Export under Claim for rebate of duty on excisable materials used in the manufacture of export goods [Rule 12(1)(b)] procedure regarding - Central Excise - 129/40/95-CX

Export under Claim for rebate of duty on excisable materials used in the manufacture of export goods [Rule 12(1)(b)] procedure regarding Circular No. 129/40/95-CX Dated 29-5-1995 [From F. No. 209/18/93-CX.6 (PT)] Government of India Ministry of Finance (Department of Revenue) New Delhi Subject : Export under Claim for rebate of duty on excisable materials used in the manufacture of export goods [Rule 12(1)(b)] procedure regarding. 1.1 Attention of the Collectors is invited to Board's Telex No. 209/18/93, dated 26-09-1994 27-09-1994 communicating the issue of fresh rules and notifications relating to exports. 1.2 The new Central Excise Rule No. 12(1)(b) has been framed to grant rebate of CE duty paid on raw materials/inputs used in the manufacture of the finished goods exported from India. The new Rule 12(1)(b) thus incorporates in it the erstwhile Rules 12(A) and 191A of the Central Excise Rules, 1944. A fresh Notification No. 42/94-C.E. (N.T), dated 22-9-1994 issued under the new rule permits grant of rebate of duty paid on any excisable materials used in the manufacture and packing of the goods exported. The notification details the conditions for claiming such rebate of duty. Benefit of Notification No. 42/94-C.E. (N.T.) is not available for exports to Nepal or Bhutan and such exports are governed by separate instructions. 2.1 The salient features of the new rules and the notification issued thereunder are briefly summarised below :- 2.2 The benefit of input stage rebate under Rule 12(1)(b) can be claimed on export of all finished goods whether excisable or not. But by Notification No. 42/94 the facility has been extended only to goods appearing under the Schedule to the Central Excise Tariff Act, 1985. It is not necessary that the eligible finished goods to be exported are chargeable to Central Excise duty. Consequently the benefit under Rule 12(1)(b) can be claimed even by a unit exempted from registration under Rule 174 of Central Excise Rules, 1944 in view of production of goods exempted from payment of Central Excise Duty. 2.3 Benefit of input stage rebate can be claimed by a manufacture of finished goods only when the export is in his own name. Benefit of the input stage rebate shall not be extended where exports are through merchant exporter. In short manufacturers working under this scheme are not permitted to export their goods through third parties. 2.4 The definition of 'materials' has been made wider. The benefit is now available for excise duties paid on raw materials, consumables, components, semi-finished goods, assemblies, sub-assemblies, intermediate goods, accessories, parts and packing materials required for manufacture of export goods. Sources of Energy such as high speed diesel, furnace oil etc. shall not be regarded as consumables and consequentially benefit of Rule 12(1)(b) shall not be available on Source of Energy. Similarly, the rebate of Central Excise duty paid on equipment and machinery items in the nature of capital goods used in relation to manufacture of finished goods being shall not be allowed under Rule 12(l)(b). 2.5 The definition of "manufacture" for the purpose of grant of input stage rebate has also been made liberal and now includes process of blending, alterations, or any other operations thereon. 2.6 Form AR5 modified; The erstwhile AR 5 was prescribed under the old Rule 191A. Since rule 191A has been rescinded, the old proforma of AR 5 has been continued on an adhoc basis. However a revised proforma of AR 5 is enclosed which may be notified by the Collectors of Central Excise through Trade Notice and the new proforma of AR 5 may be brought into effect in all field formations positively from 1-6-1995. Under this scheme, there is no need to use AR4 forms at all and the modified format of AR 5 would take care of all the requirements whether the finished products are dutiable or not. 2.7 The benefit of input stage rebate cannot be claimed in any of the following situations : - where the finished goods are exported under Claim for Duty Drawback - where the finished goods are exported in discharge of export obligation under a Value Based Advance Licence or a Quantity Based Advance Licence issued before 31-3-1995. - where facility of input stage credit is availed under Modvat provisions under Chapter VAA Central Excise Rules, 1944. 3.1 The following consolidated instructions are issued with regard to grant of rebate of Central Excise Duty paid on inputs used in the goods exported to countries other than Nepal and Bhutan. The earlier instructions on the subject which are inconsistent with these instructions, the new rules, and the notifications issued thereunder may be treated as withdrawn. Declaration Permission 4.1 The manufacturer of finished goods intending to export such goods, under claim for rebate of Central Excise Duty on materials/inputs shall file a declaration (in quintuplicate) to the Collector of Central Excise having jurisdiction over the factory where finished goods for export are manufactured. The declaration shall contain details of finished goods to be exported, the details of materials required and their consumption ratios. 4.2 Proforma of declaration to be filed in terms of Notification 42/94-C.E. (N.T.) is enclosed (Annexure I). Dated acknowldgment or postal receipt of despatch by registered post shall be adequate proof of submission of the declaration. 4.3 The declaration should be filed complete in all respects by the manufacturer intending to avail the facility of input stage rebate. A neat flow diagram alongwith the write up of manufacturing process may be enclosed. Where there are more than one export product, separate statement of the consumption ratios may be finished for each export product. 4.4 The premises in which goods are manufactured for exports under Rule 12(1)(b) should be clearly demarcated in the ground plan. The manufacturing area shall also be segregated. 4.5 Statement of consumption ratio is the most important information and should be carefully filled for each export product. Estimated monthly quantum of exports may be indicated at appropriate place. The details of materials may be furnished in descending order of importance indicating important materials (from duty incidence view point) first. Materials which contribute negligible amount to rebate may not be shown at the discretion of the exporter. The consumptions should be net of recycled materials. 4.6 The Collector of Central Excise may nominate suitable officer for verifying the declaration or direct Divisional Officer for arranging the verification. For this purpose, four copies may be sent to verifying officer and Collector's office may retain one copy for future reference. 4.7 The verifying officer shall carefully examine the data furnished in the declaration with special reference to consumption of materials and the wastages. Where manufacturing activity had been going on for the past many years, yearly consumption ratios may be used as guideline. The claim for rebate under Rule 12(1)(b) is available for all duty paid excisable inputs used. The input output norms notified under the Export Import Policy may be referred for guidance. However, it may be noted that the norms in the Export Import Policy may not include all materials and claim under Rule 12(1)(b) should not be denied merely on the grounds that a particular material does not appear under the norms in the Policy. Special care should be paid to materials which are recycled. Some solvents used in the Chemical Industry are recycled. Similarly many plastic wastages and non ferrous metals are recycled. Care should be taken that consumption of materials is net of such recycled materials. Where recoverable wastages are generated but not recycled but sold on account of its unsuitability, the same should be clearly reflected in the declaration. 4.8 The Central Excise Officer after carrying out the verification of the declaration shall append the necessary certificates/endorsements at appropriate places in the Declaration and sent three copies to the Collector of Central Excise, retaining one copy for his records. 4.9 (1) Based on the verification carried out by the Central Excise Officer, or otherwise, where the Collector of Central Excise is satisfied that the consumption norms claimed are reasonable and that the applicant has proper facility for carrying out the manufacture of goods for exports, the Collector may grant permission to the applicant for manufacture and export of finished goods under claim for rebate of Central Excise duties paid on materials used in the manufacture of finished goods exported. The letter of permission shall clearly indicate the conditions subject to which benefit under Rule 12(1)(b) of Central Excise Rules, 1944 shall be available. A proforma in which such permission may be granted is enclosed (Annexure II). A copy of the permission with verified declaration shall also be sent to the Assistant Collector of Central Excise and the Superintendent of Central Excise. 4.9 (2) If for any reason the Collector of Central Excise could not satisfy himself with reference to the correctness of the consumption norms claimed by the applicant and the product is being manufactured for the first time in his jurisdiction, the Collector may permit the manufacturing operations and the verification of the consumption norms should be completed while the process of manufacture is on. The verification should be completed before allowing the export of the goods as the manufacturer working under this Scheme is expected to declare the raw materials consumed in the AR5 for making their claims for rebate. In such circumstances, the Superintendent of Central Excise would complete the verification as quickly as possible and the Collector can indicate the consumption norms as amendment to the permission already given. In some cases, where the manufacturer has to fulfil certain export commitments in view of letters of credit to be honoured, the Assistant Collector can permit the manufacturers to export the goods if the Superintendent had already conducted the verification and submitted the report but is pending approval by the Collector of Central Excise. In such cases in the AR 5 Form against the declaration of the party, the Superintendents supervising the clearance shall clearly indicate that the consumption norms have been verified but not yet approved by the Collector. This would enable the Assistant Collector sanctioning the rebate to take note of this fact. 4.10 The permission granted by the Collector of Central Excise can be withdrawn at any time if it comes to the notice of the Collector that the information furnished by the applicant is incorrect or where it comes to the notice of the Collector that the applicant is not maintaining the records required under the Trade Notice issued in this regard or where it comes to the notice of the Collector that the premises where goods for export are manufactured is not properly segregated. 4.11 Any change in the consumption ratio should be promptly intimated by the manufacturer to the Collector of Central Excise, Assistant Collector of Central Excise and the jurisdictional Range Superintendent giving reference of the permission granted by the Collector of Central Excise. Collector of Central Excise may order fresh verification if the revised consumption ratios are higher (say 5% or more) than the ratio already verified and approved. However, Collector of Central Excise may use their discretion in this regard. Procurement of Materials and Record Maintenance 5.1 The excisable materials required for export production should be procured directly from the factory where such goods are manufactured or from dealers registered under Rule 174 of Central Excise Rules. The excisable materials and packing should be obtained in the original packed condition. The invoice should be in the name of the manufacturer of export goods. Accounts Returns 5.2 The manufacturer shall maintain register of duty paid materials brought to the factory for manufacture of finished goods for export under claim for input stage rebate under Rule 12(1)(b) in the proforma of RG 26. The account for finished goods manufactured and exported may be maintained in the proforma of RG 27. The manufacturer shall also file a quarterly return in form RT 14, of materials received and finished goods cleared. 5.3 Any officer duly empowered by the Assistant Collector in this behalf shall have access at all reasonable times to any premises indicated in the application and to any place where goods for export are processed or stored. The applicant shall also permit the officer of Central Excise access to any records relating to the production, storage and export of goods. Removal for Export 6.1 The AR 5 application in sixtuplicate should be submitted by the manufacturer to the Supdt. of CE having jurisdiction over the factory atleast 24 hours before the intended removal of the goods for export from the factory under claim for rebate of Central Excise Duty paid on materials and packing used in the manufacture of export goods. 6.2 Where export goods are dutiable the manufacturer may avail the facility of export, without payment of Central Excise duty on finished goods, under Central Excise Bond [Rule 13(1)(a)]. Alternatively finished goods may also be exported, after payment of Central Excise duty leviable on finished goods under claim of rebate [Rule 12(1)(a)]. For this purpose manufacturer shall indicate the particulars clearly in AR 5. For export clearances under AR 5, instructions already issued for export clearances under Rule 12(1)(a) and Rule 13(1)(a) may be followed subject to modifications indicated below. 6.3 The new proforma of AR 5 incorporates the requirements of Export clearances under Rule 12(l)(a)/13/(l)(a). Therefore where export goods are dutiable, no separate AR 4 is required and manufacturer needs to the fill up only AR 5. However the facility of clearances of finished dutiable goods for export under claim for rebate or against bond with Maritime Collector shall not be available in such cases and manufacturer shall have to approach Jurisdictional Assistant Collector of Central Excise for claiming rebate/discharge of bond. 6.4 The goods cleared under AR 5 will be moved directly from the place of manufacture to the place: of export. 6.5 The packages in which the goods are to be exported should be legibly marked in ink or oil colour or in such other durable manner with progressive number commencing with number 1 for each calendar year and with the manufacturer's name. 6.6 Every AR 5 shall be numbered in a running serial of the factory starting with for each financial year. 6.7 The Superintendent of Central Excise shall himself verify the information contained in AR 5. For this purpose he shall refer to the verified declaration (of para 4.1 above) received from the Collector of Central Excise along with permission granted by the Collector. The export consignment shall be carefully examined vis-a-vis the description of the goods, their value and other particulars/declarations on the AR 5. The Supdt. of CE shall verify the facts, certificate and declaration made by the manufacturer. The value declared on the AR 5 should be as per Section 4 of the Central Excises and Salt Act, 1944. After the Supdt. of Central Excise is satisfied that the information contained in the AR 5 is true and after verifying that necessary bond [where goods are being exported under bond in terms of Rule 13(1)(a)] has been executed by the manufacturer, he would allow the clearances for exports and also sign on the AR 5 at appropriate places and put his stamp with his name and designation below his signature. 6.8 The Superintendent of Central Excise examining the consignment shall draw representative samples (wherever feasible) in triplicate. He would handover two samples duly sealed to the manufacturer or his authorised agent for delivering to the Customs Officer at the point of export. He would retain the third set for his records. The export consignment shall be sealed by the Superintendent of Central Excise before permitting clearances. 6.9 The facility of export without presence of the Central Excise officer shall not be available for exports under Rule 12(1)(b). 6.10 Where the consumption data furnished in Table 2 of the AR 5 is exhaustive and the Superintendent of Central Excise is not in a position to verify the same immediately, the export consignment should not be held up. The goods should be allowed to be cleared after certifying the original, duplicate and sixtuplicate copies of the AR 5 and after verifying the remaining aspects. A separate detailed verification report may be submitted by the Supdt. of Central Excise to the Assistant Collector of Central Excise within a fortnight on the Triplicate, Quardruplicate and quintuplicate copies of AR 5. 6.11 The colour coding and disposal of the AR 5 will be as follows :- (i) — White   Original To the exporter for presentation at point of export. (ii) — Buff   Duplicate -do-       (iii) — Pink   Triplicate To rebate sanctioning authority i.e. Asstt. Collr. (iv) — Green Quadruplicate CAO (v) — Blue Quintuplicate Office record (vi) — Yellow  Sixtuplicate DEEC Copy Disposal of AR 5 in the Custom House : 7.1 The original, duplicate and sixtuplicate copies of the AR 5 shall be presented by the exporter/his authorised agent to the Customs Officer at the point of export along with the goods, Shipping Bill/Bill of export and samples sealed by the Central Excise Officer. The export consignment shall be checked by the Customs Officer to see whether the seals are intact and the marks and number tally and, if found in order, he may allow exports after ensuring that the No. of the AR 5 has been indicated in the Shipping Bill or the Bill of Export, as the case may be. However, Custom Houses may wherever they desire on grounds of sufficient reasons examine the export cargo for conducting any check in terms of the Customs Law and Procedure. The samples shall be dealt with in accordance with instructions/standing orders of the Collector of Customs or the Central Board of Excise and Customs. After the goods have been shipped the proper officer of Customs would make necessary endorsements in the Original, Duplicate and Sixtuplicate copies of the AR 5 at appropriate places and put his stamp with his name and designation below his signature, the copies of AR 5 shall be disposed off by him in the following manner :- Original and :Sixtuplicate Both to be handed over to the Exporter. Original shall be used by the exporter for claiming rebate from the Assistant Collector of Central Excise having jurisdiction over the factory. Sixtuplicate copy shall be used for DEEC endorsement. This copy shall be presented by the exporter for endorsement of exports in the DEEC. At that stage the same shall be retained in the DEEC Cell of the Customs House for its record. :Duplicate To be sent to the Assistant Collector of Central Excise (may also be handed over to the exporter under a sealed cover for delivering to the Assistant Collector of Central Excise). 7.2 Where goods being exported are made from materials bearing high Central Excise Duty such as polyester filament fabrics/knitwears made from polyester filament yarn, the goods must be examined at the point of export notwithstanding the fact that the same has been sealed at the factory gate by the Superintendent of Central Excise. Samples should be invariably drawn in such cases for testing. Where test reports indicate otherwise, a report should be submitted to the Assistant Collector of Central Excise besides taking such action as is necessary under the Customs Act. 7.3 Customs Officer responsible for making endorsement in AR 5 shall carefully check that exports are not covered under any of the following :- - The Duty Drawback Scheme - A Value Based Advance Licence issued prior to 31-3-1995 - A Quantity Based Advance Licence issued prior to 31-3-1995 He will certify on all the three copies of AR 5 that the exports are not under any of the Schemes specified above. He will also certify the fact of exports and make suitable endorsements at appropriate places in the AR 5 and put his stamp with his name and designation below his signature. However it may be noted that any exports made in discharge and any export obligation under a Value Based or a Quantity Based Advance Licence issued after 1-4-1995 shall not be disqualified from availing benefit under Rule 12(1)(b). 7.4 The duplicate copy of AR 5 duly signed by the Customs Officer shall be despatched by the Customs Officer to the Assistant Collector of Central Excise whose address is indicated in the AR 5. On a request from exporter the original copy may also be handed over to the exporter, under a sealed cover for delivering to the Assistant Collector of Central Excise. The Original copy and Sixtuplicate copies shall be returned by the Customs Officer to the exporter against proper acknowledgement. The original copy of AR 5 duly endorsed by the Customs Officer shall be used by the exporter for claiming input stage rebate and also rebate of any Central Excise Duty paid on the finished goods exported or for discharge of bond executed under Rule 13(1)(a), if any. All these claims as indicated would be settled by the Assistant Collector of Central Excise having jurisdiction over the factory. Claim for Rebate 8.1 Claim for rebate of Central Excise Duty paid on materials used in the manufacture and packing of finished goods exported and rebate of Central Excise Duty paid on finished goods cleared for export after payment of Central Excise Duty [under Rule 12(1)(a)] shall be lodged by the manufacturer in prescribed form (Annexure III). The application for rebate has to be made only to the Assistant Collector of Central Excise having jurisdiction over the factory. Where exports are under claim for rebate under Rule 12(1)(a), the same should be claimed in the combined application for rebate. 8.2 The claim for rebate should be filed within the time stipulated under Section 11B of the Central Excises and Salt Act, 1944. 8.3 For claiming rebate, the exporter shall submit the following documents along with the prescribed application :- Original — copy of the AR 5 duly endorsed by the Customs Officer; Duly — attested copy of Shipping Bill (Export Promotion Copy) Duly — attested copy of Bill of Lading/Airway Bill Duplicate — Excise Duty was paid copy of the Central Excise Invoice under which Central under Rule 12(1)(a) is alsoon goods cleared for export. [where rebate being claimed] Duplicate — sealed cover (if copy of the AR 5 received from the Customs Officer in a obtained). 8.4 The Assistant Collector of Central Excise shall carefully examine the refund claim and satisfy himself that the exports are not under claim for duty drawback. He will also satisfy himself that the exports are neither under VABAL nor QBAL (as indicated above) issued prior to 31-3-1995 (where the Shipping Bill indicates that the same is a Drawback Shipping Bill or the Shipping Bill contains an endorsement that the same is in discharge of export obligation under VABAL or QBAL issued before 31-3-1995, the claim should be rejected) he shall verify from his records that the manufacturing units is not availing the Input Stage Credit under Chapter VAA of Central Excise Rules, 1944. 8.5 The Assistant Collector of Central Excise should point out deficiency, if any, within 15 days of lodging of the claim and ask the exporter to rectify the same within 15 days. Queries/deficiencies shall be pointed out at one go and piecemeal queries should be avoided. The claim of rebate should be disposed of within a period of two months. 8.6 The Assistant Collector sanctioning rebate shall ensure that the relevant transport copies (duplicate copies) of Duty paying documents have been suitably defaced before payment is made. 8.7Computation of Rebate Amount Where is no by-product or co-product generated in the process of manufacture, the amount of rebate can be simply worked out by adding the duty incidence on various inputs used in the manufacture. However, where by-products are generated or where recoverable wastages come into existence, the amount of rebate should be calculated by using the following formula: $QB5300000003E4B72B59FFFFFE2868A0E042F28A22A90B5AA24428ABEA7 AF380EE1BFE144A1BFA3840BEE4812C400B70198398CBA813ACE02C4 EDCDC9BAE39E841D7C2943E9516D2FC2927EC3C8D7DE0757017949644 56C455289F4469705D8253EFEECC8BF80 R Where Rebate to be sanctioned =      D Total Duty incidence on materials  =     FOB  FOB value of exports  =    S Duty and Sale value of recoverable wastages and by-product sold (net of = taxes) It may be ensured that when the procurements are at varying rate of Central Excise Duty and/or varying value, the duty incidence is worked out using FIFO (First in First Out) principle. The earliest procurements shall be adjusted first and subsequent procurements shall be taken into account only when the earlier procurements have been taken into account. Illustration : Consider exports of 100 MT of Steel Pipe of the Manufacture of which 105 MT of HR Mild Steel Coils are required. Consider date of export 1-6-1995. Assume no wastage or the same are lost. Procurement on 1-1-1995 (earliest) : 20MT (Duty rate 1000 PMT) Procurement on 20-1-1995 : 50MT (Duty rate 1100 PMT) Procurement on 1-3-1995 : 100MT (Duty rate 1500 PMT) Rebate = 20 x 1000 + 50 x 1100 + 35 x 150 = 127500 Miscellaneous : 9.1 The rebate of duty will not be allowed if —    The market price of the goods is less than the rebate amount. —    The amount of rebate admissible is less than Rs. 500/-. 9.2 Notification No. 42/94-C.E. (N.T.) permits a manufacturer to remove the raw materials or intermediate products for processing without payment of Central Excise Duty. The general job-work provisions under Chapter VAA of Central Excise Rules, 1944, will apply. Care should be taken that this movement is permitted only for a single stage activity. The goods, after going to one job worker, shall not be permitted to go to the another job worker, and it will be necessary to bring the goods back to the factory for further processing. 9.3 Collector may issue detailed Trade notice/s and standing order/s in this regard. Copies of all the Trade Notices and Standing Orders may be endorsed to the Board and DGICCE. [Annexure not printed - See 1995 (78) E.L.T. (T104)]