Commissioner of Customs, Bombay has informed that in a number of cases the exporters while applying for Value Based Licences often state inflated unit prices in the application in order to obtain a licence for a higher CIF value so long as they are able to meet the value addition prescribed. The licences so obtained are, subsequently, used for importing inputs at prevailing international prices with the result that quantities far in excess of requirements for export production, based on which the entitlement to CIF was calculated, can be imported. Thus, in addition to the flexibility permitted under the scheme for importing any one or more inputs upto full CIF value of licence except for sensitive items, the exporters through above modus-operandi  take unintended benefits under the Scheme.

2.    In terms of rule 2(1) of the Foreign Trade (Regulation) Rules, 1993, "value" has the same meaning assigned to it as under Section 2(41) of the Customs Act, 1962. Therefore for the purpose of obtaining Value Based Advance Licence, the exporters are required to declare prevailing international prices which correspond to valuation as per Customs Act. Since the Licencing Authorities while issuing VABAL indicate quantity and value of all inputs in the DEEC Book (though quantity restrictions apply only for sensitive items), the unit price declared for obtaining licence can be determined from the DEEC Book. In all such cases where the variation between the price declared at the time of actual import is above 20%, the importer should be asked to substantiate such valuation and justify the the CIF price declared in the application before the Licencing authority were the then prevailing international prices. In case importer is not able to justify the correctness of prices declared before the Licencing authorities, the matter should be referred to the concerned Licencing authority for corrective action being taken at their end. Director General, Foreign Trade has also been requested to issue suitable instructions in this regard.