Export Promotion Schemes - CBEC's Customs Manual (OLD) - Customs

Chapter 23 Export Promotion Schemes 1 Introduction: 1.1 The Export Promotion Schemes under Foreign Trade Policy 2009-14 that are implemented by CBEC may be broadly categorized as a) Incentive and Reward schemes which entitle exporters, subject to conditions, for duty credit scrips that are permitted for usage in a duty exemption framework with differing conditions (chapter 3 of FTP) b) Schemes like Advance Authorisation (AA) and Duty Free Import Authorization (DFIA) which permit duty free import of inputs required for export production, operated under a duty exemption framework (chapter 4 of FTP) c) Duty remission schemes such as Duty Entitlement Pass Book (DEPB) and the Post export EPCG duty credit scheme (chapters 4 and 5 of FTP) d) Export Promotion Capital Goods (EPCG) Scheme which permits an exporter to import Capital Goods duty free against an export obligation (chapter 5 of FTP) 2. Reward /Incentive Schemes - Served From India Scheme: 2.1 Served From India Scheme (SFIS) incentivizes exports of specified services to certain countries by identified Indian service providers who have free foreign exchange earning of at least Rs.10 lakhs in preceding financial year/current financial year. For individuals, the limit of minimum free foreign exchange earnings is Rs.5 lakhs. Duty credit scrip @ 10% of free foreign exchange earnings is issued to relevant exporters. From 2013-14, the SFIS benefit is allowed on the Net foreign exchange earned. 2.2. Scrip may be used for import of capital goods including spares, office equipment and professional equipment, office furniture or consumables that are related to the applicant s service sector business. Further, w.e.f. 18.4.2013, for service provider who is also engaged in manufacturing activity, the import of capital goods including spares related to its manufacturing sector business is permitted, subject to certain conditions. The goods should be otherwise freely importable and/or restricted under ITC (HS). However, items listed in appendix 37B of HBP v1 cannot be imported. In case of specified hotels, clubs, etc the duty credit scrip can also be used to import food items and alcoholic beverages. 2.3 The import of vehicles is not permitted. However, the vehicles which are in the nature of professional equipment (and are not personal vehicles) for use by the service provider in his regular service business are permitted. [Examples of such vehicles are Air Fire Fighting and Rescue Vehicles (AFFRVS), Heavy Duty Modular Trailer Combination etc. Ambulance, Sewage Disposal Truck, Refuse Disposal Vehicle, that are pre-designed structurally and pre-fitted with relevant devices and mechanisms that make for their use for the intended purposes and enable a reasonable conclusion that they cannot be put to generalized or personal use; and Dumpers designed for off-highway use (as described in the Explanatory Notes to Chapter 87 of the Harmonized System of Nomenclature - HSN), are also examples of vehicles in the nature of professional equipment]. For this purpose, w.e.f. 18.4.2013, motor cars, sports utility vehicles and all purpose vehicles for the service provider hotels, travel agents, tour operators or tour transport operators and companies owning or operating golf resorts, shall not be regarded as personal vehicles, subject to condition that Customs Authority endorses the bill of entry at the time of clearance specifying that the vehicles shall be registered as vehicle for tourist purpose only and the vehicle is so registered and a copy of the registration certificate to that effect is submitted to the concerned Customs authority as a confirmation of import of vehicle within six months from the date of import and the said vehicle is used for tourist purpose only. 2.4 The goods imported/procured against the SFIS scrip shall not be transferred or sold. Provided that, except in the case of capital goods including spares of manufacturing sector business which has been endorsed on the scrip by the Regional Authority of DGFT, transfer of goods may be allowed subject to actual user condition within the group company or managed hotel. 2.5 The SFIS scrip is permitted to be utilized for procurement from domestic sources. [Refer Notifications No.91/2009-Cus dated 11-9-2009, No. 34/2006-CE dated 14-6-2006 and Circulars No. 837/14/2006-CX dated 3-11-2006 and No.18/2012-Cus dated 5.7.2012] 3. Reward /Incentive Schemes Vishesh Krishi and Gram Udyog Yojana (VKGUY) and Agri. Infrastructure Incentive Scrip (AIIS): 3.1 VKGUY incentivizes exports of specified agricultural products, Gram Udyog products and forest based products so as to compensate high transport costs and offset other disadvantages by grant of freely transferable duty credit scrips @ 5% of FOB value of exports in free foreign exchange. Certain products are also given duty credit scrips equivalent to 2% of FOB value of exports in addition to the normal scrips. VKGUY scrips can be used for import of items except those listed in appendix 37B of HBP v1 or for domestic procurement or for payment of service tax on procurement of services. The scheme is implemented vide Notifications No.95/2009-Cus dated 11-9-2009, No. 32/2012- CE dated 9.7.2012 and 8/2013-ST dated 18-4-2013. 3.2 Agri. Infrastructure Incentive Scrip (AIIS) is issued to Status Holders exporting specified agricultural products @ 10% of FOB value of agricultural exports (including VKGUY benefits), subject to the condition that the total benefits to all status holders put together does not exceed Rs. 100 Cr (Rs. 50 Cr for each half year). Certain capital goods / equipment are permitted for import or domestic procurement against AIIS. The goods are subject to actual user condition and non-transferable, while the AIIS scrips have transferability amongst Status Holders as well as to Units (not including developers) in Food Parks for import of Cold Chain equipment. AIIS is transferable to a supporting manufacturer subject to certain conditions. The scheme is implemented vide Notifications No.94/2009-Cus., dated11-9-2009 and No.31/2012-CE., dated 9-7-2012. 4. Reward /Incentive Schemes - Focus Market Scheme (FMS): 4.1 The FMS seeks to offset high freight cost and other externalities to select international markets, the exports of specified products to which are made entitled to a duty credit scrip equivalent to 3% of FOB value of exports in free foreign exchange. Certain categories of export products/sectors are ineligible for such benefits. Such scrips are issued under para 3.14.2 of the FTP (2009-14). 4.2 In terms of para 3.14.4 of FTP, duty credit scrip @ 2% is issued on the incremental growth achieved in exports during the period January to March 2013 over January to March 2012. Similarly, in terms of para 3.14.5 of FTP, duty credit scrip @ 2% shall be issued on the incremental growth achieved in exports during the period 2013-14 over 2012-13. The incremental growth is in respect of each exporter, without scope for combining exports for group-company or for transferring export performance from any other IEC holder and it is in terms of freely convertible currency to designated markets. There are categories of ineligible exports. 4.3 The usage of these scrips for import or domestic procurement or for payment of service tax on procurement of services is implemented by Notification No. 93/2009-Cus., dated 11-9-2009, No.30/2012-CE., dated 9-7-2012 and No. 6/2013-ST dated 18-4-2013. 5. Reward /Incentive Schemes - Focus Product Scheme (FPS): 5.1 The FPS incentivizes export of specific products so as to offset infrastructural inefficiencies and other associated costs involved in marketing of these products. The entitlement is 2% of FOB value of exports in free foreign exchange. However, Special Focus Product(s)/sector(s) are eligible for duty credit equivalent to 5%. Further, certain products(s)/sector(s) are entitled to 2% duty credit in addition to the above benefits. A variant of this scheme is the market linked focus product scheme (MLFPS).The FPS scrips can be used for import of items except those listed in appendix 37Bof HBP v1 or for domestic procurement or for payment of service tax on procurement of services. The relevant Notifications are No. 92/2009-Cus., dated 11-9-2009, No.29/2012-CE., dated 9-7-2012 and No. 7/2013-ST dated 18-4-2013. 6. Status Holders Incentive Scrip (SHIS): 6.1 The Status Holders of specified sectors are entitled to the SHIS scrip at 1% of FOB value of exports of the specified sectors made during the years 2009-10, 2010-11 and 2011-12 and 2012-13 so as to promote investment in up-gradation of technology. 6.2 SHIS is not issued to the exporters in a particular year if they have in that year availed the benefits of Technology Up-gradation Fund Scheme (TUFS) or/and have got Zero duty EPCG Authorization. 6.3 SHIS is issued with actual user condition and may be used for imports of capital goods (as defined in FTP) except those mentioned in appendix 37B of HBP v1 relating tocertain specified sectors. It may also be used for import of a limited quantity of spares for already imported capital goods, subject to conditions. With effect from 5.6.2012 a limited transferability amongst status holders is permitted provided the transferee status holder is a manufacturer. With effect from 18.4.2013, SHIS is also permitted for transfer to a manufacturer group-company of the status holder when endorsed by the Regional Authority mentioning the sector for which the transferee has manufacturing facility. The SHIS scrip can also be used for domestic procurement. The Notifications are No.104/2009- Cus., dated 14-9-2009 and No.33/2012-CE., dated 9-7-2012. 7. Certain issues relating to reward duty credit scrips: a) Board s Circular No. 8/2009-Customs had highlighted the difference between freely transferable scrips meant for all types of goods and inputs, including capital goods and the scrips which have limited transferability/actual user and are meant for specified capital goods or equipment. These differences in the scrips issued under the FTP have to be kept in view and properly verified before allowing import of and exemption to the respective permitted goods. These scrips being usable only with respect to those goods that are permitted to be imported under the relevant reward scheme pertaining to that scrip, it implies that debit of duty in a scrip, even in the case of discharging duty on already imported goods in cases of export obligation default, is to be only in respect of goods that are importable under that scrip. Accordingly, scrips like SHIS, AIIS or SFIS which, for example, cannot be used for debiting duty on raw materials, cannot also be used for debiting of duty on raw material in cases of export obligation default. This has been brought to notice of field formations vide Board s letter F.No. 605/32/2013-DBK dated 19.12.2013 in connection with use of duty credit scrip of chapter 3 of FTP for debiting towards customs duties in case of export obligation defaults under chapter 4 and 5 of the FTP. Similarly, if a scrip can be used in relation to a capital goods CG1 but not CG2 , then it cannot be used to debit duty related to import of CG2 in relation to which there is an export obligation default. It should also be kept in view that scrips cannot be used to discharge penalty / interest which are required to be deposited in cash. b) Board s Circular No. 5/2010-Customs prescribed verification of genuineness of reward scrips before allowing registration. Further, random verification of the shipping bills based on which the reward scrip has been issued has been prescribed to ascertain the genuineness of supporting shipping bills. Customs can carry out complete verification where specific intelligence suggests misuse. This has been reiterated through Board s Instruction No.609/119/2010-DBK dated 18.01.2011 and it has also been instructed that scrips issued by the DGFT should normally be accepted unless there is a reason for detailed verification for which the AC / DC shall record the reasons in writing in file for such verification. The first two aspects have also been reiterated vide Circular No.17/2012-Customs. c) Board s Instruction No.603/01/2011-DBK dated 11.10.2013 have directed field formations to maintain a proper record of post facto sample verifications in drawback cases, and when such verifications indicate lower FOB realizations, the same should be intimated to RA/DGFT when any benefit under FTP is involved. d) Clearance of goods from Custom Bonded warehouses utilizing duty credit scrips of SFIS, VKGUY, FMS, FPS, SHIS is allowed as per the same procedure as is prescribed for DEPB scrips. [Refer Circular No. 50/2011-Cus., dated 9-11-2011 read with No.72/2003-Cus and No.68/2000-Cus] e) Re-credit of duty credit scrips, in respect of re-export of goods imported using reward/ DEPB scrips, which was earlier permitted when imported goods were found defective/unfit for use, has been extended to re-export for any other reason, subject to fulfillment of specified conditions w.e.f. 14.01.2011. [Refer Circular No. 45/2011-Cus., dated 13-10-2011] 8. Advance Authorization Scheme: 8.1 Advance Authorisations (AA) are issued to allow duty free import of inputs that are physically incorporated in the export product (after making normal allowance for wastage). The holder is required to fulfil the export obligation (EO) by exporting aspecified quantity/value of the resultant product. AA holders are required to file a bond with 100% Bank Guarantee for the duty difference at the time of import of duty free inputs. Certain categories of exporters, however, have been exempted from filing Bank Guarantees subject to certain conditions. [Refer Circular No.58/2004-Cus., dated 21-10-2004, No.17/2009-Cus., dated 25-5-2009, No.32/2009-Cus., dated 25-11-2009, No.6/2011-Cus., dated 18-1-2011and 8/2013-Customs dated 04-03-2013] 8.2 AA normally have a validity period of 12 months for the purpose of making imports and a period of 18 months for fulfilment of Export Obligation (EO) from the date of issue with certain exceptions as per para 4.22(a) of HBP Vol.1. The relevant DGFT authority who issues the Authorisation is competent to grant one extension of EO period up to six months from the EO expiry date subject to payment of composition fee of 0.5% of the short fall in EO as per para 4.22 (b) of HBP Vol.1. RA may consider a request of original authorization holder and grant one revalidation for six months from expiry date as per para 4.23 of HBP Vol. 1. 8.3 In addition to inputs, certain items like fuel, oil, catalysts, etc., which are consumed in the course of their use to obtain the export product are also allowed under the scheme. The raw materials/inputs are allowed duty free as per the quantity specified in the Standard Input-Output Norms (SION) notified by the DGFT or as per self-declared norms of the exporter in terms of Para 4.7 of Handbook of Procedures (HBP) Vol.1. 8.4 AA are issued both for physical exports as well as deemed exports. These are also issued on the basis of annual requirements of the exporter, which enables planning manufacturing/ export programme on a longer term basis. The Advance Authorisations are issued on pre-export or post export basis in accordance with the FTP and procedures in force on the date of issue of Authorisation. 8.5 AA are issued either to a manufacturer exporter or merchant exporter tied to a supporting manufacturer(s). They can also be issued to sub-contractors in respect of supplies of goods to specified projects provided the name of such subcontractor appears in the main contract. 8.6 AA have a minimum of 15% value addition with effect from the current FTP, 2009-14.In para 4.1.2 of FTP the formula/norm for Value Addition (except for gems and jewellery) includes a reference to intent of claiming drawback. All Industry Rate (AIR) of Duty Drawback is not admissible to an AA holder. However, the Advance Authorization holder may claim Brand Rate of Duty Drawback in respect of inputs which are not imported against the Advance Authorisation and on which Customs/Excise duties have been paid. However, for this the drawback would be allowed only for such duty paid items which have been endorsed for drawback payment on the authorization itself by the Regional Authority. This specification is in para 4.1.14 of FTP and is essential to ensure the value addition norms are correctly met. 8.7 The value addition for gems and jewellery and for specified goods is specified as perAppendix-11B and para 4A2.1 of HBP Vol.1. In case of Authorisation for Tea, the minimum value addition is 50% as per para 4.1.6 of FTP (RE-2010). Higher value additions are prescribed for exports for which payments are not received in freely convertible currency. The Advance Authorisations and/or materials, imported thereunder are not transferable even after completion of export obligation. 8.8 The imports/exports under AA and their utilization require proper monitoring as the goods are imported duty free against an obligation to export. AA holder is required to maintain a true and proper account of consumption and utilization of duty free imported/domestically procured goods for a minimum period of 3 years as per para 4.30 of HBP Vol.1. Further, the holder is to indicate the Advance Authorization No./date on the Shipping Bill/Invoice (in case of deemed exports) and fulfilment of export obligation, relevant export documents are to be submitted to DGFT to obtain Export Obligation Discharge Certificate (EODC) which is produced to the Customs for redemption of bond/Bank Guarantee filed. The acceptance of EODC by Customs is subject to prescribed checks including intelligence based checks. 8.9 AA holder is required to pay the duties with interest in case export obligation is not fulfilled. The DGFT s Regional Authority are required to inform details of recovery/deposits to Commissioner of Central Excise having jurisdiction over the factory of the authorization holder as per para 4.29 of HBP Vol.1. 8.10 AA schemes (normal and for annual requirement) are implemented through Notification No. 96/2009-Cus and No. 99/2009-Cus, both dated 11.9.2009 with certain variations in the conditions. AA for Deemed Exports is implemented by Notification No. 112/2009-Cus dated 29.09.2009. 9. AA for export of certain items that are otherwise prohibited for export A provision has been introduced whereby certain items which are otherwise prohibited for export may be allowed for export under advance authorization scheme, subject to stipulated conditions including export being allowed only from specified EDI enabled ports subject to pre-import condition under notified SION/prior fixation of norms by Norms Committee, export obligation period being 90 days from import clearance without extensions and import being subject to non-transfer, including for job work, and actual user condition, and the inapplicability of provisions for regularisation of default in terms of para 4.28 of HBP vol.1, etc. 10. Duty Free Import Authorisation (DFIA): 10.1 The Duty Free Import Authorisation (DFIA) scheme introduced in 2006 is similar toAdvance Authorisation scheme in many aspects. DFIA has a minimum value addition requirement of 20%. Once export obligation is completed, transferability of authorisation/ material imported against the authorisation is permitted. However, once the transferability has been endorsed, the inputs can be imported/domestically source only on payment of Additional Customs duty/Central Excise duty. The DFIA Authorizations are issued only for products for which SION have been notified. There is a requirement that in case the facility of rebate under Rules 18 or 19(2) of the Central Excise Rules, 2002 or CENVAT facility under the Cenvat Rules, 2004 has been availed, then the duty free imported goods have to be used in the manufacture of the dutiable goods. 10.2 After the annual supplement 2013 to the FTP, the exemption from anti-dumping duty and safeguard duty is not available in case materials are imported against a DFIA made transferable. In case imported materials are transferred the importer is to pay an amount equal to the anti-dumping and safeguard duty leviable on the material, with interest. These aspects apply subject to specified conditions. The DFIA is implemented by Notification No.98/2009-Cus dated 11-09-2009. 10.3 The monitoring of export obligation is also essential in the DFIA scheme. [Refer Circulars No.11/2009-Cus., dated 25-2-2009 and No.6/2011-Cus dated 18-1-2011] 11. EPCG schemes for authorizations issued prior to 18.4.2013: 11.1 The Zero duty EPCG Scheme implemented through Notification no. 101/2009-Customs and 102/2009-Customs and 3% EPCG scheme implemented through notification No. 100/2009- Customs and 103/2009-Cus all dated 11-9-2009 apply to authorizations issued prior to 18.4.2013. These provide for import of capital goods specified in EPCG Authorization at 0% or concessional 3% rate of basic customs duty and optional exemption from the additional duty of customs. 11.2 Under this Zero duty scheme, there is export obligation (EO) equivalent to 6 times of the duty saved amount on the capital goods imported to be completed within 6 years (extendable by 2 years) from the date of issue of Authorization. Under the 3% scheme, the EO is 8 times the duty saved to be fulfilled in 8/12 years (extendable by 2+2 years). There are more favorable dispensations permitted for EO fulfilled by export of specified green technology products, units located in North Eastern States, Sikkim. Further, under the 3% scheme there are certain more liberal dispensations for tiny, agro, cottage and SSI units. A block wise EO is also specified. The EPCG Customs notifications stipulate fulfilment of at least 50% of export obligation within the first block. The RA can grant extension of block- wise period or overall period of fulfilment subject to specified conditions. 11.3 EO under the scheme is to be over and above the average level of exports achieved in the preceding three licensing years for the same and similar products. However, certain sectors are not required to maintain average level of exports. 11.4 EPCG Authorizations are issued to manufacturer exporters and merchant exporter with or without supporting manufacturer, and service providers. EPCG scheme is also available to a service provider who is designated or certified as a Common Service Provider (CSP). 11.5 EPCG authorizations specify the value/quantity of the export product to be exported it. In the case of manufacturer/merchant/service exporters, the EO is required to be fulfilled by exporting goods manufactured or capable of being manufactured or services rendered by the use of capital goods imported under the scheme. Up to 50% of the EO may also be fulfilled by export of other goods manufactured or service(s) provided by the importer or his group company or managed hotel, which has the EPCG Authorization, subject to certain conditions. 11.6 In order to ensure fulfilment of EO as also to secure interest of Revenue, the EPCG Authorization holder is required to file bond with or without bank guarantee with the Customs prior to commencement of import of capital goods. Bank guarantee equal to100% of the differential duty in case of merchant exporters and 25% in case of manufacturer exporters is required to be submitted except in case of exempted categories. [Refer Circulars No. 58/2004- Cus dated 21-10-2004, No.17/2009-Cus., dated 25-5-2009, No.32/2009-Cus., dated 25-11-2009, No. 06/2011-Cus., dated 18-1-2011 and No. 8/2013-cus dated 04.03.2013] 11.7 EPCG Authorization may also be obtained for annual requirement with a specific duty saved amount and corresponding EO. It indicates the export products through which EO shall be fulfilled. 11.8 Import of Capital goods (CG) under the scheme have to be made within 9 / 36 months. The Regional Authority of DGFT has certain powers to revalidate the validity of import. The CG imported are subject to actual user condition and the goods imported cannot be transferred or sold, etc till the fulfillment of EO. Installation and use of the imported capital goods is provided for in the Customs notifications for which certificates have to be produced. 11.9 In order to ensure proper account of fulfilment of EO, the EPCG Authorization holder is required to indicate the EPCG Authorization No./date on the body of the Shipping Bill/ invoice (in case of deemed exports). After fulfilment of specified EO, relevant export documents are to be submitted to Regional Authority for obtaining EODC which is to be produced to the Customs for redemption of bond/BG filed. 11.10 Exports in discharge of EO under the EPCG scheme are entitled to duty neutralization schemes like Drawback, Advance Authorization, DFIA etc. as well as benefits of reward schemes such as FPS, FMS, VKGUY, etc. in accordance with the terms and conditions of those scheme(s). However, benefits of TUFS and SHIS will not be available in the year in which the zero duty authorization has been issued, except on fulfilment of certain conditions. 12. Post Export EPCG Duty Credit Scrip Scheme prior to 18.4.2013: 12.1 The scheme envisages that the duty credit in these scrips shall be a duty remission computed based on the basic customs duty paid on capital goods which had been imported on payment of all applicable duties of customs in cash. Subject to installation and use of the imported capital goods, and other conditions including non-disposal of the capital goods till the date of last export, the duty remission may be granted by the Regional Authority in proportion to export obligation fulfilled within a fixed export obligation period. For this purpose, the export obligation would be fixed (over and above average export obligation) at 85% of applicable specific export obligation, computed as if the duty paid imports had taken benefit of duty exemption (i.e. like the EPCG duty exemption schemes, either zero duty or concessional 3% duty). As in the EPCG duty exemption scheme, if it is opted to not take the Cenvat credit of additional duty of customs paid, a lower export obligation would be fixed. There is no provision for extension of export obligation period in this scheme. 12.2 In the Scheme the duty remission is envisaged in proportion to export obligation fulfilled within a fixed export obligation period. Unlike the EPCG duty exemption schemes, the block obligation periods or their related proportions of export obligation fulfilment are not pre-defined in the new scheme. More than one duty credit scrip may issue (against the duty paid import of capital goods) based on the progressive fulfilment, during the specified export obligation period, of larger extents of the total export obligation. The meaning of export obligation would apply individually to each duty credit scrip. Further, scrip issuance is akin to a discharge (or partial discharge) of the export obligation and is a remission by the DGFT of duty collected by the CBEC. Therefore, it is necessary that the Deputy/ Assistant Commissioner of Customs satisfies himself of the compliance of the conditions of the notification (including fulfilment of export obligation, the quantum of duty remission in the duty credit scrip, the cumulative duty credits issued against imported duty paid capital goods) before allowing a duty credit scrip, issued under the Scheme, to be registered. 12.3 A sequential monitoring should be followed. This begins from registration of authorization (for importing capital goods) at the port of registration and is followed by import on payment of full applicable duties of customs in cash, endorsement of import particulars on authorization at time of clearance, making specified endorsements on bill(s) of entry at time of import, ensuring registration or installation/use of all imports under authorization before any scrip issues, registration of scrip at the same port, keeping cumulative record of duty credit scrips issued against an authorization, and making the indicated endorsements on documents at the time of registration. Moreover, the assessment Group which handles the authorization to import capital goods on payment of duty under this variant of the EPCG scheme would need to allow the registration of this duty credit scrip. The genuineness of the post export EPCG duty credit scrip should be verified. 12.4 Safeguards are provided in the notifications relating to making endorsements on the documents. The option for not availing Cenvat Credit on capital goods imported under authorization and thereby enjoying a lower export obligation is to be backed by a certification. Jurisdictional Central Excise authority should ensure that certificate on non- availment of Cenvat Credit is issued expeditiously and normally within two weeks but not later than four weeks under all circumstances. Where the goods imported against an authorization are found defective or unfit for use and are re-exported back to the foreign supplier, if claim of duty drawback is made, no duty remission for the duty paid at the time of import on the re-exported goods is to be allowed. Further, after any duty remission in the form of duty credit scrip has been claimed in respect of the duty paid on the goods imported against an authorization, no duty drawback shall be allowed when the goods are re-exported and the export obligation is also not to be re-fixed. Indigenous sourcing of capital goods (referred to as invalidation procedure of import authorization) on payment of duty is not permitted in this scheme. 12.5 The post export EPCG duty credit scrip cannot be issued as a refund on the premise that duty was paid but a situation arose where there was no export obligation to be fulfilled. The Commissioners of Customs are also to exercise special checks so as to ensure that there is no misuse of the scheme and a proper record of all such checks is maintained. These shall include random verifications of the address shown on the authorizations (for import of capital goods) during their validity period in at least 10% of authorizations, random verifications of the certificates produced (not issued by central excise authorities) and of the declarations submitted with respect to Condition No. 14 (e)(i) of the Customs notifications in at least 10% cases. These verifications should be made through the Commissioners of Central Excise. The central excise authorities should include, in their verification, a check of the periodical utility bills (containing the address) as one of the means enabling verification of installation/ operation/ authorization holder premises. The Commissioners are expected to exercise due diligence to prevent misuse. If any other measure or safeguard is considered necessary it may be informed to the Board for appropriate action. Moreover, relevant aspects should also be incorporated in the monthly report of Monitoring of Export/Imports under various Export Promotion Schemes sent to the Board in terms of letter No. 605/64/2008-DBK dated 20.11.2008. 12.6 The notification Nos.5/2013-Customs and 6/2013-Customs both dated 18.2.13 permit imports through debit of the customs duties in the said duty credit scrip. The notifications are for scrip variants where export obligation is fixed like the zero duty or concessional 3% duty EPCG scheme, respectively. The mechanisms of fixing the export obligation, and of granting the remission, are explained in the notifications. Further, notification Nos.2/2013- Central Excise and 3/2013-Central Excise both dated 18.2.13 have been issued to permit domestic procurement. [Refer Circular No.10/2013-Cus dated 6.3.2013] 13. EPCG Scheme on or after 18.4.2013: 13.1 Only a single Zero duty EPCG scheme applicable to all sectors is available and implemented by Notification No.22/2013 - Customs dated 18.4.2013 with optional exemption from the additional duty of customs. The EO is equivalent to 6 times of the duty saved amount on the capital goods imported with EO period 6 years (extendable by 2 years) from the date of issue of Authorization. There are more favorable dispensations permitted for EO fulfilled by export of specified green technology products, units located in North Eastern States, Sikkim and Jammu and Kashmir. EO of 50% each is to be fulfilled in two blocks, of 4 years and then 2 years. The RA can grant extension of block-wise period or overall period of fulfilment subject to specified conditions. In the case of manufacturer/merchant/service exporters, the EO is required to be fulfilled by exporting goods manufactured or capable of being manufactured or services rendered by the use of capital goods imported under the scheme. The provision that up to 50% of the EO may also be fulfilled by export of other goods manufactured or service(s) provided by the importer or his group company or managed hotel is not available. Thus, the provisions are stricter. The import of capital goods has to be made within 18 months, with the Regional Authority of DGFT having certain powers to revalidate the validity of import. The single zero duty EPCG scheme is not available to exporters, who avail in that year, the benefit of SHIS. The import of cars, etc as commercially registered tourist vehicles is not permitted under this single Zero duty EPCG scheme. 13.2 However, as before, EO is to be over and above the average level of exports achieved in the preceding three licensing years for the same and similar products. Certain sectors are not required to maintain average level of exports. The Authorizations are issued to manufacturer exporters and merchant exporter with or without supporting manufacturer, and service providers and also available to Common Service Provider (CSP). The authorizations specify the value/quantity of the export product to be exported against it. The Authorization holder is required to file bond with or without bank guarantee with the Customs prior to commencement of import of capital goods. Bank guarantee exemptions are available in terms of the Circular No. 58/2004-Cus dated 21-10-2004, No.17/2009- Cus dated 25-5-2009, No.32/2009-Cus dated 25-11-2009, No. 06/2011-Cus dated 18- 1-2011 and No. 8/2013-Cus dated 04.03.2013. The A uthorization may also be obtained for annual requirement with a specific duty saved amount and corresponding EO with indication of the export products through which EO shall be fulfilled. The CG imported are subject to actual user condition and the goods imported cannot be transferred or sold, etc till the fulfillment of EO. Installation and use of the imported capital goods is provided for in the Customs notifications for which certificates have to be produced. To ensure proper account of fulfillment of EO, the EPCG Authorization holder is required to indicate the EPCG Authorization No./date on the body of the Shipping Bill/invoice (in case of deemed exports). After fulfillment of specified EO, relevant export documents are to be submitted to Regional Authority for obtaining EODC which is to be produced to the Customs for redemption of bond/BG filed. Exports in discharge of EO under the EPCG scheme are entitled to duty neutralization schemes like Drawback, Advance Authorization, DFIA etc. as well as benefits of reward schemes such as FPS, FMS, VKGUY, etc. in accordance with the terms and conditions of those scheme(s). 14. Post Export EPCG Duty Credit Scrip Scheme on or after 18.4.2013: 14.1 Consequent to there being a single Zero duty EPCG scheme from 2013-14, a single Post Export EPCG Duty Credit Scrip Scheme has been notified vide Notification No. 23/2013- Cus and 2/2013-Central Excise both dated 18.02.2013 to enable the use of Zero duty post EPCG Duty Credit Scheme Scrip subject to conditions specified in the notifications. The Circular No.10/2013-Cus dated 6.3.2013 continues to be relevant in this regard. 15. Certain issues relating to AA, DFIA, EPCG schemes: 15.1 The jurisdictional Commissioners of Customs are required to take action to monitor fulfillment of export obligation. They also have to put in place an institutional mechanism for periodical meetings with Regional Authorities to exchange intelligence, check misuse and pursue issues such as EO fulfillment status in cases where Export Obligation period has expired in that quarter/ previous quarter so that concerted action can be taken against the defaulters. Further, timely action in all cases of default is required to be initiated to safeguard revenue. 15.2 Apart from the prescribed checks, the jurisdictional Commissioners of Customs are also to cause random verification for some of the authorizations issued under EPCG / DFIA / Advance Authorization schemes to check correctness of address on the Authorizations. Such verification is to be preferably through the Central Excise divisions. Similarly, the correctness of installation certificates issued by the Chartered Engineers is required to be verified on a random basis through Central Excise divisions. When address verifications or Installation Certificate verifications are requested by the Customs authorities in respect of EPCG authorizations, the Central Excise authorities should include, in their verification, a check of the periodical utility bills (containing the address) as one of the means enabling verification of installation/operation/ licensee premises. [Refer Circulars No.5/2010-Cus., dated 16-3-2010, No.25/2012 Cus., dated 6-9-2012 and Instruction No.609/119/2010-DBK., dated 18-1-2011] 16. Certain general provisions relating to export promotion schemes: 16.1 Imports and exports under the Export Promotion schemes are restricted to the ports, airports, ICDs and LCSs, as specified in the respective Customs duty exemption notifications. However, these notifications empower the Commissioners of Customs to permit export/ import under these schemes from any other place which has not been notified, on case to case basis by making suitable arrangements at such places. Foreign Post Office at New Delhi has also been included as port of export for benefits under FPS/FMS/VKGUY/AIIS. 16.2 Facility has been extended for executing a common bond by Authorization Holders for specified export promotion schemes [Advance Authorization / Duty Free Import Authorization (DFIA) / Export Promotion Capital Goods (EPCG)]. [Refer Circular No.11 (A)/ 2011-Cus., dated 25-2-2011] 16.3 Field formations have to put in place an institutional mechanism for periodical meetings with Regional Authorities to exchange intelligence, check misuse and pursue issues such as EO fulfillment status in cases where Export Obligation period has expired in that quarter/ previous quarter so that concerted action can be taken against the defaulters. [Refer Instruction No.609/119/2010-DBK., dated 18-1-2011] 17. Older schemes still in use: 17.1 Duty Free Credit Entitlement (DFCE) Scheme was for status holders having incremental growth of more than 25% in FOB value of exports subject to a minimum export turnover of Rs.25 Cr, which provided entitlement to duty credit @10% of the incremental growth in exports. The scrip and goods imported were subject to actual user condition. The scheme was implemented by Customs notification No.53/2003-Cus., dated 1-4-2003 and since replaced by Target Plus Scheme. 17.2 Target Plus Scheme (TPS) was introduced for the Star Export Houses w.e.f. 1-9-2004 and provided rewards in the form of duty free credit based on incremental export performance. Initially, the entitlement was 5% to 15% of the incremental growth in exports, but later w.e.f. 1-4-2005, it was reduced to 5%. The scrip and goods imported are subject to actual user condition. Imports allowed were inputs, capital goods including spares, office equipment, professional equipment and office furniture. The scheme ended on 1-4-2006. The Customs notification was No.32/2005-Cus., dated 8-4-2005. 17.3 The Duty Free Replenishment Certificate (DFRC) scheme permitted duty free import (exemption from only Basic Customs duty) of inputs which were used in the manufacture of export product on post-export basis as replenishment. The DFRC authorisation were issued with a minimum value addition of 25% and only in respect of export products covered under the SION notified by DGFT. The DFRC authorization and /or material(s) imported against it were freely transferable. The scheme ended on 1-5-2006. The Customs notifications were No.90/2004-Cus., dated 10-9-2004 and No.48/2000-Cus., dated 25-4-2000. 17.4 Duty Entitlement Pass Book (DEPB) scheme was a duty remission scheme in operation from 1-4-1997 to 30-9-2011 which provided credit entitlement against exports on the basis of DEPB rates notified by DGFT. The scrip and/or items imported against it were freely transferable. Duty Drawback is not allowed on exports under DEPB scheme. However, if CVD is paid in cash on imported inputs, or where indigenous duty paid inputs, not specified in SION, are used in the manufacture of export product, the brand rate of duty drawback is admissible provided CENVAT credit in respect of such duty incidence is not availed. The scheme was implemented vide Notification No.97/2009-Cus., dated 1 1-9-2009. [Refer Circular No.39/2001-Cus., dated 6-7-2001] ***