Circular No. 32 dated 5^th April 1995

Ministry of Commerce have published a revised edition of Export & Import Policy for the period 1992-97 on 31.3.95. The changes in the Exim Policy take effect from 1.4.95. Duty Exemption Scheme in the revised Exim Policy has undergone many important changes. Consequential notifications to give effect to some of these changes have been issued by the Department of Revenue simultaneously with the publication of revised Exim Policy. Notification No. 79/95-Customs dated 31.3.95 will be relevant for imports and exports under Value based Advance Licences issued on or after 1.4.95 where as Notification No. 80/95-Customs dated 31.3.95 will apply to imports and export against Quantity based Advance Licences issued on or after 1.4.95 (copies enclosed).

I.       Changes in VABAL Scheme and QABAL Scheme:

The most significant change in Value based Advance Licensing Scheme and Quantity based Advance Licensing Scheme is that all inputs imported will henceforth be chargeable to additional duty of Customs.

The said duty can be claimed as MODVAT wherever permissible in terms of Central Excise Law. Accordingly there will not be any necessity to debar exporters from availing Modvat under rule 57A or benefits of Rule 12(1)(b) or 13(1)(b) of Central Excise Rules, Declarations to be given on Shipping Bills in this regard would also therefore not be necessary in such cases.

Under both the schemes, drawback of duties (both Excise and Customs) shall also be admissible except for drawback of basic Customs duty on inputs permitted to be imported duty free under the Advance Licence. However, drawback of Excise Duty or additional duty will be subject to the condition that the benefit of the same has not been already claimed as Modvat. Further, drawback or Customs duties shall be restricted to the imported inputs (other than for which exemption is claimed under Advance Licence) shown in list (b) under part C of the DEEC. Accordingly claims of Drawback on exports made under Duty Exemption Scheme for which Licences are to be issued on or after 1.4.95 may be kept pending till further instructions are issued in this regard.

Under both the schemes the importer will be required to execute a bond with the Customs authorities for fulfillment of the conditions of the notifications. The bond to be executed will be in addition to the bond/ LUT required to be executed with the Licensing authorities. The bond has to be for the duty difference (e.g. basic customs duty only) and with such surety/ security as may be specified. The extent of surety security should be decided by the Customs Houses based on status of the importer i.e. whether Trading House, Export House manufacturer - exporter etc., keeping in view the instructions issued by the Board from time to time in this regard. Bond would, however, not be necessary where certificate of discharge or Export obligation has been obtained from the Licensing authorities.

All Value based Advance Licences as well as Quantity based Advance Licences, after discharge of export obligation in full, shall be freely transferable Similarly, the inputs imported against the licences, after discharge of export obligation, shall also be transferable. That is, imported goods cannot be transferred until the export obligation, is discharged in full. However, the benefit of duty exemption to a transfer shall be admissible only after the Licensing authority has made an endorsement in the Licence and the DEEC Book to make it transferable. Neither licences issued for Acetic Anhydride nor Acetic Anhydride imported against Value based Advance Licences or Quantity based Advance Licences shall be transferable. Licences for import of Acetic Anhydride should also have been issued only with the approval of the Advance Licensing Committee in the office of the Directorate General of Foreign Trade.

Since the provisions of revised Exim Policy shall be applicable only in respect of licences issued on or after 1.4.95, new notifications No. 79/95-Customs and 80/95-Customs both dated 31st March, 1995 have been issued under VABAL and QABAL Schemes respectively. The existing notification No. 203/92-Customs dated 19.5.92 and 204/92-Customs dated 19.5.92 shall continue to be applicable in respect of imports and exports against VABALs issued on or before 31.3.95. These notifications have been amended by Notifications No. 82/95-Customs dated 31.3.95 (Copy enclosed) accordingly.

In terms of the revised Exim Policy issued on 31.3.95 read with Notification No. 79/95-Customs and 80/95-Csutoms both dated 31.3.95, the difference between VABALs and QABALs is a under:

(a)     In case of QABALs each item of inputs will be restricted in terms of quantity (or value where restrictions cannot be put in quantity terms), whereas in case of VABALs any item of input shall be permissible for import upto full value of licences, except for sensitive items which will be subject to quantitative limits.

However, additional flexibility for imports for Electronics Industry and Writing Instruments manufacturers under VABAL Scheme which was available under notification No. 203/92-Customs dated 19.5.92 shall continue to be available under Notification No. 79/95-Customs dated 31.3.95.

All instructions issued in respect of Notification No. 203/92-Customs relating to VABALS and 204/92-Customs relating to QABALs shall continue in relation to Notification No. 79/95-Customs (for VABAL) and Notification No. 80/95-Customs (for QABALs) with regard to nexus between inputs and export products, valuation of import and export goods, imports through specified ports, maintenance of records by Customs Houses etc. Customs houses should maintain separate records of duty foregone under new schemes of VABAL and QABAL and intimate the particulars revenue Collected (additional duty) and duty foregone (i.e. basic duty) every month along with the data presently being sent to Board.

II.      Changes in Scheme for Import Against Advance Customs Clearance Permit

3.      Amendment of Notification No. 205/92-Cus

Notification No. 205/92-Customs dated 19.5.92 exempted goods imported against Advance Customs Clearance Permits issued in terms of para 58 of the Exim Policy. The said para has been amended and requirement of Advance Customs Clearance Permit has been done a way with. Accordingly, notification No. 205/92-Csutoms dated 19.5.92 has been amended vide notification No. 82/ 95-Customs dated 31.3.95 to make it applicable only in respect of imports against Advance Customs Clearance Permits issued on or before 31.3.95.

3.1.   New Notification For Revised Para 58

To give effect to the provisions of new para 58 notification No. 81/95-Customs dated 31.3.95 (copy enclosed) has been issued. In terms of this notification goods supplied free of charge by the supplier to the importer for jobbing, repairing, servicing etc. shall be exempted from basic and additional duty of Customs subject to the condition that goods so imported and the resultant products are re-exported to the supplier of the goods. A minimum value addition of 10% will require to be achieved in terms of para 58 of the Exim Policy. The achievement of value addition requires to be monitored by the Customs Houses at the time of export. Where the value addition is less than 10%, the duty exemption shall not be admissible and action is required to be taken for demand of such duties. Clearance shall be permitted against a bond executed by the importer. Provision has been made for retention of patterns, drawings, jigs, tools, fixtures, moulds, tackles and instruments on payment of Customs duties leviable as on the date of import without allowing any depreciation provided necessary permission for retention is granted by the Advance Licensing Committee in terms of para 58 of the EXIM Policy.

3.2.   Since all goods imported in terms of aforesaid notification are subject to re-export condition, the Custom Houses should evolve suitable procedure for identification of goods and the resultant products at the time of export with reference to import documents. Further, if re-export does not take place within the prescribed time limit, prompt action to enforce the bond should be initiated. Extension of the period for re-export should be considered on merits on each case. In order to ensure that goods imported are not utilised for any other purpose except for discharge of export, obligation, Central Excise authorities may also be kept informed of the clearances permitted in terms of said notification.

4.      Customs Houses should take necessary action to issue suitable standing orders/ departmental orders for the information of field staff and also issue Trade/ Public Notices for information of the Trade. Copies of the same should be sent to Commissioner (Drawback) and DGIACCE.