Circular No. 129 dated 29^th May 1995

1.1   Attention of the Collectors is invited to Board's telex No. 209/18/93 dated 26.09.94 & 27.09.94 communicating the issue of fresh rules and notifications relating to export.

1.2   The new Central Excise rule No. 12 (1) (b) has been framed to grant rebate of EC duty paid on raw materials/inputs used in the manufacture of the finished goods exported from India. The new Rule 12 (1) (b) thus incorporates in it the erstwhile reels 12 A and 191A of the Central Excise Rules, 1944. A fresh notification 42/94 CE. (N.T), dated 22.9.94 issued under the new rule permits grant of rebate of duty paid on any excisable materials used in the manufacture and packing of the goods exported. The notification details the conditions for claiming such rebate of duty. Benefit of Notification details the conditions for claiming such rebate of duty. Benefit of Notification No. 42/94-CE (NT) is not available for export to Nepal or Bhutan and such exports are governed by separate instructions.

2.1   The salient features of the new rules and the notification issued thereunder are briefly summarised below:

2.2   The benefit of input stage rebate under rule 12(1)(b) can be claimed on export of all finished goods whether excisable or not. But by Notification 42/94 the facility has been extended only to goods appearing under the Schedule to the Central Excise Tariff Act, 1985. It is not necessary that the eligible finished goods to be exported are chargeable to Central Excise duty. Consequently the benefit under Rule 12(1)(b) can claimed even by a unit exempted from registration under rule 174 of Central Excise Rules, 1944 in view of production of goods exempted from payment of Central Excise Duty.

2.3   Benefit of input stage rebate can be claimed by a manufacture of finished goods only when the export is in his own name. Benefit of the input stage rebate shall not be extended where export is his own name. Benefit of the input stage rebate shall not be extended where export are through merchant exporters. In short manufacturers working under this scheme are not permitted to export their goods through third parties.

2.4   The definition of "materials" has been made wider. The benefit is now available for excise duties paid on raw materials, consumables, components, semi-finished goods, assemblies, sub-assemblies, intermediate goods, accessories, parts and packing materials required for manufacture of export goods. Sources of Energy such as high-speed diesel, furnace oil etc. shall not be regarded as consumable and consequentially benefit of rule 12 (1) (b) shall not be available on Source of Energy. Similarly, the rebate of Central Excise duty paid on equipment and machinery items in the nature of capital goods used in relation to manufacture of finished goods being shall not be allowed under rule 12 (1) (b).

2.5   The definition of "manufacture" for the purpose of grant of input stage reedit has also been made liberal and now includes process of blending, alterations, or any other operations thereon.

2.6   From AR5 modified: the erstwhile AR5 was prescribed under the old rule 19A. Since rule 191A has been rescinded, the old proforma of AR5 has been being continued on an ad hoc basis. However a revised proforma of AR5 is enclosed which may be notified by the Collectors of Central Excise through Trade Notice and the new proforma of AR5 may be brought into effect in all field formations positively from 01.06.95. Under this scheme, there is no need to use AR4 form at all and the modified format of AR5 would take care of all the requirements whether the finished products are dutiable or not.

2.7       The benefit of input stage rebate cannot be claimed in any of the following situations:

        -         where the finished goods are exported under Claim for Duty Drawback

-         where the finished goods are exported in discharge of export obligations under a Value Based Advance Licence or a Quantity Based Advance Licence issued before 31.03.95.

-         where facility of input sate credit is availed under Modvat provisions under Chapter V AA Central Excise Rules, 1944.

3.1   The following consolidated instructions are issued with regard to grant of rebate of Central Excise duty paid on input used in the goods exported to countries other than Nepal and Bhutan. The earlier instructions on the subject, which are inconsistent with these instructions, the new rules, and the notification issued thereunder, may be treated as withdrawn.

Declaration & Permission

4.1   The manufacturer of finished goods intending to export such goose, under claim for rebate of Central Excise Duty on materials/inputs shall file a declaration (in quintuplicate) to the Collector of central Excise having jurisdiction over the factory where finished goods for export are manufactured. The declaration shall contain details of finished goods to be exported, the details of materials required and their consumption's ratios.

4.2   Proforma of declaration to be filed in terms of Notification No. CE- 42/94 (NT) is enclosed (Annexure 1). Dated acknowledgment or postal receipt of dispatch by registered post shall be adequate proof of submission of the declaration.

4.3   the declaration should be filed complete in all respect by the manufacturer intending to avail the facility of input stage rebate. A neat flow diagram along with the write up of manufacturing process any be enclosed. Where there are more than one export product, separate statement of the consumption ratios may be finished for each export product.

4.4   The premises in which goods are manufactured for exports under rule 12 (1) should be clearly demarcated in the ground plan. The manufacturing area shall also be segregated.

4.5   Statement of consumption ratio is the most important information and should be carefully filled for each export product. Estimated monthly quantum of exports may be indicated at appertain place. The details of materials may be furnished in descending order of importance indicating important materials (from duty incidence view point) first. Materials, which contribute negligible amount to rebate, may not be shown at the desecration of the exporter. The consumption's should be net of recycled materials.

4.6   The Collector of Central Excise may nominate suitable officer for verifying the declaration or direct Divisional Officer for arranging the verification. For this purpose, four copies may be sent to verifying officer and Collector's officer may retain one copy for future reference.

4.7   The verifying officer shall carefully examine the date furnished in the declaration with special reference to consumption of materials and the wastages. Where manufacturing activity had been going on for the past years, many yearly consumption ratios may be used as guideline. The claim for rebate under Rule 12 (1) (b) is available for all duty paid excisable inputs used. The input output norms notified under the Export Import Policy may not include all materials and claim under rule 12 (1) (b) should not be denied merely on the grounds that a particular material does not appear under the norms in the Policy. Special care should be paid to materials, which are recycled. Some solvents used in the Chemical Industry are recycled. Similarly many plastic wastages and non-ferrous metals are recycled. Care should be taken that consumption of materials is net of such recycled materials. Where recoverable wastages are generated but not recycled but sold on account of its unsuitability, the same should be clearly reflected in the declaration.

4.8   The Central Excise Officer after carrying out the verification of the declaration shall append the necessary certificates/ endorsements at appropriate places in the Declaration and sent three copies to the Collector of Central Excise, retaining one copy for his records.

4.9

(1)    Based on the verification carried out by the Central Excise Officer, or otherwise, where the Collector of Central Excise is satisfied that the consumption norms claimed are reasonable and that the applicant has proper facility for carrying out manufacture of goods for exports, the Collector may grant permission to the applicant for manufacture of goods for exports, the Collector may grant permission to the applicant for manufacture and export of finished goods under claim for rebate of Central Excise duties paid on materials used in the manufacture of finished goods exported. The letter of permission shall clearly indicate the conditions subject to which benefit under Rule 12 (1) (b) of Central Excise Rules, 1944 shall be available. A proforma in which such permission may be granted in enclosed (Annexure II). A copy of the permission, which verified declaration, shall also be sent to the Assistant Collector of Central Excise and the Superintendent of Central Excise.

(2)    If for any reason the Collector Central Excise could not satisfy himself with reference to the correctness of the consumption norms claimed by the applicant and the product is being manufactured for the first time in his jurisdiction, the Collector may permit the manufacturing operations and the verification of the consumption norms should be completed while the process of manufacture is on. The verification should be completed before allowing the export of the gods as the manufacturer working under this Scheme is expected to declare the raw materials costumed is the AR5 of the making their claims for rebate. In such circumstances, the Superintendent of Central Excise would complete the verification as quickly as possible and the Collector can indicate the consumption norms as amendment to the permission already given. In some cases, where the manufacturer has to fulfil certain export commitments in view of letters of credit to be honoured, the Assistant Collector can permit the manufacturers to export the goods if the Superintendent had already conducted the verification and submitted the report but is pending approval by the Collector of Central Excise in such cases in the AR5 From against the declaration of the party, the Superintendents supervising the clearance shall clearly indicate that the consumption norms have been verified but not yet approved by the Collector. This would enable the Assistant Collector sanctioning the rebate to take note of this fact.

4.10  The permission granted by the Collector of Central Excise can be withdrawn at any time if it comes to the notice of the Collector that the information furnished by the application it not maintaining the records required under the Trade Notice issued in this regard or where it comes to the notice of the Collector that the premises where goods for export are manufactured is not properly segregated.

4.11  Any change in the consumption ratio should be promptly intimated by the manufacturer to the Collector of Central Excise, Assistant Collector of Central Excise, Assistant Collector of Central Excise and the jurisdictional Range Superintendent giving reference of the permission granted by the Collector of Central Excise. Collector of Central Excise may order fresh verification if the revised consumption ratios are higher (say 5% or more) than the ratio already verified and approved. However, Collector of Central Excise may use their discretion in this regard.

Procurement of Materials and Record Maintenance

5.1   The excisable materials required for export production should be procured directly from the factory where such goods are manufactured or from dealers registered under Rule 174 of Central Excise Rules. The excisable materials and packing should be obtained in the original packed condition. The invoice should be in the name of the manufacturer of export goods.

Accounts & Returns

5.2   The manufacturer shall maintain register of duty paid materials brought to the factory for manufacture of finished goods for export under claim for input stage rebate under Rule 12 (1) (b) in the proforma of RG 26. The account for finished goods manufactured and exported may be maintained in the proforma of RG 27. The manufacturer shall also file a quarterly return in from RT 14, of materials received and finished goods cleared.

5.3   Any officer duly empowered by the Assistant Collector in this behalf shall have access at all reasonable times to any premises indicated in the application and to any premises indicated in the application and to any place where goods for export are processed or stored. The applicant shall also permit the officer of Central Excise access to any records relating to the production, storage and export of goods.

Removal For Export

6.1   The AR5 application in Sixtuplicate should be submitted by the manufacturer to the Supdts. of CE having jurisdiction over the factory atleast 24 hours before the intended removal of the goods for export from the factory under claim for rebate of Central Excise Duty paid on materials and packing used in the manufacture of export goods.

6.2   Where export goods are dutiable the manufacture may avail the facility of export without payment of Central Excise duty on finished goods, under Central Excise Bond [Rule 13 (1) (a)]. Alternatively finished goods may also be exported, after payment of Central Excise duty leviable on finished goods under claim of rebate [Rule 12 (1) (a)]. For export clearances under AR 5, instructions already issued for export clearances under Rule 12 (1) (a) and Rule 3 (1) (a) may be followed subject to modification indicated below.

6.3   The new proforma of AR5 incorporates the requirements of Export clearance under rule 12 (1) (a)/ 13 (1) (a). Therefore where export goods are dutiable, no separate AR 4 is required and manufacturer needs to the fill up only AR5. However the facility of clearances of finished dutiable goods for export under claim for rebate or against bond with Maritime Collector shall not be available in such cases and manufacturer shall have to approach Jurisdictional Assistant Collector of Central Excise fro claiming rebate/ discharge of bond.

6.4   The goods cleared under AR5 will be moved directly from the place of manufacture to the place of export.

6.5   The packages in which the goods are to be exported should be legibly market in ink or oil colour or in such other durable manner with progressive number commencing with number 1 for each calendar year and with the manufacturer's name.

6.6   Every AR5 shall be numbered in a running serial of the factory starting with for each financial year.

6.7   The superintendent of Central Excise shall himself verify the information contained in AR5. For this purpose he shall refer to the verified declaration (of para 4.1 above) received from the Collector. The export consignment shall be carefully examined vis-�-vis the description of the goods, their value and other particulars/ declarations on the AR5. The Supdts. of CE shall verify the facts, certificate and declaration made by the manufacturer. The value declared on the AR should be as per section 4 of the Central Excise and Salt Act, 1944. After the Supdts. of CE is satisfied that the information contained in the AR5 is true and after verifying that necessary bond [where goods are being exported under bond in terms of rule 13 (1) (a) has been executed by the manufacturer, he would allow the clearance for exports and also sing on the AR5 at appropriate place and put his stamp with his name and designation below his signature.