Revised norms for execution of Bond and Bank Guarantee under Advance Licence and EPCG Schemes - reg. - Customs - 77/2003

OFFICE OF THE CHIEF COMMISSIONER OF CUSTOMS, (EXPORT PROMOTION) EPCG SECTION NEW CUSTOM HOUSE, BALLARD ESTATE, MUMBAI 400001 F. No. S/26-EPCG-05/03 Date : 16.07.2003 PUBLIC NOTICE NO. 77/2003 Sub: Revised norms for execution of Bond and Bank Guarantee under Advance Licence and EPCG Schemes - reg. DGRI has recently reported a serious fraud committed under Advance Licence Scheme by Importers of POY/PFY fabrics etc. of Mumbai and Gujarat areas. Such unscrupulous importers not only obtained Advance Licences from DGFT authorities, in order to avail BG exemption, they also submitted forged/false CA certificates which were issued by the CAs without verification. As a result it has become necessary to re-examine the facility of BG concession/exemption extended under earlier DOR Circular Nos. 45/96 - Cus dated 28.08.96 and 71/98-Cus dated 15.9.98 and incorporate additional safeguards. Whereas 45/96 grants BG concession/exemption under Advance Licence and EPCG Schemes to status holders and others 71/98 grants exemption from BG to manufacture exporters under Advance Licence and EPCG Scheme. 2. The issue has been re-examined in DOR and the following revised norms are issued for the purpose of availing exemption from BG under Advance Licence and EPCG Schemes in amendment of earlier DOR Circular Nos. 45/96-Cus dated 28.8.96 and 71/98-Cus dated 15.9.98. 3.1 Bond/BG under Advance Licence and EPCG Schemes shall be furnished in the format annexed to DOR Circular No. 71/98-Cus dated 15.9.98 as hitherto. The bonds shall cover duty ordinarily leviable on the goods but for the exemption. Surety for the bond shall be in the form of bank guarantee or cash security. Guarantee from a financial institution like IDBI, ICICI, UTI, etc. may also be accepted in lieu of Bank Guarantee. Bonds/BGs shall be taken as per the following norms for the purpose of permitting clearance of import goods under Advance Licence/EPCG Schemes. Category of Importer Quantum of Bank Guarantee a) Super Star Trading House, Star Trading House, Trading House, Export House and Public Sector Undertakings. Nil b) Service Providers who are recognized as status holder by the appropriate authority. Nil c) Manufacture exporters registered with Central Excise who have been exporting during the previous two financial years and have minimum export of ₹ 1 crore or more during the preceding financial year. Nil d) Manufacturer exporters registered with Central Excise, who have paid Central Excise duty of ₹ 1 Crore or more during the preceding financial year. Nil e) Others 100% 3.5 BG exemption as specified in Para 3.1 above shall be admissible subject to the following conditions. a) The licence holder has not defaulted on the export obligation in respect of any advance licence/EPCG licence issued to him in the past. The BG exemption shall stand withdrawn if DGFT or Customs comes across default in export obligation against any Advance Licence/EPCG Licence issued. b) For the purpose of availing BG exemption in terms of Para 3.1 above the manufacturer exporter shall submit the export performance certificate (as specified in Para 3.1 (c) issued by jurisdictional Superintendent of Central Excise where his factory is located. In respect of new manufacturer export who have paid central excise duty of ₹ 1 crore or more during the preceding financial year also (vide Para 3.1 (d) the relevant certificate shall be issued by jurisdictional Superintendent of Central Excise where the factory is located. c) The Licence holder should not have been penalized under the Provisions of Customs Act, Central Excise Act, Foreign Exchange Maintenance Act (FEMA) or Foreign Trade (Development and Regulations) Act during previous two financial years. d) In case of the person standing, as surety to the Bond, Bank shall certify that he is solvent. 3.3 In individual cases where DGFT authority/EPCG Committee/ALC/jurisdictional Commissioner of Customs is satisfied that a higher quantum of bank guarantee is justified on account of risk to revenue 100% BG may be taken by Customs after recording the reasons therefore in file. 3.4 Where an importer so requests, a BG may be taken consignment - wise subject to the condition that such consignment wise BG shall only be acceptable by Customs at the port of registration of the licence. 3.5 Bond/BG shall be filed for a minimum period of 3 years with an undertaking to keep the BG alive for the entire period of export obligation viz, 8+1 = 9 years or 12+1 =13 years etc. Under EPCG Scheme as the case may be 3.6 Custom House shall properly maintain Bond/BG registers and ensure that wherever the bank guarantees are not renewed in time recovery action is initiated by enforcement of the bank guarantee within time. Customs shall also ensure that, wherever required, bank guarantees are renewed well in time. 3.7 In the case of subsidiary company of a parent company of a recognized status, the facility of filing joint bond (both by the parent company as well as the subsidiary company holding the licence) alongwith BG/Cash security/any other guarantee from financial institutions like IDBI, ICICI, UTI, etc. shall also be available. The facility, however, shall be subject to the following conditions :- i) The parent company shall necessarily have more than 50% share holding in the subsidiary company. ii) The bond shall be jointly signed by the parent company as well as the subsidiary company and shall be executed alongwith BG/Cash security/or guarantee from financial institutions like IDBI, ICICI, UTI etc. wherever applicable in terms of criteria laid down. The guarantee shall be in relation to terms and conditions of the Joint Bond. iii) The parent company shall stand surety for the subsidiary company that in the event subsidiary company fails to fulfil the export obligation and defaults on payment of customs duty and interest, the parent company shall make good the Government revenue and the interest. In other words the parent company will be severally and jointly liable for the action in terms of the Bond/BG jointly executed by them. iv) This facility shall be extended only to those companies which have proven track record and reputation. 3.5 BG exemption specified in para 3.1 above shall also, be available in respect of past licence where licence holder had earlier filed BG but as on data he is entitled for BG exemption. 4. It shall be the responsibility of the jurisdictional Superintendent of Central Excise that while issuing Certificate about export performance in terms of Para 3.1 (c) or about the fact of payment of Central Excise duty for the purpose of para 3.1 (d) he satisfies himself about the genuiness of the declaration being given by the licence holder. Sd/- (SHISHIR KUMAR) COMMISSIONER OF CUSTOMS (EP) EPCG SECTION MUMBAI