Good news on excise, not so good on Sion

EXIM MATTERS

It was a mixed week for the exporters: the Central Board of Excise and Customs (CBEC) removed a major difficulty, while the director general of foreign trade (DGFT) created fresh difficulties for them.

The CBEC issued a corrigendum (Drawback Public Notice no. 2 dated May 17, 2005) to the Customs Notification no. 93/2004 dated September 10, 2004 that deals with duty exemption under advance licences.

Before the corrigendum, the position was that exports made under a claim of rebate of any excise duties could not discharge export obligation against advance licences.

After the corrigendum, only the exports made against claim of rebate of excise duties paid on the materials used in the manufacture of export product will not discharge export obligation against advance licences.

It means that exports made under claim of rebate of excise duties paid on the export product can very well discharge export obligation against advance licences.

Before the corrigendum, the central excise officials had contacted a number of advance licence holders who had claimed rebate of excise duties paid on the export product and asked them to withdraw their rebate claims.

The officials had even issued show cause notices to a number of exporters. The exporters can now reply to the show cause notices and fend off the central excise officials. They can also pursue the pending excise rebate claims more vigorously. A corrigendum has the effect of amending the notification from the date of its issue, that is with retrospective effect.

The finance ministry has also issued notifications giving effect to various changes in the Foreign Trade Policy announced six weeks back. Why it should take so long to issue notifications is something difficult to understand.

The notification dealing with advance licences says that imported goods can be transferred to any other unit of the licence holder only after discharge of export obligation and redemption of bond furnished to the Customs at the time of duty-free imports.

This is as good as making the provision unavailable as the Customs rarely bother to redeem bonds or even release bank guarantees.

The DGFT has called for a review of standard input output norms (Sion) for about 50 items, in response to the pressures from the finance ministry that the norms allow more duty-free imports under advance licences than necessary.

This is a good beginning and the DGFT should progressively subject more Sion entries to closer scrutiny. Many norms are fixed very liberally in exchange for hefty bribes. The DGFT should also simultaneously provide for a credible mechanism whereby exporters can appeal effectively against decisions to not grant Sion as demanded by the exporters.

The DGFT now wants the exporters to submit extracts of the imported raw material consumption registers before granting export obligation discharge certificates against advance licenses. He wants his offices to check whether duty-free materials have been used in export production as per Sion.

Although the intention behind the directive is to monitor proper use of the duty-free materials, most exporters will not be able to submit extracts from the consumption registers simply because they do not maintain the consumption records in the prescribed format.

It would be better if the DGFT withdraws the instructions. Selective verification of records maintained at the exporters' premises would be a better option.

tncr@sify.com