The commerce ministry in 2009 allowed duty credit scrips issued under Chapter 3 of the foreign trade policy (FTP) and duty entitlement passbook (DEPB) to be used/debited towards payment of Customs duties, in case of export obligation defaults under advance authorisation, export promotion capital goods authorisation, etc.
However, the Central Board of Excise and Customs (CBEC) has not got any notification amended or issued any circular regarding this facility, giving rise to unnecessary problems at the operating level.
Duty credit scrips are issued to exporters under various schemes such as focus product scheme, focus market scheme, vishesh krishi and gram udyog yojana scheme, status holder incentive scheme (SHIS) and served from India scheme (SFIS), under Chapter 3 of the FTP.
These schemes have their own restrictions. For example, SFIS allows the use of the scrip for payment of duties on imports of capital goods and consumables, among others, related to the service sector of the applicant. SHIS allows the scrip to be used for import of capital goods. Such restrictions are reflected in the related Customs exemption notifications. Paras 3.17.11 and 4.3.1 of the FTP are exceptions, which allow the scrip and DEPB to be used for duty payment to regularise cases of default under authorisations issued under Chapters 4 and 5 of the FTP.
In the absence of any change in corresponding notifications or any circular, the Customs Manual (Para 12.10) is the only authentic confirmation that the CBEC has given effect to said Paras 3.17.11 and 4.3.1 of the FTP. However, Customs officers do plead absence of any specific CBEC circular to debit duty credits or DEPB towards duty payment for defaults and cause needless difficulties to exporters unaware of the Customs Manual 2010. It would help all concerned if the CBEC issues a circular to clarify the matter and also carry out necessary amendments to the notifications related to duty credits issued under Chapter 3 of FTP and DEPB.
The second difficulty relates to taking credit of additional duties of Customs debited to the duty credit scrip. The FTP (Paras 3.17.6 and 4.3.5), related Customs notifications and Customs Manual 2010 (Para 12.5) do allow Cenvat Credit of additional duties of Customs debited to duty credit scrips (except SFIS) and DEPB.
However, the only document available in the hands of exporters is the duty credit scrip or DEPB that has been debited. Such documents are not specifically mentioned as valid documents for taking credit under Rule 9 of the Cenvat Credit Rules, 2004.
The CBEC circular no. 27/2006-Cus, dated 13.10.2006, clarified so long as the related Customs notifications allow the Cenvat Credit of additional duties of Customs debited to DFCE and Target Plus scrips, no amendment to Rule 3 of the Cenvat Credit Rules, 2004, is necessary for taking Cenvat Credit of the duty debited to such duty credit scrips.
This view should equally apply to duty debited to any other duty credit scrips. So, the CBEC should quickly clarify that non-mention of the duty credit scrip as a specified document in Rule 9 of the Cenvat Credit Rules, 2004, need not result in denial of Cenvat Credit. Indeed, the CBEC should issue instructions that as a matter of discipline, the field formations should not disregard any provisions of the FTP.
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