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Customs Circular No. 25/2003. dated 1.4.2003
Sub: 2003-04 EXIM Policy – Changes made in Advance License, DFRC, EPCG, DEPB and DEEC Schemes, etc

            EXIM Policy for the year 2003-04 has been announced on 31.3.2003 by Hon’ble Commerce & Industry Minister and it comes into force on 1.4.2003. On the demand of trade and industry changes have been carried out in the subject schemes to remove procedural bottlenecks and to boost export trade. Certain duty free concessions have also been extended to status holders and service providers with a view to augment foreign exchange earnings. Details of the new schemes introduced and changes made in the existing schemes are as follows.

2.1    Duty Free Entitlement Credit Certificate to Status holders

        In terms of Para 3.7.2.1 (vi) of the EXIM Policy, duty free import of capital goods, office equipments, raw materials, parts, consumables etc. other than agricultural and dairy products have been permitted to status holders (i.e. to say Export House, Trading House etc.) who show incremental exports of more than 25% in FOB value of exports during financial year 2002-03 as compared to financial year 2001-02. Such exporters (both manufacturer exporters and merchant exporters) would be issued Credit Entitlement Certificates equivalent to 10% of the incremental growth achieved during 2002-03 permitting duty free import of the aforesaid goods. The said certificate would be issued by DGFT authorities. Goods imported against the said Certificate would be exempted from Basic customs duty (BCD), CVD and SAD subject to the condition that the said Credit Certificate is produced at the time of clearance before proper Officer of Customs for debit. The said duty exemption would be available on debiting the element of BCD,CVD and SAD in the said Certificate. Prior to allowing duty exemption under this scheme, the genuineness of the said Certificate shall be verified by the concerned Customs House. Both the said Certificate and goods imported against it are subject to actual user condition. In case of capital goods imported under the aforesaid scheme, evidence confirming installation of the capital goods in the factory/ premises of the importer or factory premises of supporting manufacturer (in case of merchant exporter) shall be produced by the licence holder to the concerned Custom House within 6 months. In case of merchant exporter, the imported goods may also be utilized by the supporting manufacturer whose name and address is endorsed on the said Certificate. In order to prevent misuse of the facility import shall be permitted only from sea-ports, airports, ICDs and LCSs which are specified in the notification.

In order to monitor revenue outflow under this scheme, the Custom Houses located at the notified places shall send a monthly report containing details of CIF value of goods imported and amount of duty foregone under the Scheme on the 10th of the succeeding month to JS(DBK). Customs Notification No.53/2003-Cus. dated 1.4.2003 refers in this regard. The first such report shall be sent by 10th May, 2003.

2.2 Duty Free Entitlement Credit Certificate to Service Provider

In terms of Para 3.8 of EXIM Policy, service providers (other than

hotels) have been permitted duty free import of spares, office equipments and furniture, professional equipments and consumables but excluding agricultural and dairy products. Such duty free entitlement shall be equivalent to 10% of the average foreign exchange earned by the service provider during preceeding 3 years. Hotels shall be entitled for duty free import of spares, office equipments and furniture, professional equipments and consumables but excluding agricultural and dairy products equivalent to 5% of the average foreign exchange earned by them during preceding 3 years. The said Certificate would be issued by DGFT authorities. Goods imported against the said Certificate would be exempted from Basic customs duty (BCD), CVD and SAD subject to the condition that the said Credit Certificate is produced at the time of clearance before proper Officer of Customs for debit. The said duty exemption would be available on debiting the element of BCD,CVD and SAD in the said Certificate. Prior to allowing duty exemption under this scheme, the genuineness of the said Certificate shall be verified by the concerned Customs House. Both the said Certificate and goods imported against it are subject to actual user condition. In case of professional equipments imported under the aforesaid Scheme, evidence confirming installation of the equipments in the factory/ premises of the service provider shall be produced by the license holder to the concerned Custom House within 6 months. . In order to prevent misuse of the facility import shall be permitted only from sea-ports, airports, ICDs and LCSs which are specified in the notification.

In order to monitor revenue outflow under this scheme, the Custom Houses located at the notified places shall send a monthly report containing details of CIF value of goods imported and amount of duty foregone under the Scheme on the 10th of the succeeding month to JS(DBK). Customs Notification No.54/2003-Cus. dated 1.4.2003 refers in this regard. The first such report shall be sent by 10th May, 2003.

2.3        Advance License Scheme

Advance License Scheme is contained in Chapter 4 and Paras 4.1

And Paras 4.1.1 to 4.1.7A of the EXIM Policy. The Advance License Scheme announced in 2002-07 Policy (on 31.3.2002) has been continued in the same form. In order to facilitate Status holders (Export House, Trading House etc.) Advance License Scheme for annual requirement has been re-introduced. This Scheme is similar to the scheme which was announced in 1997-2002 EXIM Policy in the year 1999 (vide Customs Notification No.48/99 dated 29.4.99 and DOR Circular No.45/99-Cus. dated 19.7.99). Under Advance License for Annual Requirement, Advance License would be issued to status holders so as to enable them to import their requirement of inputs on annual basis. Both Advance License for Annual requirement and materials imported against it shall be subject to actual user condition as earlier. For the purpose of permitting clearance of goods against Annual Advance License, the procedure specified in DOR Circular No.45/99 shall continue to be followed.

Customs Notification No.56/2003-Cus. dated 1.4.2003 has been issued under Advance License for Annual Requirement Scheme. All other parameters of this Scheme remain unchanged.

2.3.1     In respect of Advance License issued for supplies to EOU, SEZ, EHTP, STP units, imports would also be exempted from the whole of anti-dumping duty and safeguard duty. Sr. No. 4 of Customs Notification No.57/2003-Cus. dated 1.4.2003 refers in this regard.

2.4        Duty Free Replenishment Certificate (DFRC) Scheme

DFRC Scheme announced in 2002-07 EXIM Policy has been

continued in 2003-04 Policy. Henceforth supplies made under Deemed Export Scheme in terms of Para 8.2 of the EXIM Policy would also be entitled for benefit of DFRC Scheme. Import of inputs against DFRC License (issued against supplies made under Deemed Export Scheme) shall also be permitted from sea-ports, airports, ICDs and CFSs specified in the DFRC Notification as usual. For this purpose, DFRC licence issued under Deemed Export Scheme shall inter-alia contain details of excise certified invoice number and date with value of supplies in Indian rupees. All other conditions of the DFRC Scheme remain unchanged.

In order to monitor revenue outflow under DFRC scheme, the concerned Custom Houses shall send a monthly report containing details of CIF value of goods imported and amount of duty foregone under the Scheme on the 10th of the succeeding month to JS(DBK). The first such report shall be sent by 10th May, 2003.

Sr.No.3 of Customs Notification No.57/2003-Cus. dated 1.4.2003 refers in this regard.

2.5        Duty Entitlement Pass Book (DEPB) Scheme

DEPB Scheme announced in 2002-07 EXIM Policy has been continued. In this regard earlier Customs Notification No.45/2002-Cus. dated 22.4.2002 and DOR Circular No.24/2002-Cus. dated 6.5.2002 refers. Henceforth, supplies made by DTA units to units in SEZ would be entitled for DEPB benefits. The area of the Special Economic Zone shall be a Customs Station and all the functions relating to the enforcement of the Customs Act shall be controlled by the Commissioner of Customs with the assistance of proper officers of Customs. The goods entered into the SEZ from the DTA shall be under the cover of a Bill of Export. This Bill shall be registered in the SEZ Customs formation and assigned a running serial number. Thereafter the goods shall be examined by the Customs Officers posted in the SEZ like a normal export consignment. These goods shall be eligible for DEPB benefit & the DEPB scrips shall be issued by the licensing authority to the SEZ Unit receiving supplies from DTA Unit on the basis of a disclaimer certificate given by the DTA Unit in favour of SEZ Unit. This is because it has now been decided to treat supplies made by DTA Unit to a unit in SEZ as exports for the purpose of granting DEPB benefit.

For the purpose of allowing DEPB benefit against DEPB licenses issued for supplies to SEZ units, verification of the DEPB license shall be done in the same manner as specified in earlier DOR Circular No.14/99-Cus. dated 15.3.99 excepting that in case of supplies made to SEZ units, the Bill of Export and other related documents shall be verified. Since the port of registration in respect of such DEPB license would be the place where the receiver SEZ unit is located, import against such DEPB scrips shall be permitted either from the same Custom House or from any other place notified in DEPB Custom Notification No.45/2002 against TRA in terms of para 6 of DOR Circular No.85/99-Cus. dated 23.12.99 and also in terms of DOR Circular No.66/2001-Cus. dated 19.11.2001 when the Custom House of receiver SEZ unit is a non-notified place. For this purpose, both Commissioner Incharge of Customs House (who issues TRA) and the Custom House receiving the TRA shall follow the procedure as specified in DOR Circular No.66/2001.

Sr.No.2 of Customs Notification No.57/2003-Cus. dated 1.4.2003 refers in this regard.

All other parameters of the DEPB Scheme shall remain unchanged.

2.6        Export Promotion Capital Goods (EPCG) Scheme

5% Duty EPCG Scheme has been continued in 2003-04 Policy (Vide Chapter 5). However, export obligation under EPCG Scheme would now be determined on the basis of quantum of duty saved by the license holder and his export obligation would be fixed equivalent to 8 times the quantum of duty saved by him. In respect of license where duty saved is Rs.100 crores or more or where the license is issued to units in agri export zone, the export obligation shall be fulfilled within a period of 12 years instead of 8+2 years. In order to help revival of sick units, a longer EO period is provided in Para 5.1 of EXIM Policy in respect of such sick units. Capital goods(CG) required for pre-production, production and post-production including second hand capital goods upto 10 years old shall be permitted under EPCG Scheme. The earlier restriction of 20% for import of spares of capital goods under EPCG Scheme is done away with. In addition, spares of existing plant and machinery of the license holder shall also be permitted to enable upgradation/modernization of existing CGs. Units holding licences both as manufacturer/merchant exporter and service provider shall be permitted to fulfill export obligation either by export of products specified in the EPCG License (issued to him as manufacturer/merchant exporter) or by earning free foreign exchange for services rendered (against EPCG license issued as service provider). To give an example, if a unit has been issued EPCG License as manufacturer/merchant exporter specifying EO of $ 100 and EPCG License (as service provider) specifying EO of $ 200 then the said unit may also fulfill his total export obligation of $ 300 by exporting resultant product equal to $ 150 and by earning free foreign exchange (on rendering service) equal to $150.

It is reiterated that redemption of Bond/BG against license issued under EPCG Scheme shall normally be allowed by the Custom House on the basis of EO Discharge Certificate issued by DGFT authorities without insisting for production of copies of relevant export documents including shipping bill etc. This is because the job of monitoring of export obligation fulfilled under EPCG Scheme is assigned to relevant DGFT authorities.

All other procedural requirements of 5% duty EPCG Scheme as specified in DOR Circular No.24/2002-Cus. dated 6.5.2002 remain unchanged. Customs Notification No. 55/2003-Cus. dated 1.4.2003 refers.

3.         Corresponding Trade Notice and Standing Order may be issued for the guidance of staff and trade.

4.         Receipt of this Circular may please be acknowledged.

R.K. Talajia
Officer on special duty (DBK)

F.NO.605/01/2003-DBK
Government of India
Ministry of Finance
Department of Revenue

Above Circular has been corrected in terms of corrigendum reproduced below.

Corrigendum to Circular NO.25/2003 Dated, the 1st April, 2003
2003-04 EXIM Policy - Changes made in Advance License, DFRC, EPCG, DEPB and DEEC Schemes, etc.

In Department of Revenue Circular No. 25/2003 dated 01.04.2003 :-

(i) the heading of paragraphs 2.2 and 2.6 shall be corrected to read as "Duty Free Entitlement Credit Certificate to Service Provider" and "Export Promotion Capital Goods (EPCG) Scheme" respectively, and

(ii) in para 2.2, the third sentence shall be corrected to read as " Hotels shall be entitled for duty free import of spares, office equipments and furniture, professional equipments and consumables but excluding agricultural and dairy products equivalent to 5% of the average foreign exchange earned by them during preceding 3 years."

Yours faithfully,

(R.K. TALAJIA)
OFFICER ON SPECIAL DUTY (DBK)

F.NO.605/01/2003-DBK
Government of India, Ministry of Finance, Department of Revenue