Goods imported for resale will not attract excise

SME CHATROOM

We are merchant exporters and would like to address one problem mentioned below: We cleared certain machinery partexcisable under our CT1 issued to our vendor in Rajkot in the month of October, 2004.

As this machinery part was required to be fitted in main machinery which was being made at some other non-excisable vendor in Ahmedabad, who took time, ultimately the entire shipment could be completed in April, 2005.

Add to this, due to sheer negligence on behalf of our official handling these documents, we did not get ARE1 set duly endorsed by Customs at the time of shipment. Now, when this has come to our knowledge, we have approached ICD, Ahmedabad Customs with a request to get ARE 1 set to endorse on the back after verifying the necessary documents. But, the Customs is not accepting our request.

Please let us know:

How to convince the Customs officials so that they can endorse at the back of ARE1.

What stand should we take before the excise authority to release the credit in our bond and to avoid penalty/duty in case the Customs do not endorse or even if they endorse, because looking to the timeframe and gap of actual shipment of goods (April,2005) and actual release of goods from vendors factory (October 2004)

I believe that you have issued CT1 in terms of notification no. 42/2001-CE (NT) dated June 26, 2001 covered under Rule 19 (1) of the Central Excise Rules 2002.

Secondly, you seem to have issued CT1 for removal of parts of certain machinery, whereas what you have exported are machinery and not the parts. The parts removed under ARE1 were resolved into machinery at a different factory and from there the machinery were exported. I suppose that even in the shipping bills and other export documents that you mention, you might have described the export goods as machinery and not as parts.

The point you have to note is that the parts lose their original identity, when they are resolved into machinery.

In fact, what you removed under CT1/ARE1 were components for manufacture of export goods. The goods removed under cover of ARE1 were not exported in the same form. The goods removed were, in fact, inputs required for manufacture of export goods.

For removal of inputs that are required for manufacture of export goods, the notification no. 43/2001-CE (NT) dated June 26, 2001 and 44/2001-CE (NT) dated June 26, 2001 have been issued.

Those notifications are covered under Rule 19 (2) of Central Excise Rules, 2002. The procedures for such removals are quite different and they do not envisage issue of CT1.

In view of the above, I am of the opinion that the Customs are quite justified in refusing to endorse the ARE1 at this stage. I am unable to suggest what might convince the excise authorities to let you take the credit.

Regarding the delay, the excise authority who accepted your bond can extend the period for exports beyond six months from the date of removal of the export goods from the factory, as per condition No. (ii) of the Notification no. 42/2001-CE (NT) dated June 26, 2001. Without that extension, pressing the Customs authorities for ARE1 endorsement may not help.

Thank you for your response to import of foreign brands. Having complied with trademark and other related regulations as applicable to the products, we would like to know the applicability of central excise, or otherwise, in three cases at licensed premises of the importer.

The fact is that the licensee is already manufacturing similar class of products under his own brand name, say Chapter 90.16 and Chapter 90.27, where the transaction value is applicable.

If such a small-scale industry (SSI) importer, under any of the three conditions i.e.(a) product with his own brand name, (b) foreign product co-branded with his name or (c) foreign brand products and no process is done in the premises except perhaps checking and re-packing, what are the central excise rules applicable?

It is assumed that no Modvat credit will be taken, as these items are for re-sale only. However, since it is in the licensed premises, what should an SSI unit take, as a caution, to be on the right side of the law?

The first point to note is that central excise duty is a duty on goods manufactured in India. The central excise laws and procedures deal with goods manufactured in India. The imported goods, with or without trademark, do not come under the purview of central excise.

As I had clarified earlier, once imported goods cross the Customs barriers the Indian laws do not discriminate between imported goods and domestically produced goods. Goods imported for the purpose of resale do not attract any central excise.

If the importer, while reselling the goods wants to enable the buyer take Cenvat credit of the additional duty of Customs, that is, CVD paid on the imported goods, the procedures laid down for that purpose such as registration as dealer, issue of invoices, etc. have to be followed as per the Cenvat Rules, 2004.

Regarding bringing the imported goods into the premises of a manufacturer, there are no restrictions under the Central Excise Rules 2002.

Restrictions regarding bringing the goods for trading into a manufacturer's licensed premises existed before the Central Excise (No. 2) Rules, 2001 came into effect. These restrictions have now been removed and the laws are silent on this point. So, there are no restrictions.

As a matter of abundant precaution, what you may do is to store the imported goods for re-sale separately and maintain separate accounts for the trading goods.

You may maintain separate accounts for the manufactured goods and claim your eligibility for exemptions based on the value of clearances.

We had imported certain equipment which are defective. The supplier agreed to repair those equipment free of charge. We want to send them back for repairs and get them back. Could you please let us know about the formalities?

At the time of export, please obtain a GR waiver from your bankers and file a shipping bill indicating that the goods are being sent abroad for repairs and re-import.

Also, write the part number or identification mark of the equipment in the export documents because when you re-import the goods after repairs you have to establish before the Customs that the re-imported goods are the same that were exported.

Under Customs Exemption Notification No. 94/96-cus. dated December 16, 1996, you have to pay on the re-imported goods, duty of Customs which would be leviable if the value of re-imported goods after repairs were made up of the fair cost of repairs carried out including cost of materials used in repairs (whether such costs are actually incurred or not), insurance and freight charges, both ways.

Please take note that there should be no change in ownership of the goods between the time of export of such goods and re-import thererof.

tncr@sify.com