CVD payment on EPCG imports

CHATROOM

If it's paid in cash, the duty won't be considered for computation of net duty saved.

To implement the EPCG Scheme, Notification No. 97/2004 - Cus dated 17.09.2004 has been issued, which exempts so much of the duty of customs leviable thereon which is specified in the First Schedule to the Customs Tariff Act, 1975 (51 of 1975) as is in excess of the amount calculated at the rate of five percent ad valorem, and the whole of additional duty leviable thereon under section 3 of the said Customs Tariff Act, when specifically claimed by the importer.

However, a restriction has been incorporated in the Notification No. 97/2004 - Cus by an amending Notification No. 27/2005 - Cus dated 02.03.2005 (clause 3) wherein an importer may opt to pay the CVD / Special Additional Duty and have lower EO, provided CVD/Special Additional Duty is not Cenvatted. In case it is Cenvatted, it would be taken into consideration for fixation of EO. Prior to amendment vide Notification No. 27/2005 - Cus dated 02.03.2005, there was no restriction in claiming credit of CVD, while Special Additional Duty was not there at that time. Therefore this amendment has resulted in significantly increasing the importers' EO.

Is our reading of the position as mentioned above correct?

As per Para 5.1 of the Foreign Trade Policy (FTP), "In case CVD is paid in cash on imports under EPCG, the incidence of CVD will not be taken into consideration for computation of net duty saved provided the same is not Cenvatted." This provision gave an option to pay CVD in cash and thereby take up lower export obligation. It was introduced on 31st August 2004. At that time, the 4% additional CVD under Section 3 (5) of the Customs Tariff Act, 1975 (CTA) was not introduced.

While giving effect to the FTP through notification no. 97/2004-cus. dated 17.09.2004, the Government omitted to mention that the CVD paid is not to be taken as Cenvat credit. This omission was set right through notification no. 27/2005-cus. dated 02.03.2005. The inference that prior to 02.03.2005 there was no restriction regarding claiming credit of CVD, although quite logical in terms of the notification, is not justified as the FTP did not permit the same. The import under EPCG is subject to not only the conditions of the exemption notification but also licensing conditions and the FTP provisions.

After introduction of 4% additional CVD, the total duty has gone up and therefore, the duty saved under the EPCG scheme and consequently, the export obligation has also gone up. However, the wordings in the FTP and notification have remained unchanged. So, a plain reading of the notification would lead to the conclusion that there is an option to pay 4% additional CVD also in cash and not take Cenvat credit of the same, although the FTP is not specific on this point.

You may, however, take note that if you pay CVD in cash and do not take Cenvat credit of the same, you can claim depreciation on that amount. Also, the option to claim exemption from CVD continues to be available.

When Electronic Fund Transfer (EFT) is done through DGFT site whether payment verification through website should be completed on the same day?

Till recently we have not faced any problem, but since 16/07/06 we understand that the both should be simultaneously completed on same day for the purpose of payment verification. If it is not done on same day and being done on alternative day the message is reflected as "No pending payment verification". This is creating a lot of practical hassles and not possible for various reasons.

Please advice under this above circumstances how to represent the matter and to whom.

You may represent the problem to the DGFT explaining the practical difficulties you have mentioned and why it is not possible to verify on the same day.

I would like to know what is the rate of duty payable if a unit in SEZ supplies the goodsto DTA. There is an impression that the rate is 50% of the normal import duty applicable to a given product.

Clearances from SEZ to DTA are treated as physical imports and customs duties will be applicable in the same manner and at the same rates as for goods imported from outside India. However, in terms of S.No. 7 of the exemption notification no. 20/2006-Cus. Dated 1.3.2006, the 4% additional CVD (leviable under Section 3 (5) of the Customs Tariff Act, 19750 will be exempted on all goods manufactured or produced in a SEZ and cleared in the DTA for home consumption, provided such goods are not exempted from sales tax or value added tax (VAT). All other customs exemptions available for imported goods are equally available for goods cleared from SEZ to DTA.

(email: tncr@sify.com)