The Duty Free Import Authorisation (DFIA) scheme has been a messy and controversial scheme since its introduction. Now, domestic producers of certain goods have represented that anti-dumping duty on the goods akin to what they produce is being avoided through the DFIA scheme.
The DFIA scheme replaced the earlier Duty Free Replenishment Certificate (DFRC) scheme in 2006. It gave double benefits by allowing Cenvat Credit as well as transferability under the scheme. This was pointed out repeatedly but the government continued to give double benefits. Nearly three years after the introduction of the scheme, the government plugged the loophole and then made a retrospective amendment to the exemption notification. In the meantime, many had already availed of the double benefit and nothing could be done about it. Under the DFIA scheme, inputs covered under Standard Input Output Norms (SION) for an export product can be imported duty-free for export production. In case the export obligation is fulfilled, DFIA or the goods imported under DFIA can be transferred upon payment of Additional Duty of Customs (equal to excise duty) i.e., CVD. However, unlike its predecessor DFRC scheme, the DFIA scheme does not provide for payment of anti-dumping duty upon transferability endorsement. That enables avoiding payment of anti-dumping duties.
Now, some domestic producers allege that there are several SION entries which allow duty free import of certain inputs on which anti-dumping duty is payable, if imported outside the duty exemption scheme. Exporters of products covered by such SION entries do not use such inputs in their export production but obtain DFIA and after discharging export obligation transfer the DFIA or sell the inputs imported duty free under DFIA in the market. That takes away the protection available through anti-dumping duty, say the domestic producers.
Another way of avoiding the impact of anti-dumping duty is to import certain inputs without payment of anti-dumping duty under the DFIA scheme, use the same for domestic production and sell the manufactured goods in the domestic markets after discharge of export obligation. This also hurts the domestic producers of dumped like articles.
Under the Export Oriented Units (EOU) scheme, if goods manufactured from inputs that are exempted from anti-dumping duty are to be sold in the domestic market, then the anti-dumping duty that was not paid at the time of import of the input must first be paid. Similar restrictions are not there under the DFIA scheme. In fact, similar restrictions are not there even under the Special Economic Zone (SEZ) scheme or the advance authorisation scheme. So, it is an anomalous situation, where the
EOU has to surrender the anti-dumping duty exemption on inputs that are used in the manufacture of goods that are sold in the domestic market but SEZ units or the advance authorisation holders or DFIA holders need not do so.
So, the commerce and finance ministries should quickly review the schemes to consider disallowing anti-dumping duty exemption under the DFIA scheme upon endorsement of transferability and disallowing anti-dumping duty exemption, if goods manufactured from duty-free inputs under DFIA or advance authorisation or by SEZ units are sold in the domestic market. The SION entries must also be reviewed to make sure that only the inputs actually required for manufacture of the export product are allowed duty-free import under the duty exemption scheme.
Source : sify.com