Duty free scheme: Joint DG exceeded his brief

EXIM MATTERS

ocured against the DFIA has not been availed.  There is no prohibition in the FTP or Customs notification against discharging export obligation against DFIA by using inputs, other than those procured under DFIA, in respect of which Cenvat credit has been availed. The JDGFT, Mumbai, however, calls for a declaration that the exporter has not availed Cenvat credit in respect of any inputs used in the product export. Thus, the Trade Notice No 2 (dated February 2, 2007) of JDGFT, Mumbai violates the FTP provisions.  According to JDGFT, Mumbai, the Customs notification (no. 40) provides that for exports made under DFIA, the Cenvat credit facility cannot be availed in respect of the inputs used in the product exported under DFIA scheme. In fact, the notification only says that export obligation must be fulfilled by exporting goods in respect of which Cenvat credit should not have been availed in respect of any inputs imported or procured under DFIA scheme.  The JDGFT, Mumbai, says that the exporter should not have availed the facility under Rule 18 of the Central Excise Rules, 2002. The said Rule 18 refers to rebate of excise duty paid on the inputs used in the export product as well as the duty paid on the export product. The relevant Customs notification bars the rebate of the duty paid on the materials used in export production only and not the rebate of the duty paid on the export product.  The JDGFT, Mumbai, calls for the declaration at the time of filing DFIA application that neither the exporter nor the supporting manufacturer has availed Cenvat credit in respect of the inputs used in the product exported under DFIA. Practically, this is not possible, as the exporters have to file the DFIA application before making any exports in discharge of export obligation.  The Director General of Foreign Trade (DGFT) must immediately intervene and ask the JDGFT, Mumbai to withdraw the faulty Trade Notice. The JDGFT also needs to be informed that it is the central government that notifies the FTP or Customs notification and that any amendments to the FTP or notifications can be made only by the government. Even the DGFT has no powers to amend the FTP but only the powers to advise the government on the formulation of the FTP and to implement the FTP. The job of JDGFT is to implement the policy and not amend it through Trade Notices.

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