Monitoring of Bonds and Bank Guarantees - Instructions thereof - Customs - F. No. 483/32/90-Cus.-VII

Monitoring of Bonds and Bank Guarantees - Instructions thereof F. No. 483/32/90-Cus.-VII Dated 2-7-1991 Government of India Ministry of Finance (Department of Revenue) Central Board of Excise Customs, New Delhi Subject : Monitoring of Bonds and Bank Guarantees - Instructions thereof - Regarding. You will recall that the Public Accounts Committee in its 92nd Report (8th Lok Sabha) had found certain glaring shortcomings as well as system/human failures in the acceptance and monitoring of bonds and bank guarantees executed by importers. The Committee had, therefore, recommended that the circumstances under which the bonds were accepted by the Department without proper verification of the genuineness of the importer should be thoroughly investigated and responsibility be fixed for lapses. Steps should also be taken to obviate recurrence of such lapses in future. Accordingly the Director General of Inspection, Customs and Central Excise had been asked to undertake a detailed study of the form in which bank guarantees should be accepted with a view to adopting uniform conditions for acceptance of bank guarantees. 2. In this connection, attention is invited to the instructions contained in Board's letter F. No. 7/10/58-CUS-VII dated 1-8-1960 under which the Board have issued detailed instructions for monitoring of bonds and guarantees. These instructions are reproduced in Chapter 2 (Part-VI) of Volume II of the Central Appraising Manual. The DGI while undertaking the study has observed that the existing instructions on the maintenance and acceptance of bonds are being followed strictly by some Custom Houses whereas they are not being followed by others. The area of failure in following the laid-down procedure and reasons thereof are given below :- (i) In accordance with the Manual instructions bonds are being executed on stamp paper of Rs. 50 and the guarantees on a stamp paper of Rs. 10. In some cases it is noticed that names and sureties (Designation etc.) are not properly incorporated in the Bonds. There are two signatures of witnesses on the bonds but at times the status of such persons is it not ascertainable and particulars of such witnesses standing for the bonds are missing. In fact, all bonds and guarantees presented in the Appraising Department, must be signed by the party, in presence of an Appraiser of Gazetted Officer. In majority of the cases such an instruction is being ignored. Possibility of forging the documents therefore cannot be ruled out. In case of Bank Guarantees the Custom House should verify the signatures of Bank Officers on percentage basis with a view to ascertain the genuiness of the guarantee. (ii) As per the instructions the Departmental officer who is accepting the bond is supposed to verify the authenticity of the bonds by verifying partnership deed etc. Instances have come to light wherein it is noticed that in many cases the department was accepting bonds and guarantees in a casual manner and the manual instructions were flouted with the result it was difficult to enforce the bonds on the expiry of their validity period when it was seen that either the firms were not in existence or the signatures on the bonds were not genuine. (iii) As per the instructions the provisional duty register should be maintained in a prescribed form i.e. CBR. CUS. No. 321. While after the acceptance of the bonds by the Asstt. Collector the particulars are indicated in the receipt register, it has been invariably observed that most of the Appraising Departments were not maintain A.D. bonds register in the prescribed form. The register maintained, contains minimum columns, as a result of which full information cannot be obtained from such incomplete registers. It has also been observed that no uniformity is maintained in various Appraising Groups. (iv) The original copy of the bond is supposed to be kept in safe custody with the cash department and on the strength of duplicate bond copy, the finalisation of the Bond case file has to be initiated in the Appraising Group. Contrary to such instructions it was observed that almost all original bound were being kept in the case file itself. If the bond while is misplaced/ lost the original documents are out of reach of the Custom House. (v) In the follow-up action the P.D. Bond registers are not being put up to Asstt. Collector Incharge, by the Appraising Groups, from time to time, as required under the instructions. It is suggested that a 'Forward Diary' should be maintained by each bond and guarantee clerk, in the Custom House wherein file number in which action is required to be taken on a particular date, should be noted by him. This will ensure timely action on the part of the Custom House in each and every case. Timely action can be taken in a case, as soon as it becomes ripe for initiating action and/or action is required to be taken against the bonder who has failed to fulfil the terms and conditions of the Bond/Guarantee. This 'Forward Dairy' should be seen periodically by the Supervisory Officers to ensure that action is being taken in all such cases. It is also seen that due to non-maintenance of 'Forward Diary' appraising groups have lost sight of the no. of bonds accepted during the preceding years. The 'Forward Diary' should have ten columns :- (1) S. No. (2) Name of the firm executing bonds or guarantees. (3) Name of the surety (4) File No. (5) Nature of obligation (6) Date by which obligation under the guarantees bond is to be discharged by executor. (7) Time limit upto which the liability of the surety continue. (8) Signature of the Asstt. Collector accepting Bond/Guarantees. (9) Date when the Bond Guarantees cancelled. (10) Remarks. The Assistant Collector Incharge should not accept Bond/Guarantees, unless the entries in the register, as above, are made by the clerk concerned. (vi) Instances have come to light where after cancelling the bond parties are not intimated accordingly and the original bonds remain in the case file itself. Here the parties must be informed that the bond stands cancelled by the Department and if the Bond is supported by the Bank Guarantee/surety copy of the cancellation order should be endorsed to the concerned Bank. All Bonds/Guarantees should be reviewed by the Deputy Office Supdt. or Supervisory Officers concerned at least once in a month in advance of the expiry period and if the conditions of the Bond/Guarantee have not been fulfilled, action should be taken to recover the amount from the bonder. In the case of ITC Bonds, such bonds are accepted in lieu of licence for the purpose of clearance of the goods. But after acceptance it is generally noticed that the Department is not taking proper review of these bonds. If the importer fails to produce proper licence within prescribed date, the case should be taken up for adjudication immediately. (vii) Instances have also come to notice where a number of bonds are cancelled on the strength of photo copies of Bill of Entry on the pretext that original Bill of Entry is not traceable in the Department. It is also noticed that the Bills of Entry are not being finally assessed but bonds are being cancelled. It appears that appraising groups are not provided with manual instructions and the question of following these instructions in respect of maintenance of records etc. perhaps becomes difficult. 3. In view of the areas of failures mentioned above and in order to safeguard revenue and ensure quick disposal of pendency and effective monitoring of the bonds and bank guarantees, the following instructions are being circulated, which may be strictly followed :- (a) 'Forward Diary' registers should be maintained in each appraising group as per the manual instructions. (b) The bond registers may be maintained in prescribed from (CBR CDS 321) and the relevant details in the respective columns may be indicated therein. (c) The bond should be accepted strictly as per the instructions laid down in the manual i.e. the bonder should sign the bond in presence of appraiser. The Custom House should make all out efforts to ascertain the authenticity of the bonder by way of verifying partnership deed etc. Further, the status of the witnesses should also be verified at the time of accepting of the bond. (d) The Custom House should satisfy themselves regarding genuineness of the bank guarantees. In case where huge amount is involved, the Custom House can cross-check the same with the concerned banks. (e) As per the instructions laid down in the manual, auditing of the documents pertaining to acceptance/discharge of bonds and guarantees may be done. (f) In master register standard/concessional rate of duty prevailing at the time of accepting the bond may be indicated so that at the time of executing the bond conditions, the Department may not face any difficulty in arriving at bond value. (g) In a master registers the amount in which the bond is executed may also be invariably indicated and monthly abstract for the pendency may be drawn so that every month the department knows about the exact pendency of the bonds with amount involved therein. (h) Before cancelling the bonds, the assessments should be finalised and audited. (i) Finalisation of the assessment should be avoided on photo copies of the bill of entry furnished by importer/exporters. (j) Custom House can have a common bond cell (for accepting and discharging bonds) so that a particular set of officers can work with uniformity and disputes arising out of legal/technical points could be taken care of, if any. (k) Conditions of the bonds should be enforced immediately after the expiry of the prescribed time limit. (l) Custom House Agents should also be made responsible for not complying with the condition of bond. (m) Since computerisation has been introduced in the Custom House this item of work can also be computerised so that discharging of bond liabilities becomes effective. (n) The original bond should be kept under safe custody in the cash department as prescribed in the manual instructions. (o) All bonds and bank guarantees executed in pursuance of the Courts Order must be accepted in the format circulated with letter F. No.483/8/89-Cus.-VII, dated 15-1-1989 and F.No. 483/ 16/89-Cus.-VII respectively.