DGFT should word circulars carefully

EXIM MATTERS

My last week's article on deemed exports in this column has provoked some responses, including one from the officialdom.

The responses highlight the need for better co-ordination between the Central Board of Excise and Customs (CBEC) and the Directorate-General of Foreign Trade (DGFT), which indeed was the theme of the article.

The DGFT issued policy circular No 10 (dated June 24, 2005) to clarify the matters relating to refund of terminal excise duty in case of projects financed by agencies covered under appendix 13 (of the Handbook of Procedures), other than the World Bank and the Asian Development Bank.

The same circular says the earlier clarification (through circular No 6/2004-09 of October 26, 2004) that as a general rule terminal excise duty refund is available only in cases where no CVD is payable on import had resulted in the denial of the refund for projects, financed by certain notified funds/agencies.

The point is deemed export benefits are subject to fulfilment of certain conditions laid down in the chapter 8 of the foreign trade policy.

The DGFT issues circulars when some clarity is required for smooth implementation of the policy. But such circulars are binding on the sub-ordinates of the DGFT and if the circulars do not clarify but create confusions, exporters do not get the benefits and suffer.

So, there is every need to word circulars carefully, without creating any ambiguities and with full understanding of the related provisions under the central excise and Customs laws.

Second, the DGFT's offices do not grant refund of terminal excise duty against deemed exports supplies by advance intermediate licence holders to advance licence holders because the policy does not make express provisions to do so.

The DGFT seems to be under an impression that such supplies are exempted from payment of excise duty in terms of notification No 49/94-CE(NT)of September 22, 1994, and that detailed procedure for removal of intermediate goods has been prescribed under notification No 43/2001-CE(NT) of June 26, 2001.

In fact, the notification 49/94 was issued under powers conferred under Rule 13 of the Central Excise Rules 1944, but these rules have been replaced by new set of rules. At present, the Central Excise Rules 2002 hold sway and fresh notifications have been issued under the new rules. So, the notification No 49/94 is no more valid.

It is not correct to say notification No 43/2001-CE(NT) lays down the detailed procedures for advance intermediate licence holders to remove the goods without duty payment to advance licence holders.

It is the notification No 44/2001-CE(NT) of June 26, 2001, that covers situations covered earlier by the notification No 49/94-CE(NT) and the procedures laid down in 34/2001-CE(NT) need to be followed.

The trouble is that any advance licence holder who uses the notification No 44/2001-CE(NT) or for that matter 43/2001-CE(NT) will have difficulty in discharging export obligation against advance licence.

The reason is both notifications 43/2001-CE(NT) and 44/2001-CE(NT) are issued under the Rule 19(2) of the Central Excise Rules, 2002 and taking any benefit under the Rule 19(2) of the Central Excise Rules, 2002 is not allowed for discharge of export obligation, as per condition No (v) of the Customs exemption notification No 93/2004 of September 10, 2004, which allows duty exemption to advance licence holders.

The DGFT should confer with the CBEC and sort out exporters' difficulties.

tncr@sify.com