The Central Board of Excise and Customs (CBEC) has revised the norms for furnishing bank guarantees for imports under the duty exemption scheme or export promotion capital goods (EPCG) scheme.
However, these norms differ from those issued by the Director-General of Foreign Trade (DGFT).
Exporters, who import duty-free inputs for export production or capital goods at 5 per cent duty under the EPCG scheme, are required to provide an undertaking to the Customs department that they will fulfil certain export obligations within a certain period of time.
Similarly, if duty-free or EPCG licence holders source their inputs or capital goods from domestic suppliers under the deemed export scheme, they have to furnish a legal undertaking to the licensing authorities.
The bond/legal undertaking need not be backed by a bank guarantee if the exporters hold the status of export houses, trading houses etc. The CBEC has not made any changes to this provision.
The DGFT has waived the requirement of bank guarantees for manufacturer exporters, who exported a minimum of Rs 1 crore worth of goods in the previous year.
On the other hand, the CBEC has waived the bank guarantee requirement only for exporters who have achieved the export figure in the previous two years.
The CBEC has exempted manufacturers, who have paid a central excise duty of at least Rs 1 crore in the preceding year, from providing a bank guarantee. The DGFT, however, has not provided a similar exemption.
The CBEC asks for central excise certificates regarding duty payment and export performance in the preceding years, whereas the DGFT requires chartered account certificates.
Another interesting difference is that the CBEC wants a solvent surety in certain bank guarantee waiver cases, whereas the DGFT does not want any sureties.
The CBEC has allowed corporate guarantees of parent companies in lieu of bank guarantees. It has also limited the bank guarantee validity to three years.
The exporter has to provide an undertaking to renew it on time to keep the bank guarantee valid for the remaining period specified under the export obligation. The DGFT has given no such directions.
In fact, the DGFT wants EPCG licence holders to give a bank guarantee valid for 9 years or 13 years, depending upon the export obligation period.
The Customs department used to insist, quite illegally, on a single bond/bank guarantee covering the entire licence under the duty exemption scheme.
The CBEC has now allowed bond/bank guarantees to be furnished on a per consignment basis. The DGFT used to accept legal undertakings/bank guarantees covering only the duties in respect of the item and quantity being sourced indigenously.
Under the earlier dispensation, small manufacturer exporters, other than some specified categories, had to furnish bank guarantees only to the extent of 25 per cent of the bond amount.
This has now been withdrawn. The CBEC now wants a bank guarantee for the entire bond amount. The DGFT, however, continues to accept bank guarantees covering 25 per cent of the legal undertaking amount.
The CBEC circular does not mention whether an annual interest of 15 per cent has to be worked into the bond amount.
Exporters can now insist that the bond amount should cover only the amount on which duty was saved.
Despite the CBEC reviewing its earlier circulars, some inconsistencies remain. An example being the CBEC
