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Subject: Amendment in Circular No. 52/95 allowing the relaxation of execution of bond/ bank guarantee by the parent company on behalf the subsidiary company.
A representation has been received by the Ministry to extend the facility of execution of BG/ Bond to the subsidary of export house/ trading house/ star trading house/ super star trading house as has been made available to them under Circular No. 52/ Customs & 97/ 95 Customs issued from F.No. 605/75/95- DBK. It has been represented by the representationist that such facility will be in conformity with the provisions of para 103(i)(d) of the Handbook of Procedures Volume- I.
The matter has been considered by the Ministry and it has been decided to exited the benefit of joint bond/ bank guarantee which shall be signed both to the parent company as well as the subsidiary company holding the licence. The facility, however, will be subject to the following conditions :-
(1) The parent company should necessarily have more than 50% share holding in the subsidary company.The above instructions will apply Mutatis Mutandis both to Duty Exemption Scheme and EPCG Scheme. A Standing order for the guidance of the departmental officers and a Public Notice for the benefit of the trade may kindly be issued. A copy of SO/ PN issued on this behalf may be sent to the Commissioner (DBK) and DGI ACC & E. In case of any difficulty, the same may please be brought to the notice of the Ministry.(2) The facility will be subject to the fact that both the parent company and the subsidary company, should have common Board of Directors. This fact can be verified from the Article of Association/ memorandum of Association of the parent company and the subsidary company.
(3) The bond/ bank guarantee shall be jointly signed by the parent company as well as the subsidary company and shall be executed in terms of criteria laid down under Circular No. 52/95-Cus. as further amended by Circular No. 97/95-Cus. issued from F.No. 605/ 75/95 -DBK.
(4) The parent company shall stand surety for the subsidary company that in the event subsidary company failing to fulfill the export obligation and thereupon defaulting payment of Customs Duty and interest, the parent company shall make good to Govt. revenue and the interest. In other words the parent company will be severally are jointly liable for the action in terms of the bond/ bank guarantee jointly executed by them.