Some regional offices of the Directorate General of Foreign Trade (DGFT) have, on directions, asked exporters to restrict or surrender their entitlements under the Incremental Exports Incentivisation Scheme (IEIS). To be done to the lesser of 25 per cent of growth or Rs 10 crore under the quarterly scheme and Rs 1 crore under the annual scheme per Importer-Exporter Code (IEC) holder, this has surprised those affected.
The IEIS quarterly scheme was notified in December 2012, granting duty credit of two per cent of the FOB (free on board) value of incremental exports during January-March 2013 over those in January-March 2012. This region-specific incentive was restricted for exports to Asia (barring those to United Arab Emirates, Hong Kong and Singapore), America and Europe. Some specific categories of exports and specific products were not eligible. A similar IEIS annual scheme, notified in April 2013, covered incremental exports during April-March 2013-14 over those in April-March 2012-13.
On September 25, 2013, the commerce ministry notified amendments to the effect that the benefit under the quarterly scheme would be limited to 25 per cent growth or incremental growth of Rs 10 crore in value, whichever was less. And, under the annual scheme to Rs 1 crore per IEC holder; claims in excess were to be subject to greater scrutiny. On the same date, the DGFT issued a public notice prescribing the extra documents to be given for such greater scrutiny. Accordingly, the regional offices of the DGFT have been calling for extra documents for claims in excess of the specified limits and granting the entitlements after scrutiny.
Over recent months, the same offices are asking exporters to surrender the duty credits granted in excess of the specified limits and rejecting claims in excess of the prescribed limits. Exporters have pleaded that their claims beyond the stated limits have only to be scrutinised closely but not denied. But their pleas have been rejected, quoting DGFT's internal directive dated September 25, 2014, and threatening them with penal action.
It is clear from the notifications dated September 25, 2013, that the specified limits do not restrict the entitlement but only subject claims in excess of these to greater scrutiny. The DGFT wants to read only the first part of the notifications and ignore the second. If the intention of these notifications was to only restrict the entitlement, there ought to have been no need to issue a public notice prescribing procedures and extra documents for greater scrutiny of the applications.
In fact, the public notice of DGFT specifically clarified that claims beyond a particular level would require greater and more intensive scrutiny and, so, prescribed a list of indicative documents for such scrutiny. It is surprising that after clarifying the correct interpretation of the relevant notifications, and having prescribed the procedures to give effect to these, the DGFT should now ask for surrender of the duty credit already granted after due scrutiny, despite it being fully in accordance with its own public notice and the Foreign Trade Policy.
The trade is repeatedly assured of non-adversarial administration but such actions invite disputes that will burden the judicial system with more cases and unnecessarily. Is this good governance? The minister of commerce must intervene.
The IEIS quarterly scheme was notified in December 2012, granting duty credit of two per cent of the FOB (free on board) value of incremental exports during January-March 2013 over those in January-March 2012. This region-specific incentive was restricted for exports to Asia (barring those to United Arab Emirates, Hong Kong and Singapore), America and Europe. Some specific categories of exports and specific products were not eligible. A similar IEIS annual scheme, notified in April 2013, covered incremental exports during April-March 2013-14 over those in April-March 2012-13.
On September 25, 2013, the commerce ministry notified amendments to the effect that the benefit under the quarterly scheme would be limited to 25 per cent growth or incremental growth of Rs 10 crore in value, whichever was less. And, under the annual scheme to Rs 1 crore per IEC holder; claims in excess were to be subject to greater scrutiny. On the same date, the DGFT issued a public notice prescribing the extra documents to be given for such greater scrutiny. Accordingly, the regional offices of the DGFT have been calling for extra documents for claims in excess of the specified limits and granting the entitlements after scrutiny.
Over recent months, the same offices are asking exporters to surrender the duty credits granted in excess of the specified limits and rejecting claims in excess of the prescribed limits. Exporters have pleaded that their claims beyond the stated limits have only to be scrutinised closely but not denied. But their pleas have been rejected, quoting DGFT's internal directive dated September 25, 2014, and threatening them with penal action.
It is clear from the notifications dated September 25, 2013, that the specified limits do not restrict the entitlement but only subject claims in excess of these to greater scrutiny. The DGFT wants to read only the first part of the notifications and ignore the second. If the intention of these notifications was to only restrict the entitlement, there ought to have been no need to issue a public notice prescribing procedures and extra documents for greater scrutiny of the applications.
In fact, the public notice of DGFT specifically clarified that claims beyond a particular level would require greater and more intensive scrutiny and, so, prescribed a list of indicative documents for such scrutiny. It is surprising that after clarifying the correct interpretation of the relevant notifications, and having prescribed the procedures to give effect to these, the DGFT should now ask for surrender of the duty credit already granted after due scrutiny, despite it being fully in accordance with its own public notice and the Foreign Trade Policy.
The trade is repeatedly assured of non-adversarial administration but such actions invite disputes that will burden the judicial system with more cases and unnecessarily. Is this good governance? The minister of commerce must intervene.
Email: tncrajagopalan@gmail.com