Bonds under Central Excise - Central Excise Practice Manual (OLD) - Central Excise

BONDS UNDER CENTRAL EXCISE Bond is an agreement where a person executing a bond undertakes to fulfil certain conditions as per agreement. Primary purpose of bond under excise is to secure due compliance with rules and procedures as per Act and Rules and to provide for payments to be made if the conditions are not complied with. Forms of Bonds: - Bonds are executed for various purposes and for each such purpose there are different Forms. These Forms have been standardized and numbers have been given for identification. Some of the main Forms of bond are as follows: - 1. B-1 General Bond (Surety/ Security): for export of goods without payment of duty under Rule 19 - · Generally such Bond is executed when export is through merchant-exporter. · Export Bond should be accepted within 24 hours or the next working day by the DC/AC of Central Excise or Maritime Commissioner or any other officer authorized by the board in this behalf. Complete address of bond accepting authority should be mention in A.R.E.-1 Form for admission of proof of export. · The bond amount should be sufficient to cover the duty liability. · B-1 bond can be with surety or security, such as:- Ø Exporters i.e. Super Star Trading House, Star Trading House, Other (status holder) export houses, Exporters registered with Export Promotion Council and Registered Exporters need not require to furnish any bank guarantee or cash security while executing export bond provided the exporter has not come to adverse notice of the Central Excise or Customs department in last three years. However, they may furnish sureties only. Ø Other Exporters or those who have come to the adverse notice of department are require to furnish 100% surety or 25% security/ bank guarantee while executing export bond. 2. B-2 General Bond (Surety/ Security): for provisional assessment - · The amount of such Bond should be equal to the difference between the duty payable on provisional assessment and the probable duty payable applying the highest rate/ value applicable to such goods for a period of 3 months. However where provisional assessment cannot be completed within the 3 months and took longer period, differential duty likely to arise during such period shall be the basis of determination of bond amount. · The B-2 Bond should be furnished/ backed with 25% security/ bank guarantee. In special cases, higher or even fresh security may be asked. For e.g. in the case of inadequate security officer may demand additional security or in case of death or insolvency of the surety assessee may be asked to furnish fresh bond. · If the assessee fails to make the due adjustment within 15 days after the Final Assessment is made, he officer may proceed to enforce the bond or encash the bank guarantee after giving due notice to the assessee. 3. B-3 General Bond: for due dispatch of excisable goods removed for rewarehousing and export therefrom without payment of duty - · The amount of such bond should be equal to the duty liability. · The B-3 bond should be backed/ furnished with 25% security of the bond amount. 4. B-5A Bond: for due arrival and rewarehousing of excisable goods removed from a warehouse in India to a factory in SEEPZ [Notification No.146/ 89-CE]. 5. B-8 General Bond (Surety/ Security): for obtaining goods at Nil or concessional rate of duty under CE Rules - · Earlier B-8 bond form may be used with suitable modifications. · The amount of bond should be equal to the duty amount of 1 month's estimated consumption of goods for industrial purposes. · B-8 bond can be with surety or security: - Ø If B-8 bond is surety bond, the surety should be solvent to the extent of full bond amount and that the surety is financially sound. Ø If B-8 bond is security bond, the amount of security should be of the full amount of bond. 6. B-4 or B-11 Bond (security): for clear/ release of seized goods on provisional basis - · Earlier/old B-11 bond form under previous rules may be used. New Rules has mentioned B-4 for the above purpose but no Form has been prescribed. Thus old B-11 form is to be used. · The amount of bond should be equal to the whole value of seized goods. · Amount of security will be as determined by the Adjudicating authority. Normally it is 25%. · The person (or owner) to whom the goods are realized on provisional basis may be asked to produce such goods at the time of adjudication order if authority is of the opinion that goods are liable to confiscation. · If the person fails to produce the goods the bond may be enforced for recovery. 7. B-17 General Bond (Surety/ Security): composite bond for 100% EOU, EPZ/ STP/ EHTP/ BTP units for export to foreign countries, assessment, accounting and disposal of excisable goods procured without payment of duty. · Fresh bond may not be taken, where the existing units have already furnished bond in B-17 Form prior to 1-7-2001. The existing bond may be simply re-validated under the new rules. · The amount of security will be 5% of the value of the bond in the form of bank guarantee or cash deposit or any other mode of security may be accepted in lieu of surety. Types of bonds: - Bonds are of two types i.e. either surety bond or security bond. 1. Surety Bond - Under Surety bond, another person stands as surety to guarantee the performance on the part of obligor. · Surety bond should be signed by both the obligor and surety. · Since Surety bonds are covered under the provisions of Contract Act, the liability of the surety is co-extensive with that of the principal debtor. This means that department is entitled to recover the dues either from the obligor or from the surety. · A partner or a director can also stand as surety in their individual capacity, as they are treated separate from the legal entity, to guarantee the performances of the firm or a company as the case may be provided they fulfill all other conditions applicable to sureties. · Surety should be for full value of bond and thus the surety should be solvent and to the extent of bond amount. To ensure that the sureties are financially sound, solvent and alive periodical verification preferably on an annual basis, by the jurisdictional Central Excise Officers will be made by any of the following methods: - Ø By reference to surety's banker. Ø By reference to Revenue Officer not below the rank of Tahsildar or a Mamalakdar. Ø By making personal enquiries such as, asking surety to furnish a list of his property, which may be verified. The result of enquiry as well as solvency of surety should be incorporated in the records of the department and a solvency certificate in the prescribed format, duly signed by Chartered Accountant should be submitted. 2. Security Bond - Security bond is executed where security is offered instead of guarantee of surety. · Different types of securities: - Ø Bank deposit receipts, Ø Cash deposits/ securities, Ø Post office savings, Ø National savings certificates, Ø National defence bonds, Ø National defence gold bonds, 1980, Ø Government promissory note or similar realizable Government papers of Central or State Government. · Above securities shall be accepted subject to the conditions as laid down in clause (iii) of Rule 274 (iv) of G.F.R. and these conditions are: - Ø Deposit receipt shall be made in the name of the pledgee otherwise bank shall certify on it that the deposit can be withdrawn only on demand or with the sanction of the pledgee. Ø Only the larger scheduled banks are to be considered as recognized banks approved by Government. Ø The responsibility of the pledgee in connection with the deposit and the interest cease when he issues final withdrawal order to the depositor and sends intimation to the bank that he has done so. · Interest on such securities will accrue to person making such deposits but in case of cash deposits no interest is payable. In respect of other deposits arrangements are to be made for payment of interest at regular intervals of 6 months. · Security should be in favour of president of India and accepted on his behalf by commissioner, AC/ DC or Superintendent by designation. Bank Guarantee bond Form of bank guarantee has been prescribed, both for scheduled and un-scheduled banks. 1. The provisions governing the execution of bonds when the bank gives a guarantee for a registered person with or without deposit of security are as follows - · The bank guarantee bond should provide a period of validity and an extra period during which obligations arising during the period of validity to be enforced. The time limit for enforcement of obligation should be at least 2 years. · Where there is a need for extension of the period of validity of bank guarantee, it should be done by means of supplementary deed of bank guarantee on a stamp paper, in pursuant of order of original or appellate authority or any other reasons. 2. Where bank guarantee is furnished as surety for a Central Excise Bond, it can be accepted to the extent of 25% of the bond amount. However commissioner can accept lower bank guarantee/ cash deposit. 3. Where bank guarantee is furnished as security for a Central Excise Bond like national saving certificates, Govt. promissory notes etc the assessee should fill details of bank guarantee in place where details of security given have to be filled in. Requirements of Bond 1. Bonds should be executed in favour of and in the name of the president of India. 2. Bonds should be executed on a non-judicial stamp paper of the respective State government in which the registered persons business is situated. 3. if adhesive stamps are affixed to any instrument chargeable to duty, the stamps shall be cancelled, by drawing two lines across or by signing on the stamp or in other effectual manner, so that it cannot be used again. 4. The prescribed wordings of the bond form must be copied out on a non- judicial stamp paper of the appropriate amount except where arrangement can be made for embossing printed forms. 5. The bond shall be signed by the person authorized by board of directors in case of a company or by any partner in case of registered firm except minor. 6. Bond should be accepted by any excise officer not below the rank of AC/ DC. 7. Bond shall be preserved by excise officer till the discharge of obligations. 8. The bond can be cancelled either by returning it to the obligor or on execution of a deed of cancellation. Mere writing the word 'cancelled' is not sufficient. Execution of bond by government undertakings or autonomous corporations 9 Every undertaking owned and managed directly through any - · Ministry, · Directorate, or · Directorates by any Central government or state government is exempt from execution of any surety or security bond as required under CEA, 1944. However, this facility is not available to the undertaking belonging to corporation owned or controlled by the Central or State government and established under a central provisional or state act, or any other undertaking belonging to government company within the meaning of section 617 of the companies act, 1956.