond with the Maritime Commissioner who are located only at seven ports, namely, Considering that there have been tremendous export potentials from the inland areas located at considerable distance from a sea port and that there have been considerable growth of exports from Inland Container Depots and the Air Cargo Units located in such inland areas, the Board had appointed an officer in each Commissionerate except those Commissionerates in which the Maritime Commissioner is posted as Deputy/Assistant Commissioner of Central Excise (Export) for the purpose of facilitating export under bond by Circular No. 500/66/99-CX dated 15th December, 1999, under authority of rule 19 of the said Rules read with notification No.42/2001-Central Excise (N.T) dated 26.6.2001.
    
    14.2 Any merchant exporter/manufacturer-cum-merchant exporter can file the required bond with the Deputy/Assistant Commissioner of Central Excise(Export) under whose jurisdiction his Head Office/factory is located (within the jurisdiction of the Commissionerates). In such case the exporter can procure the goods from a factory located anywhere in India.
    
    14.3 For clarification it is mentioned that the Deputy/Assistant Commissioner of Central Excise (Export) will not deal with the exports where the manufacturer-exporters are permitted to export by furnishing an Annual Undertaking (UT-1) in lieu of bond.