Customs Circular No- 21/2007 dated 08.05.2007
Clarification : Scope and
coverage of goods imported under Target Plus Scheme
I am directed to invite
your attention to the above mentioned subject. The Target Plus Scheme (TPS) for
the Star Export Houses was introduced in the Foreign Trade Policy (FTP) which
came into force on 01.9.2004. Under the scheme the exporter gets entitled to
rewards in the form of duty free credit based on incremental exports. In terms
of para 3.7.6 of the FTP the duty credit may be used for import of any inputs ,
capital goods including spares, office equipment, professional equipment and
office furniture provided the same is freely importable, for their own use or
that of the supporting manufacturer(s) . In terms of para 3.2.5 (II) of the
Handbook of Procedures, Vol.I (2005 edition), goods imported under this scheme
shall have a 'broad nexus' with the products exported. In terms of condition No.
3 of Notification Nos. 32/2005-Cus dt. 8.4.2005 and 73/2006-Cus. dated 10.7.2006
the certificate and the goods imported against it shall not be transferred or
sold.
2. It has been brought to the notice of the Ministry by the trade that some
exporters had obtained duty credit certificates against exports of rice and
using these certificates they have imported almonds which, after removal of the
shells, have been sold in the market without payment of duty. As dry fruits /
almonds cannot be used in the processing / manufacture of rice, it is alleged
that the condition of 'broad nexus' stipulated in the Handbook is not fulfilled.
The 'actual-user' condition specified in the Policy and the Customs notification
is also violated because almonds, after removal of shells, are being sold in the
open market. It has been alleged that the act of importation of almonds which
are neither inputs nor capital goods in relation to rice is nothing but misuse
of the TPS.
3. The matter has been examined in consultation with the Ministry of Law (MOL).
After examination of the provisions of Para 3.7.6 of the FTP and Para 3.2.5 (II)
of the HBP, the MOL has opined that the FTP does not use the expression "broad
nexus" and, therefore, the same cannot be dissociated from the words "input" and
"use" mentioned in the Policy. The MOL has categorically stated that the
addition in Para 3.2.5 (II) of the HBP is to facilitate the search for "inputs"
and "use" and any interpretation so as to dissociate the import from the
"inputs" and "use" in the export goods would make it ultra vires the FTP. The
MOL has further stated that the words "inputs" and "use" can not be brushed
aside and have to be in focus for the intended import. Together these words
indicate that the item sought to be imported should be an "input" in the
manufacture of the exported items which is required for "use" by the exporter or
the supporting manufacturer, as the case may be. For this purpose, the intended
input must have a relationship with the export product. Whereas SION will act as
a prima facie evidence of the inputs, the exporter is not debarred from
satisfying the authorities that there is a broad nexus between the intended
import item as an input with the export product, both falling within the same
product group. Ignoring to give effect to the words "inputs" in the beginning
and "own use" towards the end in Para 3.7.6 of the FTP would mean to render a
part of it redundant and would not be in keeping with the objective and
framework of the scheme.
4. In the light of this, the Ministry of Law has clarified that the holder of
TPS certificate is permitted to import an item under the TPS and get the same
processed into possible resultant products only if the same has a 'broad nexus'
with the product group as an input in the export product and is required to be
used as an input in the product exported for which TPS benefit is sought. The
Ministry of Law has also clarified that the term 'broad nexus' with the product
group is in addition to and not in substitution of the words "inputs" and "own
use" in Para 3.7.6 of the Scheme.
5. The Ministry has accepted the aforesaid opinion of the Ministry of Law.
Accordingly, import of goods against TPS certificates may be allowed keeping in
view the said opinion discussed in paragraphs 3 and 4 above.
6. These instructions may be brought to the notice of the trade 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.
F.NO.605/66/2006-DBK
ANURAG BAKSHI
S.T.O. (DBK)
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