T N C Rajagopalan: Notifications go beyond new trade policy

EXIM MATTERS

The revenue department has issued several notifications to give effect to the provisions of new foreign trade policy and the Finance Act, 2004. Some of these notifications go beyond what the policy says.

The much discredited duty exemption entitlement certificate (DEEC) has a made a comeback in the notification (No 94/2004, dated September 10, 2004) that relates to annual advance licences (AAL). Contrary to what the policy says, the notification restricts validity of the licence to items covered under the standard input-output norms. The same notification also covers AAL for intermediate supplies.

The DEEC was an integral part of the advance licence since the introduction of the duty exemption scheme. It was abolished in 2002, as a measure of simplification. Its comeback as part of AAL is, perhaps, a response to the nature of AAL scheme that gives the status holders much greater flexibility to import any items within a product group. The AAL scheme has not succeeded the way the policy makers had expected.

The notification (No 93/2004, September 10, 2004) dealing with advance licence and advance licence for intermediate supplies contains a condition regarding endorsement of shipping bill details where imports are made after discharge of export obligation.

The notification only says the exempt materials shall not be sold or transferred unlike the AAL notification, which insists that the exempt materials shall not be disposed of or used in any manner except for discharge of export obligation or for replenishment of such materials and that the materials so replenished shall not be sold or transferred to any other person.

Strangely, both the above notifications contain the mischievous clause that in respect of the products exported in discharge of export obligation, the facility of Rule 18 or Rule 19 (2) should not have been availed. Most exporters using advance licences and claiming rebate of excise duty paid on the export products will face difficulties and harassment due to the above clause.

In the previous Exim Policy period also, similar restriction was placed in the notification No 43/2002 (Customs), dated April 19, 2002, but was later corrected, curiously, through a drawback public notice. For strange reasons, the restriction has come back now.

Mercifully, the notification (No 91/2004, dated September 10, 2004) relating to advance licence for deemed exports and notification (No 92/2004) relating to duty free credit entitlement certificate to service providers under the "Served from India" scheme are devoid of any major defects.

The notification (No 90/2004, dated September 10, 2004) creates two categories that the policy does not categorically envisage like the duty-free replenishment certificate (DFRC) and the DFRC for intermediate supplies.

The other notifications relating to leather, gem and jewellery, handlooms and handicrafts sectors are fairly faithful to what the policy says.

As a measure to combat inflation, the government has reduced the tariff value on edible oils by about 10 per cent. Besides the Directorate-General of Foreign Trade has also restricted use of duty entitlement passbook to 50 per cent in case of import of edible oils.

The revenue pressures are beginning to be felt. New Cenvat rules have been notified integrating the service tax with the Cenvat on goods. Even the export-oriented units have now been allowed to take the Cenvat credit.

Further, new central excise notifications have been issued to deal with exports to Nepal and Bhutan.

tncr@sify.com