The work of examination of goods (usually done on a percentage basis), classification, valuation, checking from import licence point of view and assessment of duty is attended to in the Customs House by Appraisers and Examiners of Customs. The work divided among different commodity groups on functional basis and each group is placed under the charge on an Assistant Commissioner. The following documents have usually to be submitter by importer/exporter for clearance of goods through customs:

If customs duty happens to be short paid or excess paid, there is provision to demand from, or refund to, the importer the differential amount provided the demand or the claim for refund is made within six months from payment of duty (wherein one year in the case of personal imports or imports by Government etc.).

Goods which are exported out of India would, on their re-import, attract Customs duty like any import unless specifically exempted by a notification. (Section 20). However, by issue of exemption Notification No. 94/96-Cus., dated 16/12/1996, the pre-1995 Budget position has been substantially restored i.e. the goods on re-import have to pay customs duty equal to export benefit availed at the time of their export.

In principal, it is conceded that exports should and large to relieved of home taxes so as to make Indian manufactures internationally competitive. The following main schemes have been evolved to translate this principal into practice.

(1) Free Trade Zones, Export Processing Zones, Electronics Technology Parks and Jewellery Complex have been set in compact areas near ports, international air ports and Inland Container Depots. Units located in such zones etc. can get their requirements of Capital Goods and other materials, whether imported of indigenous, free of customs and Central Excise duties. They have, in turn, to export bulk of their production.

(2) On similar principal, hundred per cent export oriented units have been set up in scattered interior areas. These are the Customs bonded units set up under Section 65 and in accordance with the EXIM Policy for production or packaging or job work for export of goods or series out of India or for manufacture or articles for export out of India by 100% EOUs.

(3) Units primarily engaged in production of domestic market can also get required inputs free of duty to service an export order under Duty Exemption scheme/Advance Licence (Quantity Based only). They have to execute a bond with Customs authorities at the port of registration of their DEEC to fulfil the export obligation. Execution of bond is not necessary where certificate of discharge of export obligation has already been produced to the satisfaction of the Assistant Commissioner of Customs. In other cases, under Duty Exemption Scheme, the bond should be for a minimum period of two years and should cover the complete duty leviable on the goods on merits but for the exemption (i.e. basic duty and additional duty leviable on the goods on merits minus additional duty actually paid). Surety for bond should be in the form of guarantee from a Bank or financial institution like IDBI, ICICI, UTI etc. on the following scale:

Category of Importers:

• Super Star Trading House, Star Trading House, Trading House, Export House and Public Sector Undertaking…. NIL
• Manufacturer – Exporter other than (a) above…. 25%
• Others…. 100% of duty saved.

Under EPCG Scheme also bond should be for the differences between the duty leviable on the 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 under:

Bond and bank guarantee should be kept alive for full period of export obligation plus 1 year.

In case of non-fulfilment of the conditions of the notifications relating to EPCG and DEEC Schemes, interest at the rate of 24% per annum on the duty becoming payable shall also be recoverable form the date of clearance of imported goods till the date of payment.

The following documents are normally necessary for logging of exports in BEEC Books :-

• DEEC Pt. II.
• Customs copy of the advance licence.
• DEEC copy of the Shipping Bill in original.
• Non-negotiable copy of ON Board Bill of Landing in original. Alternatively a copy of the same attested by either Steamer Agent of Bank.
• Customs attested copy of the Export Invoice.
• AR4 wherever required.
• A copy of Test Report/Technical Opinion/Chartered Engineer’s Certificate wherever applicable.

Under the EXIM Policy (1997-2002), validity of the Advance Licence would be 18 months and the period available for discharging export obligation would also be 18 months, extendable upto further six months be Regional Licensing Authority on payment of penalty for the for the unfulfilled export obligation value. Further, the value limit of Advance Licence on production programme basis has been enhanced from 25 per cent of average FOB value of exports of 100 per cent. Evidence of discharge of export obligation should be in the form of endorsement in Part F of DEEC Book by proper officer of Customs supported by ‘Export obligation discharged Certificate’ from the licensing authority. Under the EPCG scheme, a statement of export signed by the exporter and certified by a Chartered Accountant and supported by Export Promotion copies of shipping bills with respective bills of lading would be accepted as evidence of discharged of export obligation. Export of goods on the basis of mis-declared shipping bill would not be taken into account for fulfilment of export obligation [Notification Nos. 80/95-Cus and 31/97-Cus].

Board’s instruction (refer Member Customs letter F.No. 605/333/96-DBK, dated 16/1/1997) clearly spell out that correct interpretation of must be physically incorporated. Inputs may be allowed even if they are not exactly those used in the export product but provided the inputs are commercially known to be usable in the product exported. It is also not necessary to ask the exporter to establish that the entire quantity of raw materials was used in the export product. Para (v) of Notification Nos. 30/97-Cus. and 31/97-Cus. Only required that the exporter must discharge his export obligation by exporting the "resultant products" which are specified in Part E of DEEC in terms of quantify and FOB value as also the quality and technical characteristics of the export product.

With effect from 1/4/1995 imports against Advanced licence have to pay additional customs duty equal to excise duty payable on similar goods manufactured in India (commonly called c.v.d.) This duty can be got back by way of Modvat credit by user of the imported inputs. If the inputs are not eligible under the Modvat scheme, the importer can claim drawback if he uses them for export production. However, under Notification No. 149/95-Cus., import under Quantity Based Advance licence on applications made on or after 1/12/1995 (19/9/1995 in case of readymade garments and leather garments) to manufacture-exporters with actual user condition, additional customs duty would be exempted. Such licences or materials imported thereunder shall not be transferable even after the export obligation has been fulfilled. In terms of para 7.4 of the EXIL Policy 1997-2002, a fresh Notification No. 30/97-Cus., dated 1/4/1997 has been issued to continue such exemption from CVD for actual users. Further, under the new EXIM Policy effective from 13/4/1998, Advance licences with Actual user condition will be allowed based on positive value addition only and not necessarily 33% minimum value addition. A Special Advance Licensing Scheme for manufacture-exporters of Electronic Products has also been devised which is subject to strict actual user condition. In case on merchant exporter, the Advance Licence should also specify the name and address of the supporting manufacture, export obligation bond should be executed jointly be the merchant exporter and the supporting manufacture and the exempted material should be utilised in the factory of the supporting manufacturer. If merchant exporter do not declare the names of supporting manufactures in their application for Advance Licence, the Superintendent of Central Excise i/c of the supporting manufacturer would not give them certificate non-availment of Modvat credit later. In case of export of goods which are unconditionally exempt from central excise duty, a self declaration of the export regarding non-availment of Modvat would be acceptable.

Under Notification No. 41/97-Cus., dated 30/4/1997, imports against an advance licence endorsed with non-transferable and actual user condition have also been exempted from anti-dumping duty leviable under Section 9A of the Customs Tariff Act, 1975.

Sending out duty free goods imported under DEEC of job worker (supporting manufacturer) for processing is permissible.

Third party exports are permissible under DEEC and EPCG Schemes. Exports made through a third party (export order holder) can be counted towards discharge of export obligation by the EPCG licence holder or the Advance licence holder, as the case may be, subject to the following conditions :-

• There is a contractual agreement between the licence holder and the third party (export order holder) in respect of the goods sought to be exported.
• Shipping bill and all other export documents should prominently indicate that it is third party exports.
• Shipping bill shall be filed after jointly being signed by the licence holder as well as export order holder.
• Both the licence holder as well as export order holder will be required to make a declaration on the shipping bill that in case of any default/fraud, they will be jointly and severally liable for action under the Customs Act, 1962 or any other Act for the time being in force at the time of making the export.

(4) The recently introduced simpler Duty Entitlement Pass Book Scheme (DEPB) is patterned on the credit-debit system of Central Excise Modvat Scheme. Under the scheme, exporters will be granted duty credits, on the basis of pre-notified entitlement rates, which will allow them to import inputs duty free. It is a sort of duty free REP Licence, with safeguards. It is also a substitute for drawback. While drawback is a payment in cash, the Pass Book credit would be payment in kind. The exporter can export any product under the DEPB Scheme provided the came is covered by the Standard Input-Output Norms and provisionally even those products for which credit rates have not yet been notified. Export made under counter trade agreement and export proceeds realised through "Escrow Account" in US $ are also entitled for DEPB benefits. The importer has the option to forego exemption from C.V.D. and pay the C.V.D. in cash. Goods in the Negative List of EXIM Policy cannot be imported. Pass Book credit can also be used for paying duty on (1) SIL imports and (2) imports under other schemes like EPCG scheme or Project imports. Thereby availing the exempting from Special Additional Duty of 4%. In case the imported goods are eligible for another partial exemption from payment of duty, such exemption would also be applicable to goods imported against a DEPB scrip.

Export and import should be form the same port and a special blue coloured shipping bill or the one with a blue strip on the top would be required to be field for exports. Entitlement Sl. No. of the product in DGFTs Public Notice should be mentioned in the shipping bill. A rate non-notified product can also be exported provided it is specified in the standard input-output norms. DEPB holders whose Pass Book are registered at Delhi, Mumbai, Calcutta or Chennai are allowed to import goods at any of these four parts through Telegraphic Release Advise. The TRA facility is applicable only to imports. The Pass Book would be valid for 12 months (non-extendable). The credit under the scheme can be transferred to another person but the transfer will be valid within the same port. The licensing authority can allow a pre-export provisional credit in the Pass Book (calculated at 5% of average FOB value of export in the preceding 3 years) to be set off by the credits earned on exports to be subsequently effected. The importer claming exemption against provisional credit will have to execute a bone with the Assistant Commissioner of Customs for 150% of the DEFB amount with bank guarantee etc. as follows and in case of default pay the customs duty otherwise leviable with interest at the rate of 24% per annum.

The bond and bank guarantee shall be valid for two years.

Further, the importer claming exemption against provisional credit can import only such goods as are in the nature of inputs required for use for production of goods in the factory of the Pass Book holder or in the factory of his supporting manufacturer declared in the Pass Book and such inputs cannot be transferred, loaned, sold, parted with or disposed on in any manner even after credits on exports to set off provisional credit have been earned.

Triplicate copy of the shipping bill bearing customs examination report and "Let Export" order would be given to the exporter for producing before the licensing authority for claming credit in the Pass Book.

In the case of products where the credit entitlement rate is 15 % of more, the amount of credit against each product would not exceed 50% of the market value of the goods at the time of export as ascertained by customs by examination of the goods or through market inquiry. The exporter will in the first instance declare the market value (inclusive of excise duty, sales tax and other local taxes) in all shipping bills under DEPB Scheme. Pending market inquiry etc., customs may provisionally clear the shipping bill for export. The market inquiry etc. would thereafter be completed as per the guidelines and the shipping bill finally assessed within one month (extendable to 90 days at the discretion of the Commissioner of Customs) of "let export order" and only then released to the exporter for getting DEPB credit. Wherever the goods are being exported under firm contract supported with letter of credit or other like securities and the same are presented along with the shipping bill, the transaction value will normally be accepted.

Entitlement will be recorded in the DEPB on the basis of FOB value of exports as given in the Bank Certificate, except in cases where the Customs have brought the value down to the level of present market value as endorsed by them on the shipping bill. [EXIM Policy 1997–2002 and Customs Notification No 34/97-Cus.]

Knowledgeable people who have assessed the performance of the scheme say that it cannot be called a success, mainly because the hidden liabilities of sales tax, income tax, ½% service charge payable to DGFT and licence premium involved in sale/purchase/transfer of credit make the rate of credit attractive than drawback. In order to make the scheme simpler and core attractive, it has been suggested that –

• Deemed exports should also be made eligible for DEPB Credit;
• Credit available in the Pass Book should be allowed to be utilised for payment of Central Excise duty on indigenous procurement of goods also (the present policy encourages avoidable imports); and
• Credit remaining unutilised for a specified long time should be refunded in cash.