Admissibility of DEPB credit and Market verification for ascertaining the present market value under DEPB Scheme -reg - Customs - 077/02

Circular No.77/ 2002-Cus 27th November, 2002 F.No.605/38/2002-DBK Government of India Ministry of Finance Company Affairs Department of Revenue Sub: Admissibility of DEPB credit and Market verification for ascertaining the present market value under DEPB Scheme -reg. Attention is invited to Board's Circulars No.26/2001-Cus dated 24.4.2001, 56/2002-Cus dated 9.9.2002 and 63/2002-Cus dated 27.9.2002. These circulars were issued in the wake of various cases of over-valuation under the DEPB scheme reported by the DRI and field formations. It was brought to the notice of the Board that many unscrupulous exporters had been deliberately resorting to the artificial inflation of the FOB values of their exports to avail unintended DEPB benefits. In order to curb such practice, Government through these circulars laid down that wherever, the declared f.o.b. value is more than the present market value (PMV) as declared by the exporter or as ascertained by the Customs authorities, the present market value shall be the basis for granting DEPB credit. 2. Trade have represented at various fora that the above instructions have led to harassment in the field formations with consequent adverse impact on the exports. It has been represented that each and every export consignment is being subjected to market verification, which results in delay in meeting the export commitments. Further, it has also been stated that in all those cases where the PMV declared is less than the FOB value, the DEPB benefit is being allowed only on the PMV. It has been argued by the export promotion bodies that high value added products are bound to have FOB values higher than the PMV and therefore, the principle of granting DEPB credit on the PMV in every case is not correct. 3. The issue has been examined in consultation with the Directorate General of Foreign Trade. It has been decided in modification of the instructions contained in the above referred circulars that as a general rule, FOB value of the exports shall remain the basis for extending the DEPB credit since FOB value is recognised as the basis of export transactions both in the EXIM Policy as well as in the Customs Act, 1962. 4. However, in cases of specific intelligence that the FOB declared is inflated or there is evidence confirming such over-valuation, the field formations should resort to market verification to ascertain the correct market price of the goods. In addition to above, market verification can also be initiated on receipt of intelligence or where the intelligence is gathered in respect of consignments entered for export to sensitive destinations and/or where the goods are sub-standard and it appears that the acceptance of the declared value would result in accrual of substantial unintended DEPB benefits. But all such cases should be taken up for investigation only with the express written approval of the Commissioner of Customs. 5. In those cases where it is conclusively proved through the investigations that the FOB value had been artificially inflated/ manipulated by the exporter to avail of unintended higher DEPB benefits, the DEPB credit entitlement shall be worked out only on the PMV and not FOB value. 6. This should be ensured that the market verifications are not resorted to in a routine manner and should be undertaken only on the basis of intelligence and concrete evidence. Administrative authorities should also ensure that market verifications are expeditiously concluded and no harassment is caused to the trade nor are any exports held up. 7. Suitable public notices for information of the trade and standing orders for guidance of the staff may kindly be issued accordingly. 8. The receipt of this Circular may kindly be acknowledged.