Government of India
Ministry of Finance
Department of Revenue
New Delhi dated 30th September, 2009
Circular No. 26 /2009-Cus.
To,
All Chief Commissioners of Customs
All Chief Commissioners of Customs & Central Excise/ Central Excise
All Director Generals under CBEC,
All Commissioners of Customs, Customs (Preventive)
All Commissioners of Customs & Central Excise/ Central Excise
Sir/Madam,
Sub: Foreign Trade Policy (FTP), 2009-14 – regarding.
The Foreign Trade Policy (FTP), 2009-2014 (herein after referred to as the
Policy) and the Handbook of Procedures (Vol.I) (herein after referred to as the
Handbook) have been notified by the
DGFT vide notification No. 1 / 2009-2014
dated 27th August 2009 and
Public Notice 1/2009-14 dated 27th August 2009 respectively. The Department of Revenue has since issued
notifications Nos.
91/09-Cus to
103/09-Cus all dated 11.9.09,
104/09-Cus & 105/09-Cus both dated
14.9.09,
109/09-Cus dated 24.9.09,
23/09-CE(NT) dated 25.9.09 and
112/09-Cus
dated 29.9.09 to implement the Policy and the Handbook. The Policy, Handbook and
the above mentioned notifications may please be perused for details. The salient
features of the changes are discussed below:
- New schemes.
(1) Status Holder Incentive Scheme (SHIS)
The scheme has been introduced vide paragraph 3.16 of the Policy. Under the
scheme, Status Holders are entitled to incentive scrip @1% of FOB value of
export of goods of certain specified sectors made during 2009-10 and during
2010-11. The scrips will be valid for a period of 2 years for import of capital
goods with actual user condition. The status holders who avail the benefits
under Technological Up gradation Fund Scheme (TUFS) (a scheme administered by
the Ministry of Textiles, Government of India) or zero duty EPCG scheme in a
particular year shall not be eligible for Status Holders Incentive Scrips for
that year. Notification No. 104/2009-Cus dated 14.9.2009 has been issued to
operationalize the SHIS. This may be perused for details.
(2) Agri-Infrastructure Incentive Scrip (AIIS).
Para 3.8.6 of FTP (04-09) permitted issue of scrips against exports of
agricultural exports for import of specified capital goods. This was part of the
Vishesh Krishi and Gram Udyog Yojana (VKGUY) scheme. A new name has been given
to such scrips in the Policy. In terms of para 3.13.4 of the Policy such scrips
will now be known as Agri-Infrastructure Incentive Scrip (AIIS). The scrips
issued under the scheme would be allowed for import of specified agri-equipments
with actual user condition, as was the case earlier. One important change is
that now, transferability of the scrips amongst status holders has been
permitted for import of cold chain equipment only without breaking the actual
user condition. Notification No. 94/2009-Cus dated 11.9.2009 has been issued to
operationalize the scheme and may be perused for details.
(3) Zero duty Export Promotion Capital Goods (EPCG) Scheme:
The scheme has been introduced vide Para 5.1 of the Policy and is applicable to
certain specified sectors. The benefits under this scheme shall be available
only if the importer is not currently availing any benefits under TUFS and /or
does not avail the benefit under Status Holder Incentive Scheme (SHIS) in the
year of import of the goods. All imports of capital goods under this scheme have
to be completed within 9 months from the date of issue of the authorization. The
scheme requires that Export Obligation (EO) of 6 times the duty saved has to be
fulfilled within 6 years with one extension of 2 years. The scheme shall be
valid up to 31.3.2011.
Notification No. 102/2009-Cus dated 11.9.2009 & Notification No. 101/2009-Cus
dated 11.9.2009 have been issued to operationalize Zero Duty EPCG Scheme and
Zero Duty EPCG Scheme for Common Service Providers. The notifications may be
perused for details.
- Changes in the existing Export Promotion schemes
(1) Duty Free Credit Entitlement (DFCE) scheme and Target Plus Scheme (TPS)
The exporters of the marine sector have been allowed to import 36 additional
items, specified in list 50 of notification No. 21/2002-Cus against the scrips
issued to them under TPS and DFCE schemes vide DGFT Policy circular No.
03/2009-14 dt 27.8.09. The notification Nos. 53/2003-Cus dated 1.4.2003,
32/2005-Cus dated 8.4.2005 and 73/2006-Cus dated 10.7.2006 issued under DFCE
scheme and TPS have been amended vide notification No. 105/2009-Cus dated
14.9.2009 in this regard. There are no other changes in the schemes. The
notification may be perused for details.
(2) Served From India Scheme (SFIS)
The scheme as it existed under FTP (2004-09) was operationalized vide
notification number 92/04-Cus dated 10.9.2004. There is no change in the scheme.
Notification No. 91/2009-Cus dated 11.9.2009 has been issued to operationalize
the scheme under the new Policy. The notification may be perused for details.
(3) Vishesh Krishi and Gram Udyog Yojana (VKGUY).
The scheme as it existed under FTP (2004-09) was operationalized vide
notification number 41/05-Cus dated 2.5.2005. There is no change in the scheme
except that the scrips earlier issued under erstwhile para 3.8.6 of the FTP
(04-09) shall now be issued as AIIS already mentioned above. Notification
No.95/2009-Cus dated 11.9.2009 has been issued to operationalize the scheme
under the new Policy. The notification may be perused for details.
(4) Focus Market Scheme (FMS)
The scheme as it existed under FTP (2004-09) was implemented vide notification
number 90/06-Cus dated 1.9.2006. There is no change in the scheme. Notification
No. 93/2009-Cus dated 11.9.2009 has been issued to operationalize the scheme
under the new Policy. The notification may be perused for details.
(5) Focus Product Scheme (FPS)
The scheme as it existed under FTP (2004-09) was implemented vide notification
number 91/06-Cus dated 1.9.2006. There is no change in the scheme. Notification
No. 92/2009-Cus dated 11.9.2009 has been issued to operationalize the scheme
under the Policy. The notification may be perused for details.
(6) Advance Authorization Scheme
The scheme as it existed under FTP (2004-09) was implemented vide notification
numbers 91/04-Cus dated 10.9.2004 (Advance Authorization for deemed Exports),
93/04-Cus dated 10.9.2004 (normal Advance Authorization scheme) and 94/04-Cus
dated 10.9.2004 (Advance Authorization for Annual requirement). Notification
Nos. 96/2009-Cus and 99/2009-Cus both dated 11.9.2009 and 112/09-Cus dated
29.9.09 have been issued to operationalize the Advance Authorization, Advance
Authorization for Annual requirement and Advance Authorisation for deemed export
schemes respectively under the new Policy. The following changes have been made
in these schemes:-
(i) In respect of imports made after the discharge of export obligation,-
(a) if the exporter has availed the facilities in respect of inputs used in the
manufacture of export goods as specified in para (v) of notification No.
96/2009-Cus dated11.9.2009, para (v) of notification No. 99/2009-Cus dated
11.9.2009 and para (v) of notification No. 112/09-Cus dated 29.9.09, then the
importer at the time of clearance of the imported materials shall execute a bond
that the imported materials will be used in his factory or in the factory of the
supporting manufacturer for the manufacture of dutiable goods. Further, he shall
submit a certificate from the jurisdictional Central Excise officer or a
specified Chartered Accountant within 6 months from the date of clearance of the
said materials, that the imported materials have been so used. It may be noted
that in case this condition is violated, then the importer would be required to
pay all duties of Customs i.e. duty of Customs,the additional duty, safeguard
duty and anti dumping duty specified under sections 2,3,8B,and 9A of the Customs
Tariff Act,1975 respectively and cess as aplicable which have been exempted
under the notification Numbers 96/2009-Cus,99/2009-Cus and 112/2009-Cus. The
term ‘dutiable goods’ has been defined in the explanation to the notifications
and would mean all excisable goods which are not exempt from Central Excise duty
and which are not chargeable to ‘nil’ rate of central excise duty; the term
specified chartered accountant has been defined in the explanation to the
notifications.
In this regard, it is clarified that, the there is no need to furnish any Bank
Guarantee ordinarily along with the bond, as the imports are taking place after
fulfilment of Export Obligation. However, if the assessing officer, based on
past record of the importer, feels that some revenue safe guarding measure is
necessary, then a bond backed with sufficient bank guarantee may be taken.
(b) the importer also has an option to pay additional duty of customs on the
imported materials and clear the goods without furnishing any bond as specified
above. This additional duty of customs so paid shall be eligible for availing
CENVAT Credit under CENVAT Credit Rules, 2004.
(c) if the facility under rule 18 (rebate of duty paid on materials used in the
manufacture of resultant product) or sub-rule (2) of rule 19 of the Central
Excise Rules, 2002 or CENVAT credit under CENVAT Credit Rules, 2004 has not been
availed, then the imported materials can be cleared without furnishing a bond
specified above. However, the importer will have to furnish a proof to the
assessing officer to the effect that the ‘said facilities’ have not been
availed.
In this regard, it is clarified that, in case the importer is not registered
with the Central Excise then he may be allowed clearance based on a self
declaration that the facilities specified in the above referred conditions have
not been availed. The jurisdictional Deputy Commissioner of Customs or Assistant
Commissioner of Customs, as the case may be, may carry out random checks to
verify the correctness of the above declarations. However in case the importer
is registered with the Central Excise then he may be allowed clearance based on
a certificate issued by the jurisdictional Superintendent of Central Excise that
the facilities specified in the above referred conditions have not been availed.
(ii) In case of imports made before the discharge of export obligation in full,
the importer has to execute a bond, at the time of clearance, binding himself to
the conditions specified in the notifications and to pay the leviable customs
duties along with interest @15% in case the conditions of the notification are
not complied with. It may be noted that this condition was also present earlier
in notification numbers 91/04-Cus dated 10.9.2004 93/04-Cus dated 10.9.2004 and
94/04-Cus dated 10.9.2004
The above changes are in line with para 4.1.5 of the Policy. It may be noted
that the conditions are similar to those incorporated in the Duty Free Import
Authorization (DFIA) scheme vide notification No. 40/06-Cus dated 1.5.06 as
amended vide notification No.17/2009-Cus. dated 19.2.2009. The only change is
that the importers have been permitted to submit certificates from Specified
Chartered Accountants also under the Advance Authorization scheme.
3.Condition (v) of notification No. 91/04-Cus dated 10.9.2004, condition No.(vii)
of notification No.93/04-Cus dated 10.9.2004 and condition No 10 of notification
No. 94/04-Cus dated 10.9.2004 provided that the duty free material imported
under these notifications could be transferred to any manufacturer for
processing under actual user condition only after the bond filed under the afore
mentioned notifications had been redeemed i.e. after the fulfilment of export
obligation. The Policy and the Handbook, however, did not have the condition of
permitting job work only after fulfilment of export obligation. Para 4.16 of the
Handbook states that the imported material may be used in any unit of jobber /
supporting manufacturer provided the same is endorsed on the authorisation by
the Regional Authority. If, the authorisation holder is registered with Central
Excise, he has the option of getting names of the jobber endorsed by Central
Excise as per central excise rules in lieu of RA endorsement. In case the
manufacturer exporter holding the authorisation is not registered / not required
to be registered with central excise authority, job work may be allowed as per
central excise rules and regulations without insisting for endorsement of
supporting manufacturers’ name.
The new customs notifications have been aligned with the provisions of the
Policy and the Handbook. Condition (x) of Notification Nos. 96/2009-Cus,
99/2009-Cus and 112/09-Cus may kindly be referred to in this regard.
(iv) Para 4.5 of the Handbook provides that the duty free material imported or
procured against an authorisation can be taken to the project site as per the
provisions of the ANF-4A and the DOR guidelines in this regard. This provision
has been implemented vide condition (xi) of the notification No 112/09-Cus dated
29.9.09. The following guidelines are prescribed in this regard:-
The facility, for the present, shall be restricted to only finished components
and parts required to manufacture final goods which are fully exempted from
payment of terminal excise duty in terms of a central excise notification read
with the provisions of the para 8.3(c) of the FTP for supply to projects
specified in para Nos.8.2 (d), (e), (f) and (g) of the FTP, (i.e. where supply
is made under ICB procedure). These goods shall be allowed to move directly from
the port of import to such project site subject to the following conditions:-
(a) the details of such finished components and parts are mentioned in the
authorisation;
(b) the address of the site shall be mentioned on the authorisation;
(c) importer shall execute an undertaking at the time of clearance of the
imported finished components and parts with the Deputy Commissioner of Customs
or Assistant Commissioner of Customs, as the case may be, to the effect that he
shall take the finished components directly to the site and shall produce a
certificate to this effect from the Jurisdictional Superintendent of Central
Excise /executive head of the Project Authority within a period of 60 days from
the date of clearance of the goods. If however, he fails to produce the
certificate, then he shall pay an amount equal to the duty which was otherwise
leviable on the imported goods, but for the exemption contained in the
notification, along with interest from the date of clearance of the said
materials to the date of payment as prescribed in the notifications.
(d) The importer shall also inform his jurisdictional Central Excise authorities
of such movement, in case he is registered with Central Excise.
(v) Under para 8.3(c) of the Policy, it has been provided that, exemption from
payment of Terminal Excise duty (TED) shall also be available for supplies made
by an Advance authorization holder to a manufacturer holding another Advance
authorization if such manufacturer, in turn, supplies the resultant product(s)
to an ultimate exporter in terms of para 8.3(c) of the FTP. Notification No.
44/01-CE has been amended vide 23/09-CE(NT) dated 25.9.09 to incorporate the
above change.
(vi) The period to re-export the defective and unfit for use materials imported
under the advance authorization scheme has been lowered from the existing period
of three years to six months, which is extendable, by a maximum period of six
more months by the Jurisdictional Commissioner of Customs.
(vii) The importer was required to produce evidence of discharge of export
obligation to the customs within 30 days of the expiry of EO period under the
existing notifications. This period has been extended to 60 days.
(7) Duty Free Import Authorization (DFIA) Scheme:
The scheme as it existed under FTP (2004-09) was implemented vide notification
No. 40/06-Cus dt 1.5.2006. The notification as amended last vide notification no
17/2009-Cus dated 19.2.2009. It was later given effect to retrospectively vide
clause 92 of Finance Bill 2009. The scheme has been operationalized in the new
Policy vide notification No. 98 /2009-Cus dated.11.9.2009. The following changes
have been made in this scheme in the new Policy / customs notification:-
(i) The duty free replenishments imported under the scheme cannot be transferred
to the units located in areas, which are availing the area specific exemptions
of Central Excise Duty. (para 4.34 of Handbook refers).
(ii) The period to re-export the defective and unfit for use materials imported
under the advance authorization scheme has been lowered from the existing period
of three years to six months, which is extendable, by a maximum period of six
more months by the Jurisdictional Commissioner of Customs. This is in line with
similar provision under the Advance Authorization scheme.
(iii) The importer was required to produce evidence of discharge of export
obligation to the customs within 30 days of the expiry of EO period under
notification No 40/06-Cus dt 1.5.2006. This period has been extended to 60 days
under notification No.98 /2009-Cus dated.11.9.2009. This is in line with similar
provision under the Advance Authorization scheme.
(8) Export Promotion Capital Goods (EPCG) Scheme:
The scheme as it existed under FTP (2004-09) was implemented vide notification
numbers 97/04-Cus dated 17.9.2004 and 64/08-Cus dated 9.5.2008. The EPCG scheme
for Common Service Providers was implemented vide notification No.136/08-Cus
dated 24.12.2008. The scheme has been operationalized in the new Policy vide
notification Nos. 100/2009-Cus, 101/2009-Cus., 102/2009-Cus and 103/2009-Cus.
all dated 11.9.2009. The following changes have been made in these schemes in
the Policy / customs notifications:-
1.A new para (5.2A) has been added to the Policy to provide that in the case of
import of moulds, dies, jigs, fixtures, tools and spares e.t.c. specific EO
shall be 50% of the normal EO i.e. 4 times instead of normal specific EO of 8
times the duty saved amount in case of 3% EPCG scheme and 3 times instead of 6
times the duty saved amount in case of zero duty scheme. In both cases it will
be subject to the condition that the value of spares will be limited to 10% of
the value of the capital goods imported under the EPCG scheme or 10% of the book
value of the plant and machinery in case they were not imported under EPCG
scheme
(ii) The definition of “Aquaculture” has been expanded to include fisheries also
in Para 5.7.6 of the Handbook, thereby exempting fisheries from the requirement
of maintaining average EO. However, this exemption from maintenance of average
EO shall not be allowed for import of fishing trawlers, boats, ships and other
similar items.
(iii) Para 5.2A of the new Policy allows import of refractory only for initial
lining and catalyst for initial charge. Hence the import of these items shall
not be allowed for existing plant and machinery under the EPCG scheme.
(iv) Para 5.3 of new HBP Vol.1(2009-14) provides that reasonable wastage if any
anticipated at the time of installation of capital goods and certified by the
Chartered Engineer in the nexus certificate would be allowed to be sold on
payment of applicable Customs duties.
(v) Para 5.14 of new HBP Vol.1 (2009-14) provides that in the event of non-fulfilment
of EO, the EPCG Authorization holder may pay duties of customs through the
scrips issued under reward /DEPB scheme also. The interest on such duty and
penalties, if any, however shall be paid in cash.
(9) DEPB Scheme
The scheme as it existed under FTP (2004-09) was implemented vide notification
number 89/05-Cus dated 4.10.05. There is no change in the scheme except that the
notification mentions the date upto which it will be valid viz. 31.12.10 .
Notification No. 97/2009-Cus dated 11.9.2009 has been issued to operationalize
the scheme under the new Policy. The notification may be perused for details.
- Deleted Schemes
The Hi-Tech Products Export Promotion Scheme (HTPEPS) has been deleted in the
new Policy. The products covered under the said scheme have been shifted to the
Focus Product scheme (FPS).
- Miscellaneous changes
(i) The exports / imports under export promotions (EP) schemes are currently
permitted from specified ports mentioned in the notifications issued under the
EP schemes. In other words, the benefits under the export promotion schemes are
available only if the exports and Imports under the concerned export scheme
takes place through the seaports/airports/ICDs/ LCSs specified in the said EP
notification.
In some of the EP notifications which were issued to operationalize the FTP
(04-09), the Jurisdictional Commissioners of customs were empowered to permit
imports and exports under EP schemes through any other seaport, airport, ICD, or
LCS in their jurisdiction even if the said port / ICD e.t.c. was not
specifically mentioned in the concerned EP notification. This facility has been
extended to all EP notifications. The jurisdictional Commissioners have now been
empowered, in cases of exigency, to permit imports and exports under all EP
schemes through any other seaport, airport, ICD, or LCS in their jurisdiction
even if the said port / ICD e.t.c. has not been specifically mentioned in the
concerned EP notification.
2.The notifications issued under reward schemes under FTP (2002-07 &2004-09),
contained a proviso which states that ‘exemption from duty shall not be
admissible if there is insufficient credit in the duty credit certificate for
debiting the duty leviable on the goods, but for this exemption’. The said
proviso had raised doubts in the field formations though the Board had clarified
the matter vide Circular number 34/97 dt 10.9.97. In order to set at rest the
doubts, the said proviso has been deleted in the notifications issued under
reward schemes. The position however remains the same-thus exemption from duty
is not to be extended to that portion of the duty assessed, which is in excess
of the credit available. The excess amount of duty assessed not covered by
credit may be allowed to be paid in cash.
(iii) The DGFT vide Public Notice No 151/2009 dated 26.2.2009 had clarified that
the freely transferable duty credit scrips issued under reward schemes shall be
granted on FOB value of exports, including commission, discounts, if any. The
Public Notice had created confusion whether reward scrips would also be issued
on ‘discounts’ and whether unlimited commissions would be permitted in case of
reward schemes. The matter had been taken with the DGFT. The DGFT has clarified
vide Policy circular no 98 dt 10.8.2009 that, the ‘discounts’ would be excluded
for computation of benefits under the reward schemes. As regards ‘commissions’,
the Policy vide para 3.17.3, has clarified that the foreign agency commission
will be restricted to 12.5% of FOB value for computation of rewards. It is
therefore clarified that the duty credit scrips pending for registration may be
decided as per the above position and the said scrips may be permitted to be
utilised.
(iv) The number of duty free commercial / gem & jewellery samples has been
increased from the existing limit of 15 to 50 pieces without changing the value
limits prescribed in the notification No. 154/94-Cus dated 13.7.94 as amended
subject to compliance of terms and conditions specified therein. The
notification No. 154/94-Cus has been amended vide 109/09-Cus dated 24.9.09.
(v) The notification Nos. 92/04-Cus, 41/05-Cus, 90/06-Cus, 91/06-Cus, 64/08-Cus
and 136/08-Cus issued to operationalize EPCG and reward schemes provided that,
‘the foreign exchange counted towards fulfilment of export obligation (over and
above the average) under the Export Promotion Capital Goods scheme shall not be
eligible for benefits under the scheme’. The said clause has been deleted in the
new notifications issued under the EPCG and reward schemes. Hence now the
exports for fulfilment of export obligation (over and above the average) under
the Export Promotion Capital Goods scheme shall also be eligible for benefits
under the reward schemes
(vi) Para 3.23.8 of the HBP-2008 and para 3.11.8 of the Handbook-2009 provides
that the exporters exporting their goods under the reward schemes have to
declare, at the time of export, their intent to avail the benefits of the reward
schemes. This provision was incorporated in the FTP as it was noticed that many
export consignments especially which were exported on free shipping bills were
not being examined for valuation / description as the customs department was not
aware that the exporter would be claiming the benefits of reward schemes on such
shipping bills at a later date. In this regard it is clarified that, the
exporters are required to declare their intention to claim benefits under
Chapter 3 of FTP by way of endorsement as prescribed in the above paras of the
HBP on all copies of duty free shipping bills till suitable modifications are
made in the EDI software.
(vii) The new notifications issued under the Advance Authorization, DFIA and
EPCG schemes continue to stipulate that the exporter shall submit the proof of
discharge of export obligation within the periods specified in the respective
notifications. It is needless to stress that the stipulated conditions are
required to be adhered to strictly; monitoring mechanism may be put in place and
recovery action against defaulters initiated promptly.
- These instructions may be brought to the notice of the trade / exporters by
issuing suitable Trade / Public Notices. Suitable Standing orders/instructions
may be issued for the guidance of the assessing officers. Difficulties faced, if
any in implementation of the Circular may please be brought to the notice of the
Board at an early date.
- . Receipt of this Circular may kindly be acknowledged.
Yours faithfully,
Sd/-
(NAJIB SHAH)
JOINT SECRETARY
F.NO.605/58/2009-DBK
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