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Publish Date: 09 Aug, 2008
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Changes in EOU/EHTP/STP and Gems & Jewellery Export Promotion Schemes-A Note

 

NOTE - CHANGES/AMENDMENTS IN EOU/EHTP/STP AND GEMS AND JEWELLERY EXPORT PROMOTION SCHEMES

 

 

The changes made in Foreign Trade Policy, 2004-09 and Handbook of Procedure, Vol.1 relating to EOU/EHTP/STP/BTP units under Export Oriented Undertaking scheme and Gem & Jewellery Export Promotions Scheme. 

The various changes effected are briefly explained in Customs Circular No. 12/2008-Customs dated 24.06.07. The said changes are as follows:

 

EXPORT ORIENTED UNDERTAKING SCHEMES

 

1.       Net Foreign Exchange Earnings (NFE):-

 

A unit has to achieve positive NFE in the block of five years starting from the date of commencement of production.   

 

Para 6.5 of FTP provides that a unit shall have to be positive net foreign exchange earner except for the sector specific provision of Appendix 14-I-C of HBP.

Manner of computation of NFE is defined under Para 6.10.1 of HBP and the manner of calculation is explained in Annexure-I to Appendix 14-I-G of HBP.

 

The term NFE in customs has been defined similar to the definition of the same given in FTP for the purpose of EOU.

 

Changes to this effect have been made vide Notifications No. 76/2007-Customs and 26/2007-C.E. both dated 06.06.2007.

 

 

2.   Rationalization of calculation of NFE with rate of depreciation allowed on the capital goods:-

 

As per Para 6.10.4 of HBP, the value of imported capital goods and payment of foreign technical know-how fee is amortized at the rate of 10% per year. And as per Para 6.5 of FTP, NFE earnings are to be calculated cumulatively in the block of five years.

Therefore, a unit can achieve positive NFE only by exporting 50% of value of the imported capital goods.

Further, 100% depreciation for computer and computer peripherals and 60% for other capital goods have been allowed in the period of five years under Para 6.36.1 of HBP (read with Para 6.36.2 and Para 6.36.3 of HBP).

This means that a unit can achieve positive NFE only for 50% of the value of capital goods in a period of five year though 100% depreciation on the value of computers and 60% depreciation on the value of other capital goods is allowed.

 

Now, Para 6.10.4 of HBP is amended so that for a unit existing prior to expiry of 10 years, NFE is to be calculated on the value of capital goods and payment of foreign technical know-how fee based on the rate of deprecation allowable on the goods.

Therefore, when a unit is exiting from EOU Scheme and before the no-dues certificate is to be issued, the Customs Officials are required to ensure that the unit has achieved positive NFE taking into consideration the rate of depreciation allowable on the goods as explained above.

 

 

3.   Clearance or de-bonding of capital goods in the event of non achievement of positive NFE:-

 

 Para 6.15 (b) and Para 6.18 (e) were amended so that the clearance of de-bonding of capital goods for being disposed in DTA and exit from EOU scheme will be allowed only when the unit achieves positive NFE. Depreciation allowed is also to be considered for calculating positive NFE.

     

 Accordingly, amendments have been brought to EOU Notifications vide Notifications No. 60/2008-Cus and No. 26/2008-C.E., both dated 05.05.2008. The clearance or de-bonding of capital goods will be allowed on the depreciated value proportionate to the NFE achieved by the unit. Such value is to be arrived at after taking into consideration the rate of depreciation allowable on such capital goods.

If a unit does not achieve positive NFE as per the above provisions, then the unit has to pay the duty foregone at the time of import on such value of goods which is in proportion to the positive NFE which is not achieved.

 

 

4.       Exit from EOU scheme to EPCG scheme:- 

     

Para 6.18 (d) has been amended to allow exit from EOU scheme to Export Promotion Capital Goods scheme only when EOU has fulfilled positive NFE criteria on the date it wishes to de-bond or migrate to EPCG scheme. 

 

Accordingly, changes have been made in EOU Notifications vide Notifications No. 47/2008-Cus and No. 24/2008-C.E. both dated 11.04.2008. In case a unit wants to exit from EOU Scheme to EPCG Scheme, clearance or de-bonding of capital goods will be allowed on the condition that the EOU has fulfilled the positive NFE criteria.

If a unit does not achieve positive NFE after taking into consideration rate of depreciation allowable, it cannot exit EOU Scheme.

 

 

5.   Exit from EOU scheme to Advance Authorization Scheme:-

 

A new Para 6.18 (g) has been inserted in FTP which permits a unit to exit from EOU Scheme to Advance Authorisation Scheme on the condition of fulfillment of positive NFE criteria. This is allowed only as one time option.

Accordingly, EOU Notifications have been suitably amended by Notification No. 76/2007-Customs and No. 26/2007-C.E, both dated 06.06.2007. In case a unit wants to exit from EOU Scheme as one time option, clearance or de-bonding of capital goods will be allowed on the condition that the EOU has fulfilled the positive NFE criteria.

If a unit does not achieve positive NFE after taking into consideration rate of depreciation allowable, it cannot exit EOU Scheme and enter Advance Authorisation Scheme.

 

 

6.   Recovery of duty in event of non fulfillment of export obligation in the block period of 5 years :-  

 

 For a quick and effective recovery of duty in case an EOU does not fulfill the EO in block period of 5 years, it is provided that the final decision with regard to fulfillment of EO is to be taken by the Development Commissioner within 6 months if possible or within 1 year. An amendment to this effect has been brought in Para 3 (ii) of Part (A) of Appendix 14-I-G to HBP.

       

Thus, in case of an EOU defaults in fulfilling EO after block period of 5 years and the Development Commissioner reaches a conclusion within 6 months that the said unit has defaulted in achieving positive NFE, then duty (if any)  can be demanded from such unit.

 

In case where the Development Commissioner has not yet reached a final decision within 6 months, the jurisdictional Customs /Central Excise Authorities are to immediately take up the matter with these authorities (Development Commissioner/ Director STPI) so that a decision regarding the status of positive NFE is reached before one year is completed and action can be initiated for recovery of duty from defaulting units. This procedure has been evolved to recover duty without much delay.     

 

Accordingly, the Board Circular No. 21/95-Cus, dated 10.03.95 has been accordingly modified to this extent. The said circular before amendment provided that demand of duty could be confirmed only after a definite conclusion regarding non-fulfillment of export obligation is arrived at by the Development Commissioner.

 

 

7.   Accountal of inputs in accordance with Standard Inputs-Output Norms (SION):-

 

 For clearance of scrap/waste/remnants arising out of production or in connection therewith in EOUs to DTA, it was prescribed that such clearance is to be according to the SION notified under the Duty Exemption Schemes. But there was no system for accounting of inputs/raw materials consumed in manufacture of export product. The inputs consumed in excess of SION could not be taken as duly accounted for and consequential action was to be initiated.

 

The EOU Notifications were amended vide Notifications No. 84/2007-Cus and No. 29/2007-C.E., both dated 06.07. 2007 and a system of accounting of inputs/raw material based on the SION was introduced. For the items which are not covered by SION it is provided that they can be used subject to generation of upto 2% waste, scrap or remnants of the input quantity.

 

Now, for accounting of inputs as per SION, suitable provisions have been incorporated under para 6.7 (e) of HBP and para 6.8 (e) of FTP has also been suitably amended. Amendments have also been brought in EOU Notifications have been suitably amended to bring a uniformity in approach of field formations.

 

Further amendments brought by Notifications No. 60/2008-Cus and No. 26/2008-C.E, both 05.05.2008 which provide that inputs imported or procured duty free are required to be accounted for in accordance with SION. 

For the items for which SION is not fixed, consumption of inputs shall be allowed subject to generation of waste, scrap and remnants upto 2% of input quantity.  

If any item in addition to those given in SION are required as input or where generation of waste is more than 2% of the input quantity, such items will be allowed to be consumed on the basis of self declared norms for a period of 3 months till the jurisdictional Development Commissioner fixes ad hoc norms subject to an undertaking by the unit that the self-declared/ ad hoc norms shall be adjusted in accordance with norms as finally fixed by the Norms Committee in DGFT for the unit.

Further, a provision has also been made to consider such cases by the Board of Approval for appropriate decision in case of difficulty in fixation of SION by the Norms Committee. The norms fixed by the Norms Committee shall be applicable to the specific unit.

 

8. Flexibility for DTA sale for the units manufacturing and exporting multiple products:-

           

Under the EOU Scheme, only 50% of the goods which are ‘similar’ to the goods exported or are expected to be exported at concessional rate of duties are allowed to be sold by a unit.The term ‘similar’ has been defined in Board Circular No. 7/2006-Cus, dated 13.01.06 as

 

goods which although not alike in all respects, have like characteristics and like component materials which enable them to perform the same functions and to be commercially interchangeable’.

 

But the problem arose for those units which were manufacturing and exporting multiple products. They could only sell 50% of the goods of a specific product.

Para 6.8 (a) of FTP has been amended to provide flexibility for units exporting multiple products. Now, they are allowed to DTA sale of a specific product upto 75% of the FOB value of export of a specific product within the overall total entitlement of 50% of total FOB value of exports which can be cleared at concessional rate of duties.

 

This has been explained by way of an example in the Circular.

 

 

 

9.   Payment of duty on DTA clearances on monthly basis:-

 

As per Rule 17 of the Central Excise Rules, 2002, EOUs are required to pay duty on consignment basis i.e. on the goods manufactured and cleared into DTA on consignment basis before each removal.

 

Now, the EOUs are given the facility to pay duty on goods removed into DTA on a monthly basis.

 

Accordingly, in Para 6.12 of FTP anew clause (h) is added to this effect. Rule 17 has also been suitably amended vide Notification No. 23/2003-C.E. (NT) dated 23.05.2008.

The units are to pay duty on goods removed into DTA on a monthly basis in the manner specified under Rule 8.

Verification and scrutiny of duty paid is to be done by the proper officers with the help of ER-2 filed by the units. The scrutinizing officer can ask for Documents and records for verification.

The manner of scrutiny of the returns has been prescribed in Boards Circular No. 818/15/2005-CX dated 15.07.2005. Rule 17 has been suitably amended to add these provisions.

 

Vide Notification No. 24/2008-C.E. (N.T.) dated 23.05.2008, Board has prescribed a new modified version of E.R.-2. This return is to be filed from June 2008 onwards in accordance with Rule 17(3).

Besides the details of clearance into DTA/export, a detailed account of duty free imported/indigenous inputs is also to be furnished. Detailed instructions for filing ER-2 have been given at the end of the E.R-2 return which should be carefully studied by the field officers. Also, the return is to be properly scrutinized to ensure that duty as due has been paid.

 

10. Anti dumping duty foregone to be paid by the units on DTA clearances:-

 

As per Section 9A (2A) of the Customs Tariff Act, 1975, anti dumping duty is not levied on EOUs.

But in case of DTA sales by EOUs, the purpose of non levy of anti dumping duty gets defeated.

Therefore, an amendment has been brought in Section 9A (2A) vide Section 77 of the Finance Act, 2008 enacted on 10.05.2008. Section 77 is reproduced hereunder:

 

“77. Amendment of Act 51 of 1975. - In the Customs Tariff Act, 1975 (hereinafter referred to as the Custom Tariff Act),-

(i)     in the section 9A, for sub-section (2A), the following sub-section shall be

substituted, namely:-

(2A)      Notwithstanding anything contained in sub-section (1) and sub-section (2), a notification issued under sub-section (1) or any anti-dumping duty imposed under sub-section (2), shall not apply to articles imported by a hundred per cent, export-oriented undertaking unless,-

(i)      specifically made applicable in such notifications or such impositions, as the case may be; or

(ii)      the article imported is either cleared as such into the domestic tariff area or used in the manufacture of any goods that are cleared into the domestic tariff area, and in such cases anti-dumping duty shall be levied on that portion of the article so cleared or so used as was leviable when it was imported into India.”

 

Thus, an amount equal to anti dumping duty foregone on the goods at the time of import shall also be paid on the equivalent quantity of goods used for manufacture of any goods which are cleared into DTA or on such quantity of goods which are cleared as such into DTA.

 

11.  New optional scheme of payment of excise duty only on DTA clearances for EOUs in textile/granite sector:-

 

 A unit manufacturing goods wholly out of indigenous raw materials is allowed to clear these goods into DTA on payment of excise duty only. But units in textile and granite section have to pay applicable customs duty as these units use very minimal imported inputs.

 

To remove these difficulties, a new optional scheme has been introduced under Para 6.8 (l) of FTP. Accordingly, Notification No. 23/2003-CE dated 31.03.2003 has been amended vide Notification No. 26/2008-C.E. dated 05.05.2008. A new entry has been made in Notification No. 23/2003-CE which provides option to the EOUs in the Textile and Granite sectors for payment of excise duty on DTA sale of goods manufactured by such units wholly from the indigenous raw material and also by use of duty paid imported inputs upto 3% of the FOB value of exports in the preceding financial year.

 

Once such option is exercised, the unit would not be allowed to use duty free imported inputs for any purpose.

Also, it is clarified in this Circular that the term ‘input’ used herein has wider scope than the term ‘raw material’ and will cover raw materials, intermediates, components, consumable, parts and packing materials.

 

12. Supply of goods from DTA under benefit of deemed exports are to be treated as imported goods:-

 

It has been decided that the goods supplied to EOU/STP/EHTP/BTP unit under claim of deemed export benefits are also to be treated as imported goods for the purpose of payment of duty on DTA sale.

 

Accordingly, Notification No. 23/2003-C.E. dated 31.03.2003 has been amended by Notification No. 29/2007-C.E. dated 06.07.2007. Now, the goods supplied to EOU/STP/EHTP/BTP unit from Domestic Tariff Area under claim of deemed export benefits are to be regarded as imported goods.

Consequently, the goods manufactured out of such imported goods by EOUs cannot be considered as goods manufactured wholly out of indigenous raw material to be eligible to avail benefits on clearances into DTA by payment of only central excise duty.

  

 

13. Supplies of accessories like tags, labels, printed bags, stickers, belts, buttons or hangers to DTA unit for export by EOUs:-  

 

Garment exporters have been facing difficulties in executing export orders as they do not manufacture accessories which are to be sent alongwith the supply of goods. The

EOUs have been allowed to supply tags, labels, printed bags, stickers, belts, buttons or hangers without payment of duty to a unit in DTA for use of these items in the manufacture or processing of goods which are to be ultimately exported.

However, since the accessories supplied by EOUs are ultimately exported and payment of goods along with these items have to be received in free foreign exchange, a new Para 6.9 (h) has been inserted in the FTP which provides that such supplies by EOUs are to be considered for fulfillment of positive NFE.

 

Accordingly, Notification No. 31/2007-C.E. (N.T.) dated 02.08.2007, implements these provisions and provides conditions, safeguards and procedures for supply of specified items produced or manufactured in an EOU without payment of duty to a unit in DTA for use in the manufacture or processing of goods which are exported and thereafter such supplies shall be counted towards fulfillment of positive NFE of EOU.

 

14. Goods procured on High Sea Sale basis in Indian rupee to be counted towards NFE obligation: -

 

Para 6.10.1 of HBP provides that all imported inputs and capital goods and value of all payments made in foreign exchange by way of commission, royalty, fees, dividends, interest on external borrowing/high seas sales are considered towards NFE obligation. A formula has been prescribed in the Para for calculation of the same.

 

But, the imported goods purchased on high seas sales basis for which payment has been made in Indian Rupees were not included towards NFE obligation.

 

Now, Para 6.10.1 of HBP has been amended to provide that such sales are to be considered towards fulfillment of NFE obligation. 

 

15. Setting up service unit under EOU/STP/EHTP/BTP scheme:-

 

 Para 6.9 (f) of FTP allowed supply of services (by service units) relating to exports paid for in free foreign exchange or for such services rendered in Indian Rupees which are otherwise considered as having been paid for in free foreign exchange by RBI.

 

But this provision was not implemented by the Department of Revenue. The Department of Revenue only permitted setting up an EOU for export of services out of India and for which payment is received in freely convertible foreign currency in view of Export of Services Rules, 2005.

 

Now, Para 6.9 (f) has been deleted. FTP has been aligned with the legal provisions governing Service Tax. Now, a service unit under EOU Scheme can be set up for the services which are produced in India for export out of India in terms of Export of Service Rules, 2005.

 

 

16. Exemption for the goods required for production of services within the unit :-

 

A unit under EOU Scheme is allowed to duty free import/procurement of goods specified in the Annexure-I to the EOU notifications. For import or procurement of unspecified goods, the units under EOU Scheme are required to get prior approval from the Board of Approval. Thus, a unit under EOU Scheme is allowed to import or procure unspecified goods also.

 However, there was no such provision which allowed importing or procuring of unspecified goods for production of services. Thus, the service units were in a disadvantageous position and the cost of export of services was also increased.

 

Now, the Department has allowed similar benefits to Service Units. Accordingly, EOU Notifications are amended vide Notification No. 47/2008-Cus and 24/2008-C.E. both dated 11.04.2008 to incorporate the above mentioned provisions.

 

 

17. Duty free re-import of goods by EOU/STP/EHTP/BTP unit from exhibition:-

 

Display of goods manufactured by EOUs in international exhibitions is allowed under Para 6.21 of FTP read with Para 6.23 of the HBP. At the time of re-import of such goods, duty was being charged from EOUs which caused hardships to them. Only gems & jewellery enabling unit were allowed duty free re-import of goods which were exported temporarily for display in exhibition.

 

Accordingly, Notification No. 52/2003-Cus dated 31.03.2003 has been amended vide Notification No. 84/2007-Cus dated 06.07.2007. A new entry at Serial No. 15A has been inserted in Annexure I which allows duty free re-import of  goods within 60 days of close of exhibition for which these goods were exported.

 

The procedure as mentioned under para 6.23 of HBP is to be followed while allowing export of goods for exhibition and identity of goods at the time of re-imports should be established with the goods exported through photographs. The procedure of re-warehousing is also to be followed.

 

 

18. Limit increased for duty free procurement and export of spares/components:-

 

The limit of allowing duty free procurement and export of spares/components has been increased from 1.5% to 5% of the FOB value of export of manufactured articles.

 

The restriction of supply of spares/ components within the warranty period of exported articles was creating problems as supplies had to be provided for after sales services even after the warranty period.

 

The condition of export within the warranty period has been waived. Now, a unit can procure spares and components upto 5% of FOB value of manufactured articles exported by the unit in the preceding year for the purpose of supply of such spares/components to the same consignor or buyer to whom manufactured articles were exported.

 

The export value of such spares and components cannot be considered for fulfillment of NFE. But the CIF value of imported spares/components is to be counted towards NFE obligation.

 

Accordingly, Para 6.2(h) of FTP has been amended. EOU Notifications have also been amended vide Notifications No. 47/2008-Cus and 24/2008-C.E., both dated 11.04.2008.

 

19. Direct supply of goods to buyer from sub-contractor abroad:-  

 

Under the EOU Notifications, for subcontracting abroad, permission from the Board of Approval was required. Also, this facility was available only for the processes which were not available in India. Another requirement was that the goods so processed abroad are to be returned to the unit before being exported. Fulfilling these requirements was time consuming and also increased the transaction cost for exports.

 

Therefore, Para 6.14 (b) (iv) of FTP has been amended to provide that the unit need not take permission from the Board of Approval for sub-contracting abroad if the processed goods are exported from the foreign location itself after job work provided the intermediate goods sent to subcontractor abroad are included in the Letter of permission by the Development Commissioner.

 

Accordingly, EOU Notifications have been amended vide Notifications No. 47/2008-Cus and 24/2008-C.E., both dated 11.04.2008. However, no change has been brought in the existing provision for subcontracting abroad when goods are not to be exported from sub contractor’s premises abroad and permission of Board of Approval is required in such cases.  

For following the new procedure, a unit is required to apply for permission to the jurisdictional Asstt./Dy. Commissioner of Customs/Central Excise.

This provision has been made applicable only for goods partially processed or manufactured or packaged therefrom in the unit. The goods imported or procured as such cannot be sent as it would be treated as trading of the goods.

The intermediate goods so removed to sub contractor abroad shall be allowed to be cleared under export documents. The value of such goods shall be assessed in terms of Section 14 of Customs Act, 1962 and the value shall be accepted on the basis of declaration of charges of job work abroad in the declaration forms, invoices and full repatriation of foreign exchange.

 

 

20. Sale and lease back of capital goods by EOU/EHTP/BTP/STP unit scheme:-  

 

Trade Associations have represented for allowance of sale and lease back of assets of a unit with a Non Banking Financial Company (NBFC) in the DTA.  It was proposed that this would involve sale of assets belonging to a unit to NBFC and then leasing the same back to the unit on operating lease basis. Also, the goods were to remain under the custody of the unit under bond at all times. There would be no physical movement of of the assets which would improve the financial viability of a unit.

 

Accordingly, this scheme has been incorporated in Para 6.4 (b) of FTP by amending the same. The conditions, safeguards and procedures which are required to be observed by the unit undertaking sale and lease back of assets are as follows:

v       The unit should obtain permission from the jurisdictional Dy/Asstt. Commissioner of Customs or Central Excise for entering into transaction of ‘Sale and Lease Back of Assets’ and submit full details of the goods to be sold and leased back and the details of NBFC;

v       The unit should be positive NFE at the time when it enters into sale and lease back transaction with NBFC;

v       the unit should undertake to pay duty on the goods in case of violation or contravention of any provision of the notification No. 52/2003-Cus  or 22/2003-CE read with the Customs Act, 1962 or the Central Excise Act, 1944 or the Finance Act, 1994 covering Service Tax, as the case may be;

v       the unit and NBFC should undertake jointly that the lien on the goods shall remain with the Customs/ Central Excise Department, which will have the first charge in order to enable recovery of sum due to Government under provision of Section 142 (b) of the Customs Act, 1962 read with the Customs (Attachment of Property of Defaulters for Recovery of Govt. Dues) Rules, 1995

 

 

21. Replacement of imported or indigenously procured goods:-

 

Para 6.17(c) of FTP provides for replacement of imported goods by foreign suppliers or by their authorized agents in India.

 

But no such procedure was prescribed by the Department of Revenue. There is no provision to supply goods duty free to the EOU/STP/EHTP/BTP unit by the authorized agents in India except from the bonded warehouse.

 

Now, Para 6.17(c) has been amended and it is now provided that the unit can procure duty paid replacement against the defective goods from the authorized agent in India and re-export/return or destroy the defective goods.

 

22. Time bound disposal of application for re-export of goods:-

 

The provision of seeking prior permission for re-export has been retained to avoid malpractices. However, the time limit for permission to be granted for re-export of rejected raw material/capital goods/consumables which is prescribed under the Board’s circular No. 02/2007-Cus dated 09.01.2007 has been decided to be reduced from two days to one day.

 

The time limit prescribed is to be strictly observed by the field formations and its adherence is to be monitored by the senior officers.

 

 

23. Change of location of an EOU/STP/EHTP/BTP unit:-

 

 As per Para 6.34 (7) of HBP, change in location of an EOU from a place mentioned in the letter of Permission to another or to include additional location can be considered only if the new location falls within the territorial jurisdiction of the original Development Commissioner/Designated officer.

Thus, a unit cannot change his location outside the territorial jurisdiction of the Development Commissioner/Designated officer who had originally given the Letter of Permission.

Now, Para 6.34A of HBP provides that the Board of Approval can consider the cases of change of location and/ or additional location of EOU outside the territorial jurisdiction of the original Development Commissioner/Designated officer.

 

 

24. Parameter for ‘unblemished track record’ to be observed for EOU/STP/EHTP/BTP unit:-

 

For adopting a uniform practice in determining whether a unit has an unblemished track record, parameters have been laid down under Para 6.12(f) (iii) of the FTP. These parameters are as following:-

v       The unit should have achieved NFE/ export obligation wherever applicable;

v       The unit should have not been issued a show cause notice or a demand confirmed, during the preceding 3 years, on grounds other than procedural violations, invoking penal provision and/or on account of fraud or collusion or any wilful mis-statement or suppression of facts or contravention of any of the provisions of the Customs Act,1962, the Central Excise Act, 1944, the Finance Act, 1994 covering Service Tax,  the Foreign Trade (Development & Regulation) Act, 1992, the Foreign Exchange Management Act,1999 or any allied Acts or the rules made thereunder.

The units having an unblemished track record is extended many facilities like waiver of Bank guarantee, permission for self bonding, issue of pre-authenticated procurement certificate/CT-3, etc.

 

 

GEMS & JEWELLERY EXPORT PROMOTION SCHEME

 

25. Replenishment Authorization for import of Consumables:-

 

Notification No. 41/99-Cus dated 28.04.1999 allows duty free import of specified consumables upto 1% of FOB value of plain or studded jewellery made of gold and platinum and of cut and polished diamonds and upto 2% of FOB value of jewellery made of silver against the replenishment authorization issued based on these goods exported during the preceding financial year.

 

However, a new category rhodium finished silver jewellery has been created to allow duty free import of specified consumables upto 3% of FOB value of rhodium finish  jewellery made of silver exported during the preceding financial year.

 

Accordingly, Notification No. 41/99-Cus has been amended by Notification No. 76/2007-Cus dated 06.06.2007. Now, the exporter is required to distinguish between export of silver jewellery and rhodium-finish silver jewellery to get additional 1% entitlement for replenishment authorization as compared to export of only silver jewellery.

 

 

26. Re-import of plain/studded precious metal Jewellery:-

 

Under the Board’ Circular No.07/2006-Cus dated 13.01.1996; re-import of rejected jewellery is allowed upto 2% of the FOB value of the exports in the preceding licensing year.

And under Notification No. 94/96-Cus dated 16.12.2006 these re-imports have been allowed subject to condition of reversal of benefits availed of while exporting these goods.

 

Para 4A.32.1 of HBP was enacted which allowed re-import of plain/studded precious metal jewellery against a bond for re-export. This provision was not implemented by DOR on account of risk to revenue.

 

Therefore, Para 4A.32.1 of HBP has been deleted. But now a difficulty arose in arriving at the export turnover in the preceding year for the purpose of allowing 2% rejected jewellery.

 

To remove this difficulty, Para 4A.32 of HBP has been amended and it is provided that the Chartered Accountant’s certificate will be accepted for export performance of preceding year.

 

 

27. Monitoring the foreign exchange realization/remittance in respect of export made out of the duty free gold/silver/platinum :-

 

The exporters of gold/ silver /platinum jewellery and articles thereof where submitting the EP copy of shipping bill as proof of export. To this, the Customs attested invoice and Bank certificate of export as in Appendix 22A showing that documents have been sent for negotiation/collection in terms of para 4A.8 of HBP.

Submission of Bank Certificate of Export was causing difficulties in monitoring the export realization for the exports. 

 

Now, Para 4A.8 of HBP has been amended and instead of furnishing the Bank Certificate of Export, the Bank certificate of realization in Appendix 22A is to be submitted for showing that documents have been sent for negotiation/collection.

 

Further, the Board Circular No. 24/98-Cus dated 20.04.2008, governs the scheme for import of gold, silver and platinum by the Nominated Agencies under various gold, silver and platinum jewellery export promotion scheme.

 

To ensure realization for export proceeds of jewellery or articles thereof made out of duty free gold, silver and platinum, the exporter is required to furnish the EP copy of the shipping bill and Bank certificate of realization in Appendix 22A to the nominated agencies as a proof of having exported the jewellery made from the duty free goods released to them within a period prescribed in the FTP.

Para (xii) of Circular No. 24/98-Cus dated 20.04.2008 is modified to the above extent.

 

28.  Time Period for re-import of unsold stock of branded Jewellery:-

 

Export of branded jewellery is permitted with the approval of Gem & Jewellery Export Promotion Council for display/sale in the permitted shops set up abroad or in the showroom of their distributors/agents. But the items not sold abroad within 180 days were required to be re-imported within 45 days.

 

Now, the time period for re-import of unsold stock of branded jewellery has been increased from 180 days to 365 days under para 4A.18 (a) (iii) of HBP.

 

This has been done in view of the period of one year for re-import under Notification 94/96-Cus dated 16.12.1996.

 

29.  Export on consignment basis:-

 

Export and re-import of diamonds and jewellery is allowed on consignment basis under Para 4A.23 of FTP. Departmental instructions vide Letter No. DGEP/G&J/428/2007 dated 02.07.2007 were issued to all Chief Commissioner of Customs and Central Excise for implementation of the provisions of Para 4A.23 of FTP.

 

But there was no such provision for export and re-import of gemstones.

 

Now, after amendment of Para 4A.23 of FTP and Para 4A.35 of HBP, the said provisions are now extended to export and re-import of gemstones.

 

 

30. Export and re-import of cut and polished diamonds for certification and grading:-

 

Notification No. 55/2001-Cus dated 16.05.2001 governed the export and re-import of cut and polished diamonds for certification and grading.

Now, there is no duty on rough or non-industrial diamonds.

 

Therefore, Notification No. 55/2001-Cus dated 16.05.2001has been rescinded vide Notification No. 59/2008-Customs dated 05.05.2008 and the control on export and re-import for certification and grading of cut and polished diamonds under this notification  has been dispensed.

 

Moreover, Para 4A.2 and 4A.2.1 of FTP which governed this scheme have been deleted.

 

 

31. Export by Post:-

 

Para 4A.17 of FTP has been amended and the value limit for  exports of jewellery parcels through Foreign Post Office (including via Speed Post) has been increased to $ 75,000 from $ 50,000 but without any change in the weight of 20 Kgs.

 

This has been done in view of the increasing prices of gold.

 

 

 

 

 

 

Department News


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PRADEEP JAIN, F.C.A.

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