Advance Authorisation, Duty

Exemption Scheme & Exporters

Duty Exemption & Duty
Remission Scheme
 FOREIGN TRADE POLICY
CORRELATION WITH
 Foreign Trade (Development & Regulation) Act, 1992
 Foreign Trade (Regulation) Rules, 1993
 Customs Act, 1962
 Customs Tariff Act, 1975
 Foreign Exchange Management Act, 1999
 Exchange Control Regulations
 Industrial Policy Resolution, 1956
 Industrial Development & Regulation Act, 1951
 Law of Weights & Measures
 Central Excise
 Miscellaneous
COMPOSITION OF FOREIGN TRADE POLICY
 Notifications
 General Provisions
 Imports
 Exports
 EPCG
 Duty Exemption Scheme
 100% EOU
 Special Economic Zone
 Deemed Exports
 Definitions
 NOTES
1. The Foreign Trade Policy Consists of the following:
 Foreign Trade Policy
 Handbook of Procedures Vol.1
 Handbook of Procedures Vol.2
 ITC(HS) Classification
(Handbook of Procedures Vol.3)
2. The Policy and Handbook of Procedures Vol.1 are
synchronized
with each other in terms of arrangement of chapters.
3. The Policy and Handbook of Procedures Vol.1 are
divided
into chapters from 1 to 9 and paras there under.
4. The Handbook of Procedures Vol.1 at the end of chapters
contains various Appendices (40)
 DUTY EXEMPTION SCHEME
CONCEPTS
 Export
 Import
 Deemed export
 Advance Authorization
 Annual Advance Authorization
 Intermediate Advance Authorization
 Duty Free Import Authorization
 Duty Entitlement Passbook Scheme (D.E.P.B)
 Duty Drawback
 Assessable Value
 Basic Duty
 Additional Duty
 Special Additional Duty
 Education Cess
 Assessment
 Advance Release Order
 Back to back Letter of Credit
Chapter 8 : DEEMED EXPORTS

“Deemed Exports” refers to those

transactions in which the goods supplied
do not leave the country and the
payment for such supplies is received
either in Indian rupees or in free foreign
exchange.
 DUTY DRAWBACK

Duty Drawback

Is a Reimbursement of

Import Duty Excise Duty

Paid on Inputs

Used in the Manufacture of Export

Products
 BRAND RATE

AIR S.B.R

DBK I, II, III

ADVANCE AUTHORISATION
Advance Authorization

Is a Facility

To Import Inputs

Used Required

In the Manufacture of Export Product

Without Payment of Import Duty

Subject to 15% Value Addition

DUTY FREE IMPORT AUTHORIZATION
Duty Free Import Authorization

Is A Pre / Post Export Facility

To Import Inputs

Used In Manufacturer of Export product

Without Payment Of Import Duty

Subject To 20% Value Addition
DUTY ENTITLEMENT PASSBOOK
D.E.P.B

Is Notional Credit Given

By Customs

As % of F.O.B. Value Of Exports

To Be Utilized

Against Payment Of Import Duty

For Any Product
ADVANCE AUTHORISATION
Advance Authorization

Is a Facility

To Import Inputs

Used Required

In the Manufacture of Export Product

Without Payment of Import Duty

Subject to 15% Value Addition

 ADVANCE AUTHORIZATION SCHEME
Features
 It is a Pre Export Incentive
 The facility available to Merchant Exporter, Manufacturer Exporter.
 The facility available to supporting Manufacturer and Co-Licensee
 The Scheme provides Exemption from Basic, Additional Duty.
 If any product attracts Antidumping Duty, the same too is not leviable.

 15% Value Addition required.

 Duty Free Import of Mandatory Spares upto 10% of CIF value of the license
permitted.
 ADVANCE LICENCE AUTHORIZATION
SCHEME

 Facility available for Free of Cost material and New Comers.

 The facility of prior Exports available.

 Records of Utilization of Materials to be maintained under Appendix 23.

 Initial validity period of Authorization is 24 months.

 The entitlement under Advance Authorization for Annual Requirement

shall be upto 300% of the FOB value of Physical Export and/or FOR
value of Deemed Exports in preceding licensing year or Rs. 1 Crore
whichever is higher.
ADVANCE AUTHORISATION CORRELATION

 DUTY DRAWBACK
 EPCG SCHEME
 DEEMED EXPORTS
 FEMA
 ADVANCE INTERMEDIATE AUTHORISATION
 ADVANCE RELEASE ORDER (ARO)
 BACK TO BACK LETTER OF CREDIT
 CUSTOMS
 INDUSTRIAL POLICY
 Admissibility of Drawback
4.1.14 (FTP)
In case of an Advance Authorization,
drawback shall be available for any duty
paid material, whether imported or
indigenous, used in goods exported, as per
drawback rate fixed by DoR, Ministry of
Finance (Directorate of Drawback).
Drawback allowed shall be mentioned in
Authorization.
DUTY FREE IMPORT AUTHORIZATION
Duty Free Import Authorization

Is A Pre / Post Export Facility

To Import Inputs

Used In Manufacturer of Export product

Without Payment Of Import Duty

Subject To 20% Value Addition
 DUTY FREE IMPORT AUTHORIZATION
Features
 It is a Pre / Post Export Incentive.
 It permits Duty Free Import of Inputs used in the Manufacture of Export Product.
 The Benefit is available only against export of those products where SION are
Fixed.
 It requires a minimum Value Addition of 20%.
 After fulfillment of Export obligation, request for transferability can be made to
the Regional Authority.
 No CENVAT Credit Facility shall be available for inputs either imported or
procured indigenously against the Authorization.
 The Drawback shall be available in respect of any Duty paid material.
DUTY ENTITLEMENT PASSBOOK
D.E.P.B

Is Notional Credit Given

By Customs

As % of F.O.B. Value Of Exports

To Be Utilized

Against Payment Of Import Duty

For Any Product
 DUTY ENTITLEMENT PASSBOOK

Features
 It is a post export incentive
 The minimum value addition required is 25%.
 It is not subject to ‘Actual User Condition’.
 No duplicate of DEPB can be issued if original is lost.
 DEPB can be issued only against export of those items where
input/output norms have been notified.
 The DEPB shall be valid for a period of 24 months from the Date
of Issue.
 CUSTOMS
AND
ADVANCE AUTHORISATION
 ORGANIZATION CHART
Minister of Finance

Secretary Finance

Secretary Revenue Secretary Expenditure

CBDT Central Board of Excise & Customs

Central Excise Customs

Appraising
Preventive

Air Sea Land Appeals

 STRUCTURE OF CUSTOMS DEPARTMENT
Minister of Finance

Secretary Revenue

Central Board of Excise & Customs

Commissionerates of Customs

Mumbai Kolkatta Chennai Bangalore Delhi, etc.

Principal Commissioner of Customs

Commissioner

Imp Exp Appeals Cofe. Admn

Adj. Prev.
.

Addl./ Jt. Commissioner /Dy. Commissioner

Asst. Commissioner

Appraiser Staff
 STRUCTURE OF CUSTOMS
TARIFF
Customs Tariff Act, 1975

Gen. Rules of Gen.Exemption 1st SCH SCH - II Annex.

Int. (No. 1 to 132) (I to XXV)
(Rule 1 to 6) Sections (XXI)

Chapters

Ch. 1 to 98

Notes:
1. Each section is preceded by “Section Notes”
2. Each chapter is preceded by “Chapter Notes”
3. Each chapter is divided into “Headings” & “Sub-Headings”
4. Customs Tariff Classifications are eight digit numbers.
 IMPORT DUTIES
 In India Import Duties are levied pursuant to the Provisions contained
under Customs Tariff Act, 1976
 Following are the types of import duties applicable:
a) Basic Import Duty
This is levied under Sec 2 of Customs Tariff Act, 1975.
b) Additional Duty/ Countervailing Duty
This is levied under Sec 3 of Customs Tariff Act, 1975. It is equivalent
to the Central Excise Duty leviable on like goods manufactured in India.
c) Special Additional Duty.

c) Education Cess.
 ASSESSABLE VALUE
 All Import Duties are levied based on Assessable Value
 Assessable Value is the sum total of the following:
 CIF Value of Import Consignment
 Local Agency Commission if paid in India
 Loading by Customs
 1% - “Landing Charges”
 Other pre-importation cost
Note: All Pre Importation Costs are included for Assessable Value
purpose and all Post Importation Costs are excluded.
 ADJUDICATION
STEPS
1) QUERY MEMO
2) REPLY TO QUERY MEMO
3) PERSONAL HEARING
4) DECISION
NOTE
Conclude the reply with following 2 standard
phrases:
a) We do not want Show Cause Notice
b) We are desirous of being heard in person.
 SUBMISSIONS

CONTENTS
PART A - FACTS OF THE CASE

PART B – GROUNDS
 NOTIFICATION No.
93/2004-CUSTOMS DATED
10-09-2004
REDUCTION IN EXPORT DOCUMENTATION—ABOLITION OF VARIOUS
DECLARATIONS—REG.
[M.F. (DR), CIRCULAR NO. 34/2005-CUS., (F. NO. 609/132/2004-
DBK), DT.5.8.2005] .

The undersigned is directed to invite your attention to the above

mentioned subject and to say that in the wake of representations from the
trade and industry that the present export documentation procedure is
complex and cumbersome and that under the system the exporters are
required to submit a large number of documents and declarations to the
Customs, causing delays and adding to the transaction cost, the
Government had set up a Sub-Committee under the chairmanship of the
Chief Commissioner of Customs, Delhi to study the problem in all its
aspects and make recommendations.
The Sub-Committee was a multi disciplinary group and consisted of
representatives from the Customs, DGFT, RBI, Federation of Indian
Export Organizations (FIEO) and Delhi Exporters Association. After a
careful scrutiny of the export documentation requirements under EDI
system, the Sub-Committee has found that the documents required
for customs purposes are only five viz. commercial invoice, packing
list, ARE-1, self declaration form and declarations pertaining to
various export promotion schemes. These documents are essential
documents containing vital information required for various purposes
by various agencies. The Sub-Committee has, therefore,
recommended that these documents can not be dispensed with.
 There are, however, a number of declarations presently being
filed by the exporters for exports under drawback and various
export promotion schemes. The Subcommittee has observed
that many such declarations have outlived their utility and
presently do not serve any useful purpose. The Subcommittee
has, therefore, recommended that these declarations should be
done away with.

2. The recommendations of the Subcommittee have been

examined by the Board and in pursuance of the decision of the
Board, it has been decided to abolish a number of declarations
as enumerated below:
2.1. Exports under Drawback Scheme
The declarations being abolished are those relating to availing/non-availing of the rebate of
duty under Rules 18 & 19 of the Central Excise Rules, the goods manufactured/not
manufactured and exported against an Advance License, the goods not manufactured or
exported after availing of the facility under DEPB scheme, the present market value of goods,
the export value of goods being not less than the total value of imported materials used in the
manufacture of such goods, the market price of export goods being not less than the
drawback amount being claimed, the drawback being claimed is more than 1% of FOB
value/less than 1% of the FOB value but more than Rs. 500 against the shipping bill, the
payment of duties in respect of containers, packing materials or other materials used in the
manufacture and packing of export products j and the goods being exported under bond or
claim for rebate of duty. The above declarations are presently listed at SI. Nos.3, 4, 5, 9, 10,
11, j 12, & 14 of Appendix-III and SI. No. 2 of Appendix IV as prescribed vide I this office
letter No. 609/99/2002-DBK dated 29.5.2002.
2.2. Exports under DEPB Scheme
The declarations being abolished are those relating to not claiming the
benefits-under Engineering Products Export (Replenishment of Iron and
Steel Intermediates) Scheme and duty drawback, of conversion of DEPB
Shipping Bill into Drawback/DEEC Shipping Bill and of credit in \ respect of
additional duty debited from DEPB, the fact of goods being; exported under
DEPB Scheme, the present market value of goods, DEPB benefits being
claimed not exceeding 50% of the present market value of export goods,
usage of preservatives in export products and export products having
been obtained from aqua culture sources. The above
declarations are presently listed at SI. Nos. 2-7, 11, 12, 14 & 15 of
Annexure-F as DEPB declaration.
2.3. Export under DEEC/ DFRC Scheme
The declarations being abolished are those relating to export goods corresponding to the
goods specified in DEEC License and availing/non-availing of benefits under Rule 191-A and
191-B of the Central! Excise Rules, 1944. The said declarations are presently listed at SI.
Nos. l(a) & l(c) of the Annexure-II of the shipping bill.
3. Non EDI Stations
It is clarified that a few declarations viz. the goods manufactured/not manufactured and
exported against an Advance License, the goods not manufactured or exported after availing
the facility under the DEPB scheme (SI. Nos. 4 and 5 of Appendix III as prescribed by this
office letter supra), not claiming the benefits under duty drawback for exports under DEPB
(SI. No. 4 of Annexure F as DEPB declaration) and the declaration about export goods
corresponding to the goods specified in DEEC License (SI. No. l(a) of the Annexure-II of the
shipping bill) for exports under DEEC/DFRC license, although abolished in respect of exports
under EDI,will continue to be filed at non-EDI stations until such time that these stations are
brought under EDI. Barring these exceptions all declarations are abolished for exports under
schemes indicated in paragraph 3 above.
4. It is further clarified that the declaration dealing with no change in the
manufacturing formula and quantum per unit imported material (SI. No. 2 of
Appendix III as prescribed by this office letter supra) is required to be given
only for fixation of brand rate of duty drawback under Rule 6 or 7 of the
Drawback Rules, 1995 and, therefore, exporters need not give this
declaration for exports under claim of All Industry Rate of Duty drawback.
5. A suitable Draft Notice and Standing Order may be issued for the guidance of
trade and staff. Difficulties faced, if any, in implementation of the circular may
be brought to the notice of the Board at an early date.
CASE LAWS
 2006(137) ECR 0299 (Tri-Mumbai)
2006 (111) ECC 0299
Manu / C M / 0299 /2006

IN THE CUSTOMS, EXCISE & SERVICE TAX APPELLATE TRIBUNAL WEST

ZONAL BENCH AT MUMBAI

M/s Galaxy Surfactants Ltd. and Sadanand Shetty

V/s
Commissioner of Customs (EP), Mumbai

APPLICATION NO:C/S/1429 And 1471,1430 And 1470/06, 1431 And.01469/06

And Appeal No. C / 518 And 528 ,519 And 527, 520 And 526/ 06

DECIDED ON : 24.07.2006

PRIOR HISTORY: Arising out of Order in original No.(1) 06/06/CAC/CC/NRN

dated 19th January,2006,passed by Commissioner of Customs (EP), Mumbai
Judges
Archana Wadhwa Member( judicial) and K.K. Agarwal, Member (Technical)
Demand – Use of imported input – violation of condition No. (vii)
of notification No.30/97- Transfer of Impugned goods to another
unit-As also the same use in manufacture of finished products
sold in domestic market-Held ,export obligation fulfilled –
As long as export obligation has been met it is immaterial
whether goods were first used for domestic clearances and
exports were made later on or vice versa – As also said material
used in appellant's own unit – No violation of condition No. (vii)
of notification No. 30/97 – Appeal allowed – Stay petition
disposed of
 2005 (127) ECR 271 BOMBAY
IN THE HIGH COURT OF JUDICATURE AT BOMBAY
A.V.INDUSTRIES
V/S
UNION OF INDIA
Held:
EXIM – Show Cause Notice – Issuance – Advance License-
Petitioner Importing Raw Material under DEEC Scheme –
Deletion of value restrictions from License – Inadvertent lapse
on part of DGFT – On the basis of deletion, Petitioner made
imports believing that there were no value restrictions- Deletion
of the condition even if a Bona fide error or misconstruction of
import policy, the Petitioner cannot be made to suffer –
Issuance of Show Cause Notice unjustified - Show Cause
Notice quashed an set aside – Respondents not entitled to take
impugned action – Classification does not apply to the case qua
license and import.
Ref: Cen & C:18th October 2005 (127) p.g.271-274
 2005 (127) ECR 358 (Tri. – Chennai)
In the Customs, Excise and Service Tax Appellate Tribunal
South Zonal Bench
CC, Chennai
V/s
Sharda Castings Ltd. & Anr.
Held:
Valuation (Customs) – Advance License- Transaction Value –
Enhancement – Department demanded enhancement on the
basis of the custom recorded price of scrap imported and
cleared through the same port – practice of loading of price of
imported goods without reference to quantity, place and time
of import has to be rejected when it is contrary to statutory
provisions – Transaction value has to be discarded on valid
grounds – Impugned order upheld.
Ref: Cen & C:18th October 2005 (127) p.g 358- 359
 2007 (149) ECR 0026 (Tri.- Chennai)
2007 (123) ECC 0026
MANU / CE / 0026 / 2007
IN THE CUSTOMS, EXCISE AND SERVICE TAX APPELLATE TRIBUNAL,
SOUTH ZONAL BENCH, CHENNAI

Seshasayee Paper and Boards Ltd.

v.
CCE, Salem

APPEAL NO: E/ 799/2006

DECIDED ON: 01.08.2007
PRIOR HISTORY : Arising out of Order-in-Original No: 6/2006 (Commissioner)
dated 28th July, 2006 passed by the Commissioner of Central Excise Salem

Judges

P.G. Chacko, Member (Judicial) and P. Karthikeyan, Member (Technical)

Excise – CENVAT – Basic Customs Duty (BCD) –
Countervailing duty (CVD) – DEPB license – Rule 9(1) of
the CENVAT Credit Rules, 2004 – Notification No. 96/04 –
Cus – Board’s Circular No. 59/2004 – Cus. Dated
21.10.2004 – Appellants were manufacturers of paper and
paper boards for which they imported some of the inputs
on payment of Basic Customs Duty and countervailing duty
– payment of said duties were made by way of debits in
DEPB License – Respondent objected to availment of
credit on two grounds – that if a credit could be availed only
on an amount of duty paid in cash & such availment was
not permissible in the absence of a document specified
under Rule 9(1)- Issue – Whether the importer was entitled
to take CENVAT credit of the amount debited in DEPB
towards payment of CVD and whether such availment was
permissible in the absence of a document specified under
Rule 9(1)
Held, credit cannot be denied on grounds that
duty was not paid in cash – this tantamount to
flouting condition (vi) of Notification No. 96/04 –
Cus. As also Board’s Circulars in clarifications
thereof – The credits in question are of the
amounts of debits recorded in the Bills of Entry
and certified by the proper officer – It is not in
dispute that a Bill of Entry is one of the
documents specified under Rule 9(1) of the CCR
2004 for the purpose of availment of CENVAT
credit – Therefore, appellants are entitled to
CENVAT credit of the amounts debited in DEPB
as certified in the Bills of Entry – Appeal allowed.
CONCLUSION
 DO’S & DON’T S
FOR ADVANCE AUTHORISATION

 Is a preferred Export Incentive where Import content in Export Product is higher.

 The quantity of inputs involved is substantial.

 If it is proposed to combine Advance Autho. with Deemed Exports, the quantities to be

sourced locally must be substantial.

 While deciding on Advance Autho., local purchase price must be compared with CIF
value of Import + Basic Import Duty.

 At every stage transaction cost of operating under the scheme should be compared
with other Export Incentive schemes.

 There should be good internal systems to track and preserve the relevant documents
from application stage to the stage of redemption.
[

 It is preferable if imports are effected after Export under Advance Authorisation

 ADVANCE AUTHORISATION
VS
ANNUAL ADVANCE AUTHORISATION

 Annual Advance Autho. is preferable where the number of Advance Authos. in a licensing
year ranges from 5 to 10 Authos.
 The transaction cost under Annual Advance Autho. is lower as compared to Advance
Authorization.
 Annual Advance Autho. is preferable where flow of order is continuous and product of export
involved is same.
 The Annual Advance Autho. is preferable where product of export and import are
standardized.
 Advance Autho. is suitable where Export orders are on an ad- hoc basis.
 The option of applying for Advance Autho. under self declaration basis is not available under
Annual Advance Authorization.
 The flexibility in operation is more under Advance Autho. than Annual Advance
Authorization.
 Advance Authorization Vs. DBK
 Advance Autho. is preferable where Import content is in excess of
25% of value of FOB value of exports
 Advance Autho. is preferable where FOB value of exports is high
 DBK is preferable where indigenous content of inputs if high in
export product
 DBK is preferable where FOB value of exports is lower
 DBK is preferable where All Industry Rate of Drawback is fixed.
 Advance Autho. is preferable where product of export is non
standardized
 Advance Authorization is preferable where SION is fixed.
 In case of Deemed export, DBK is preferable where product supply
is based on indigenous content, or the supply is effected under
ARO or against Back to Back Letter of Credit.
 2.42
FREE MOVEMENT OF EXPORT GOODS

Consignment of items meant for exports shall

not be withheld / delayed for any reason by
any agency of the Central/ State Government.
In case of doubt the authorities concerned
may ask for an undertaking from the exporter.
 2.42.1 : NO SEIZURE OF STOCK

No Seizure of Stock shall be made by any agency so

as to disrupt the manufacturing activity and delivery
schedule of Export goods. In exceptional case, the
concerned agency may seize the stock on the basis
of Prima Facie evidence. However, such Seizure
should be lifted within 7 days
 2.44
REGISTRATION – CUM – MEMBERSHIP
CERTIFICATE

Any person applying for

1. A Authorization / Certificate/ Permission to Import/ Export,
[except items listed as Restricted Items in ITC(HS)] or
2. Any other benefit or concession under this Policy shall be
required to furnish registration – cum – membership
certificate (RCMC) granted by the competent authority in
accordance with the procedure specified in Handbook
Vol.1unless specifically exempted under the Policy.
 USEFUL WEBSITES
ORGANISATIONS WEBSITE

Foreign Exchange www.fedai.org.in

Dealers Association of
India
Department of www.commerce.nic.in
Commerce & Industry
Foreign Trade Policy www.dgftcom.nic.in

List Of Export www.indianexportersindex.

Promotion Council In
India
com
List Of Export http://cyberjournalist.org.in/
Promotion Council,
Boards etc
linkst.html
 World Trade www.wto.org
Organization

Foreign Exchange www.femaonline.com

Management Act

Reserve Bank Of India www.rbi.org.in

Federation of Indian www.ficci.com
Chamber of Commerce &
Industry
Asian Clearing Union – www.asainclearingunion.org
ACU

Informative Site www.ieport.com

Country Profiles-Good http://www.indianindustry.com/
Informative Site country-profiles/south-africa.html
Legal Aspects www.legallyindia.com
 SAARC www.sdc.gov.in

International www.iccwbo.org
Chamber of Commerce

Central Board http://www.cbec.gov.in

of
Excise and Customs

Zonal joint http://zjdgft.tn.nic.in

Directorate General
of Foreign Trade

Indian Trade Promotion http://www.indiatradefair.

Organization.
com/index.html
Market Development http://www.laghuudyog.
Assistant – MDA- for
SSI Unit
com/sido/SSIMDA.Htm
 Department of http://www.commerce.nic.
Commerce – Export
Import Data bank
in/eidb/ecomg.asp
Federation of Indian www.fieo.com
Export Organization

International Chamber www.iccindiaonline.org

Of
Commerce –India

World Trade Centre www.wtcmumbai.org

Department of http://dsir.nic.in/advt/
Scientific & Industrial
Research
dsirad1.htm

Informative Site www.eximkey.com

LIST OF BOOKS RECOMMENDED
 Set of Foreign Trade Policy Books – By R. K Jain
 Customs Tariff – By R. K Jain
 Customs Law Manual – By R. K Jain
 Export – What, Where & How – By Parasram
 Exports Do It Yourself – By M. I Mahajan
 Drawback Schedule – Current Publication
 DEPB Schedule – Current Publication
 Master Circular on Imports
 Master Circular on Exports
 Customs Law Guide – By R. Gururaj
S.M. Chaturvedi
Legal – Corporate Advisor
201,Siddhi Kanchan Vinayak Apts,
(Opp. Mantri Venture) , Bangur Nagar ,
Goregaon (W) ,Mumbai- 400 090
Tel - 091-022-65249155,
Mobile - 9820284160
Email-shashi_chaturvedi@hotmail.com