Procedure foe dealing with case of suspected misdeclaration of value in applications licences issued between 1/4/1993 and 6/3/1995 - DGFT - 23/97-98

Policy Circular No.23/97-98 Dated The 22nd October,1997 Subject:- Procedure foe dealing with case of suspected misdeclaration of value in applications licences issued between 1/4/1993 and 6/3/1995 Attention is, invited to ALC Circular No.3/95 dated 6th March, 1995, which inter alia contains guidelines on the implementation of Value Based Advance Licensing Scheme, The provisions of this circular and the subsequent incorporation of Para 109D in the Handbook of procedures, 1992-97 (Vol.1) with effect from 1.4.1995, made it mandatory for all columns in the application for a licence to be duly filled, including the quantity of each item to be imported and its CIF value based on the prevailing international price(s) further, this Circular also required that an application which was not in the prescribed form and/or is not complete in all respects shall be rejected. It's presumed that the procedure laid out in terms of the above mentioned Circular being followed uniformly by all the Regional licensing authorities. 2. Attention is invited to Para 110 of Handbook of Procedures (Vol. 1) 1992-97 pertaining to the year from 01/04/1992 (when VABAL Scheme was introduced) to 31.03.1993. In the EXIM Policy and Procedures introduced w.e.f. 01.04.1993, the relevant Para 110 of the Handbook of Procedures (Vol.1) stipulated that an application for value based advance licence should contain complete details of quantities and value of item of import and export. It is, however; reported that between 01.04.1993 and issue of Circular of 06.03.1995, many of the Licensing Authorities were issuing value based advance licences as per the international prices declared in the applications which were not subjected to actual verification, and the CIF value of the1icence was arrived at on the basis of value addition required to be achieved: There was also no proper mechanism available with the licensing authorities to cross check the accuracy of information relating to international prices provided in the application. 3. An issue arose, during the joint meetings held between the DGFT and the department of Revenue as to how the cases of misdeclaration of value in the applications for value based advance licences issued between 01.04.1993 and 06.03.1995 should be dealt with. The matter was also examined in detail in consultation with the Customs Authorities. It was viewed that the action to be taken In such cases essentially consist two types. The first relates to corrective measures to be taken by way of rectification of the licences etc.; wherever such action may be warranted. The second consists of enforcement action" if any, to be taken in such cases of wilful misdeclaration, fraud etc. Guidelines in respect of enforcement action to be taken in such cases are being issued separately through ECA Guidelines. In so far as corrective measures to be taken for correction of the licences are concerned,the following guidelines, which have been formulated in consultation with the customs authorities, may be kept In view while dealing with such cases. 4. It should be possible for the Customs authorities to determine as to whether a Prima-facie case of over valuation/misdeclaration of FOB value of exports, with an intent to claim high CIF entitlements can be actually established, by comparing the international prices of items of import/export under a licence, as declared in the application for the licence, with the international prices as prevailing on the date of such application. Where the quantity/value of input not indicated in the DEEC-I (Imports), the Customs authority may call for the information from the concerned Regional Licensing Authority so as to ascertain the reasonableness of the CIF value of the licence and for determining the extent of variation, if any. In these cases; the Customs Authorities will not permit logging of the DEEC Books, and such cases will be referred by the customs to the licensing authority for corrective action. If the variation between the international prices, of export product and the FOB price declared in the application for the licence can be satisfactorily explained by the original licence holder, Further actions, should ordinarily be taken. However, cases of excessive variation. Misdeclaration of values/inputs in the applications for value based advance licences would be reviewed periodically by a Screening Committee under the Chairmanship of the Jurisdictional Chief Commissioner of Customs. Which would also include Additional DGFT /Zonal Jt. DGFTs, The concerned Customs Authority would identify such cases in the first instance. for placing before the Committee. Which shall decide (i) cases where corrective action for scaling down of impor1s is required to be taken by the licensing authorities. (ii) cases where penal proceedings are required to be taken by the DGFT authorities, (iii) cases where no fur1her action is required to be taken For cases covered by (i) and (ii) above, the Customs authorities shall forward to the concerned licensing authority all the relevant material including the extent to which the scaling down has been approved by the committee, for initiating further action. 5. For dealing with cases as at 4(i) above the licensing authority upon receipt of such reference from the Customs. Should initiate promptly fur1her action for appropriate reduction in, or scaling down of the CIF value of the licence to the extent approved by the Screening Committee and thereafter intimate the same to the concerned Customs authorities In respect of VABALs issued between 01.04.1993 and 06.03.1995, where the expor1s had already taken place but where the impor1s have either not been made at all, or were par1ly made before 06.03.1995 on the basis of inflated values of imports, scaling down of the licence value would be confined to the extent of the unutilized balance CIF value of the licence 6. In case where licences have already been endorsed for transferability and/or transfer effected appropriate corrections should be carried out In the following manner: - (a) Where the transferee approaches the licensing authority voluntarily for scaling down of the CIF value of the licences, appropriate corrections, duly checked and verified by the concerned, Commissioners of Customs should be carried out in the same way as outlined in Para-4 above. (b) If the transferee declines to comply with the provisions of sub-para (a) above appropriate penal action should be initiated immediately against the transferee as well as the original licensee. 7. In cases where blatant misdeclaration has been resor1ed to by an exporter penal action under the Foreign Trade (Development Regulation) Act. 1992. including cancellation of the licence should be initiated in the manner indicated in the ECA Guidelines being issued separately notwithstanding endorsement of transferability/Transfer of the licence. 8. The above instructions are not intended to be applied in cases of Special VABALs as there is no co-relation between the quantities of individual inputstheir reference to the value addition to be achieved and no action pertaining to mis-declaration is to be initiated. 9. In respect of licences issued on or after issue of the ALC Circular dated 06.03.1995 the licensing authorities may take recourse to appropriate enforcement action in addition to scaling down of import entitlements as outlined above. 10. This issues with the approval of Director General of Foreign Trade. Sd/- L B. Singhal) Dy Director General of Foreign Trade) For Director General of Foreign Trade