DGRI has recently reported a serious fraud committed under Advance License Scheme by Importers of POY/PFY fabrics etc. of Mumbai and Gujarat areas. Such unscrupulous importers not only obtained Advance licenses from DGFT authorities, in order to avail BG exemption, they also submitted forged/false CA certificates which were issued by the CAs without verification. As a result it has become necessary to examine the facility of BG concession/exemption extended under earlier DOR Circular Nos.45/96-Cus dated 28.8.96 and 71/98-Cus. dated 15.9.98 and incorporate additional safeguards. Whereas 45/96 grants BG concession/exemption under Advance License and EPCG Schemes to status holders and others, 71/98 grants exemption from BG to manufacturer exporters under Advance License and EPCG Schemes.

2. The issue has been re-examined in DOR and the following revised norms are issued for the purpose of availing exemption from BG under Advance License and EPCG Schemes in amendment of earlier DOR Circular Nos.45/96-Cus. dated 28.8.96 and 71/98-Cus. dated 15.9.98.

3.1 Bond/BG under Advance License and EPCG Schemes shall be furnished in the format annexed to DOR Circular No.71/98-Cus. dated 15.9.98 as hitherto. The bonds shall cover duty ordinarily leviable on the goods but for the exemption. Surety for the bond shall be in the form of bank guarantee or cash security. Guarantee from a financial institution like IDBI, ICICI, UTI etc. may also be accepted in lieu of Bank Guarantee.

Bonds/BGs shall be taken as per the following norms for the purpose of permitting clearance of import goods under Advance Licence/EPCG Schemes.

 

3.2 BG exemption as specified in Para 3.1 above shall be admissible subject to the following conditions:

(a) The license holder has not defaulted on the export obligation in respect of any advance license/EPCG licence issued to him in the past. The BG exemption shall stand withdrawn if a DGFT or Customs comes across default in export obligation against any Advance License/EPCG License issued.

(b) For the purpose of availing BG exemption in terms of Para 3.1 above, the manufacturer exporter shall submit the export performance certificate {as specified in Para 3.1(c)} issued by jurisdictional Superintendent of Central Excise where his factory is located. In respect of new manufacturer exporters who have paid central excise duty of Rs.1 crore or more during the preceding financial year also {vide Para 3.1(d)}, the relevant certificate shall be issued by jurisdictional Superintendent of Central excise where the factory is located.

(c) The license holder should not have been penalized under the Provisions of Customs Act, Central Excise Act, Foreign Exchange Management Act (FEMA) or Foreign Trade (Development and Regulation) Act during previous two financial years.

(d) In case of the person standing as surety to the Bond, Bank shall certify that he is solvent.

3.3 In individual cases where DGFT authority/EPCG Committee/ALC/jurisdictional Commissioner of Customs is satisfied that a higher quantum of bank guarantee is justified on account of risk to revenue, 100% BG may be taken by Customs after recording the reasons therefor in file.

3.4 Where an importer so requests, a BG may be taken consignment wise subject to the condition that such consignment-wise BG shall only be acceptable by Customs at the port of registration of the license.

3.5 Bond/BG shall be filed for a minimum period of 3 years with an undertaking to keep the BG alive for the entire period of export obligation viz 8+1 = 9 years or 12+1 = 13 years etc. under EPCG Scheme as the case may be.

3.6 Custom House shall properly maintain Bond/BG registers and ensure that wherever the bank guarantees are not renewed in time, recovery action is initiated by enforcement of the bank guarantee within time. Customs shall also ensure that, wherever required, bank guarantees are renewed well in time.

3.7 In the case of subsidiary company of a parent company of a recognized status, the facility of filing joint bond (bond by the parent company aswell as the subsidiary company holding the license) alongwith BG/Cash security/any other guarantee from financial institutions like IDBI, ICICI, UTI etc., shall also be available. The facility, however, shall be subject to the following conditions:-

(i) The parent company shall necessarily have more than 50% share holding in the subsidiary company.

(ii) The bond shall be jointly signed by the parent company aswell as the subsidiary company and shall be executed alongwith BG/Cash Security/or guarantee from financial institutions like IDBI, ICICI, UTI etc. wherever applicable in terms of criterion laid down. The guarantee shall be in relation to terms and conditions of the Joint Bond.

(iii) The parent company shall stand surety for the subsidiary company that in the event subsidiary company falls to fulfil the export obligation and defaults on payment of customs duty and Interest, the parent company shall make good the Government revenue and the interest. In other words the parent company will be severally and jointly liable for the action in terms of the Band/BG jointly executed by them.

(iv) This facility shall be extended only to those companies which have proven track record and reputation.

3.8 BG exemption specified in pare 3.1 above shall also be available in respect, of past licenses where license holder had earlier filed BG but as on date he is entitled for BG exemption.

4. It shall be the responsibility of the jurisdictional Superintendent of Central Excise that while issuing Certificate about export performance in terms of Para 3.1(c) or about the fact of payment of central excise duty for the purpose of para 3.1(d), he satisfies himself about the genuineness of the declaration being given by the license holder.

5. Suitable Standing Order and Public Notice for the guidance of staff and trade may kindly be issued.

6. Receipt of the Circular may kindly be acknowledged,
 

Sd/-
(R.K. Talajia)
Officer on Special Duty (DBK)

[F. No. 605/41/2003-DBK]

Old References

DEEC & EPCG Scheme -Manufacturer-Exporters exempted from furnishing Bank Guarantee- Bond form prescribed

Subject: Exemption from Bank Guarantee to manufacturer Exporters under DEEC and EPCG Schemes - regarding.

In partial modification of Board's Circular No. 45/ 96-Cus dated 28.8.1996 vide F.No.605/75(A)/95-DBK, it has been decided that Manufacturer-Exporters registered with the Central Excise Department shall be exempted from furnishing a Bank Guarantee under the DEEC and EPCG Schemes. Under EPCG Scheme the facility shall be available to EPCG Licences issued after 1.4.1995.

2. The exemption from furnishing Bank Guarantee shall be available provided the following conditions are fulfiled :-

(i) Where he has been already issued an EPCG Licence, and is having a turnover of Rs.1 Crore or more in the preceding financial year;

(a) he must also have a record of having achieved the export obligation specified in the EPCG notification(s); or

(b) if the Export Obligation has not expired, the Exporter has not defaulted on the export obligation specified in EPCG for the block period in any licence(s) as prescribed in the relevant Customs notification (s).

(ii) For a licence holder who has no previous Hence issued under EPCG Scheme, he must have Export turnover of Rs. 1 Crore or more in the preceding financial year. The exemption from Bank Guarantee shall, however the withdrawn if such exporter defaults on his export obligation for two successive block periods under Zero duty EPCG Scheme, or for three consequtive years under 1O% duty EPCG Scheme.

(iii) For exporters operating under the DEEC Scheme, where he has been issued a DEEC Licence(s) and he has a turnover of Rs.1 Crore or more in the preceding financial year, he must have a record of achieving the export obligation as specified in the relevant customs notification(s).

(iv) For first time licence holders under DEEC Scheme, who have previous export performance with a turnover of Rs. 1 Crore or more in the preceding financial year.

(v) The exporter should not have been penalised under the provisions of Customs Act, Central Excise Act, Foreign Exchange Regulation Act or Foreign Trade (Development and Regulation) Act during the last two financial years.

(vi) Provided that the person standing surety to the Bond (format annexed to the Circular) is certified by his Bank or a Chartered Accountant that he is solvent.

3. Suitable standing orders and Public Notice may be issued for the guidance of staff and for information of the Trade. Copies of the S.O./PN may be forwarded to Joint Secretary (Drawback) and the DGI, C & C. Ex. New Delhi.

Sd/-
(Sunil Kumar)
Director (Drawback)

 

I/we, __________________________ having our registered office at _________________ hereinafter referred to as the Obligor(s) and _______________called the surety(ies) (which expression shall, unless repugnant to the context or meaning thereof include our heirs, successors, executors, administrators, liquidators, legal representatives and assignees) hereby hold and firmly bind over - selves jointly and severally unto the President of India, acting through the (jurisdictional Assistant Commissioner of Customs) Department of Revenue, Ministry of Finance, Government of India, hereinafter referred to as 'the Government' in the sum of Rupees _____________only for which payment to be well and truly made, I/we, the obligor(s) bind myself/ourselves by these presents.

WHEREAS I / we, the obligor(s), have imported goods listed in Annexure I availing customs duty exemption in terms of the Notification of the Government of India in the Ministry of Finance (Department of Revenue) No. ______________dated the ________________ (hereinafter referred to as the said notification) against the Import Licence No. ____________ dated __________________ (hereinafter referred to as licence ) for the import of the goods mentioned therein on the terms and conditions specified in the said notification and licence.

WHEREAS I/we the obligor(s) is/are manufacturer exporter(s) holding registration No. ____________dated ___________ with the (name and address of the registering Central Excise authority to be mentioned)______________.

WHEREAS I/we the obligor(s) has/have undertaken to fulfil the export obligation as specified in the said notification and the licence and to produce evidence of having, so fulfilled the export obligation within 30 days from the expiry of the specified Export Obligation period to the satisfaction of the Government.

 

1. I/we, the obligor(s) shall observe all the terms and conditions of the said notification;

2. I/we, the (obligor(s) shall observe all the terms and conditions specified in the licence;

3. I/we, the obligor(s), shall fulfil the export obligation as specified in the said notification and the licence and shall produce evidence of having so fulfilled the export obligation within 30 days from the expiry of the specified export obligation period to the satisfaction of the Government.

4. In the event of failure to fulfil full or part of the export obligations as specified in the said notification and the licence, I/we, the obligor(s), herein undertake to pay the customs duty but for the exemption and also interest @ 24% per annum thereon forthwith and without any demur, to the Government.

5. I/we, the obligor(s), shall comply with the conditions and limitations stipulated in the said Import and Export Policy as amended from time to time.

6. I / we, the obligor(s), shall not change the name and style under which we the obligor(s), are doing business or change the location of the manufacturing premises except with the written permission of the Government.

It each and everyone of the above condition is duly complied with by us, the obligor(s), the above written bond shall be void and of no effect; otherwise the same shall remain in full force and effect and virtue.

It is hereby declared by us, the obligor(s) and the Government as follows:

1. The above written bond is given for the performance of an act in which the public are interested.

2. The Government through the Commissioner of Customs or any other officer of Customs recover the sums due from the obligor(s) in the manner laid down in sub- section (1) of the section 142 of the Customs Act, 1962.

Provided always that the liability of the surety hereunder shall not be impaired or discharged by reason of any time being granted, or any forbearance, act or omission of the Government (whether with or without the knowledge or the consent of the surety) in respect of or in relation to the obligation and condition to be performed or discharged by the obligor(s) nor & shall it be necessary to sue the obligor(s) before suing the surety for amounts hereunder.

AND the President of India shall, at his option, be competent to make good all the loss and damages by endorsing his rights under the above written bond.

I/we further declare that this bond is given under the orders of the Central Government in the performance of an act in which the public are interested.

In these presents the words imposing singular shall also include the plural and vice-versa where the context so requires.

IN WITNESS HEREOF these presents have been signed this day _________of_______ 19______ herein before written by the obligor(s) and the surety(ies).

Place:
Date:

(Signature of the Obligor)

 

Witness	(1) name and address		(1) occupation		(1)_____________
	(2) name and address		(2) occupation		(2)_____________

*(Signature of surety)			*As per Para 6 of Board's Circular No.71/98-Cus.
					dated 15th Sept.1998.

Witness	(1) name and address		(1) occupation		(1)_____________
	(2) name and address		(2) occupation		(2)_____________

						Signature and date
						Name __________________________________
						Designation ___________________________
Accepted for and behalf of the President of India on ______________________day
of _________ 19 ___________.

						Signature and date
						Name ___________________________________
						Designation ____________________________

				
					Annexure - 1
					     Table
	_________________________________________________________________________________

	Sl.No.	Description of item		Quantity		Assessable	Duty involved
							Value     		(but for exemption)
	_________________________________________________________________________________

	  1		2		   3		     4			5
	_________________________________________________________________________________

Customs: Revised norms of execution of Bond and Bank Guarantee under DEEC Scheme

In supersession of all earlier instructions contained in :- Circular Nos. 52/.95-Cus. dt. 25.5.95, 97/95 dt. 14.9.95, 123/95 dt. 4.12.95 & telex F.No. 605/.75/95-DBK dt. 25.8.95, the following guidelines are hereby issued for execution of Bonds and Bank Guarantee:

I. Bond under Duty Exemption Scheme

2.1 Bonds under DEEC Scheme should cover the duty ordinarily leviable on the goods but for the exemption (i.e. basic duty and additional duty leviable on the goods on merits minus additional duty actually paid). For example, if basic duty on the imported goods is 50% and additional duty is 20%, the effective duty recoverable on imports shall be 50% plus 20% on 50% i.e. 80% of assessable value. Since additional duty will actually be recoverable only at the rate of 20% of assessable value (basic Customs duty being exempt), the bond to be executed shall be for the difference between 80% and 20% i.e. 60% of the assessable value. Surety with the Bond should be in the form of Bank Guarantee or Cash Security. A guarantee from a financial institution like, IDBI, ICICI, UTI etc. may also be accepted in lieu of Bank Guarantee.

2.2 The following norms have been fixed for quantum of Bank Guarantee for different categories of importers :-

	___________________________________________________________________

		Category of Importers		   Quantum of Bank Guarantee 
	___________________________________________________________________

	(a) 	Super Star Trading House, Star
		Trading House, Trading House,	       	Nil 
		Export House and Public Sector
		Undertaking.

	(b) 	Manufacturer-Exporter other 	       	25% 
		than at (a) above

	(c) 	Others		               		100%. of duty saved.
	___________________________________________________________________

2.3 In individual cases where Commissioner is satisfied that a higher Bank Guarantee is justified on account of the risks to revenue and past record of licence, he may ask for a higher Bank guarantee after recording the reasons therefor on the file. For example, a higher Bank Guarantee may be justified in a case where the party has large amounts of duty etc., outstanding against it, or has repeatedly been found guilty of evading duties through deliberate acts of commission.

II Bond under E.P.C.G. Scheme

3.1 Under E.P.C.G. Scheme Bond should be for the difference between duty leviable on Capital goods on merits and the duty actually paid on importation. The Bank Guarantee/Cash Security or a guarantee by IDBI, ICICI, UTI etc. may be accepted as per Table below:

______________________________________________________________________________________________
	
	Category of Importers		Quantum of Bank Guarantee		Bank Guarantee
						Scheme		 
______________________________________________________________________________________________

(a)	Super Star Trading House, Star 	(a) 15% EPCG		 	Nil
	Trading House, Trading House, 
	Export House and Public Sector 	(b) Zero Duty 		 	Nil except in case of 	
									Undertaking EPCG export 
								 	House & PUS

(b) 	Export House & PUS		Zero Duty EPCG	 		25%, except where the
								 	Committee of Secretaries
								 	/EPCG Committee fixes 	
								 	lower Bank Guarantee/
								 	Cash  Security.

(c)	Other manufacturer-exporters 	(a) 15% EPCG		 	50%
					(b) Zero Duty		 	50%
						

(d)	Service Providers			(a) 15% EPCG		 	50%
______________________________________________________________________________________________

3.2 In cases where lower Bank Guarantee is fixed in respect of Category (b) of exporters by the COS/EPCG Committee the Commissioners of Customs if finds that the importer has committed serious violation of Customs Act or is guilty of evasion of duty, he may refer the case to the licensing authority for reconsideration. Such cases may also be brought to the notice of the Ministry.

3.3 Where an importer so requests, a Bank Guarantee may be taken even consignment-wise under E.P.C.G. Scheme the same may be acceptable but only at the Port of Registration of the licence.

3.4 A bond should not be for less than a period of' two years, with an undertaking to keep the Bank Guarantee alive for the entire period of the export obligation viz. 4+1=5, or 8+1 =9 years as the case may be. Under zero duty EPCG Scheme, Bank Guarantee may be taken either consignment wise or consolidated for initial period of four years with an undertaking in the Bond to renew the Bank Guarantee. Where Bank Guarantees are not renewed by the importers before the expiry of the existing Bank Guarantee action should be taken to enforce the Bank Guarantee for realisation of the Government dues. Customs Houses should initiate action to get Bank Guarantee renewed well in time.

4. Where, however, the EPCG Committee/Committee of Secretaries or ALC indicates a higher Bank Guarantee for a particular Licence, the Bank Guarantee should be taken for such higher amount.

5. In the case of subsidiary Company of a parent Company of a recognised status, it has been decided to extend the benefit of joint bond (both by the parent company as well as the subsidiary company holding the licence) along with B.G./Cash Security/any other guarantee from financial institutions like IDBI, ICICI, UTI etc. The facility, however, will be subject to the following conditions:-

(i) The parent company should necessarily, have more than 50% share holding in the subsidiary company.

(ii) The bond shall be jointly signed by the parent company as well as the subsidiary company and shall be executed along with BG/Cash security/or Guarantee from financial institutions like IDBI, ICICI, UTI etc. wherever applicable in terms of criterion laid down. The guarantee shall be in relation to terms and conditions of the Joint Bond.

(iii) The parent company shall stand surety for the subsidiary company that in the event subsidiary company fails to fulfill the export obligation and defaults on payment of Customs Duty and interest, the parent company shall make good the Government revenue and the interest. In other words the parent company will be severally and jointly liable for the action in terms of the bond/B.G. jointly executed by them.

(iv) This facility should be extended only to those companies which have proven track record and reputation.

6. The above guidelines would apply in respect of goods to be imported in future and in respect of consignments which have arrived and are yet to be cleared from the Customs.

Sd/-
(Sunil Kumar)
Director (Drawback)

F.No. 605/75(A)95-DBK