The Office of the Commissioner of Customs, Chennai-II (Import), operating under the Ministry of Finance, Department of Revenue, Government of India, has introduced a new set of Standard Operating Procedures (SOP) for the monitoring of Export obligation fulfillment. This pertains to the Export Promotion Capital Goods (EPCG) scheme and the Advance Authorization scheme. In this article, we will delve into the details of these SOPs and their implications for trade and stakeholders.
Export Obligation Monitoring Cell (EODC)
The Export Obligation Monitoring Cell (EODC) plays a crucial role in overseeing export obligations under both the EPCG and Advance Authorization Schemes. Under these schemes, duty exemption is provided, subject to the conditions specified in the Foreign Trade Policy.
Installation Certificate for EPCG Scheme
For the EPCG scheme, importers are required to submit an installation certificate within six months of completing capital goods imports. In cases of spares imports, this certificate must be submitted within three years of import completion. The correctness of these certificates, especially those issued by Chartered Engineers, will be randomly verified through the relevant GST Division. Importers/exporters selected for verification will be informed via email.
Time-Bound Export Obligations
Both the EPCG and Advance Authorization schemes require exporters to fulfill their export obligations within specified time limits, or within extended periods if permitted. Failure to meet these obligations can result in the payment of duties, interest, and penalties.
Payment of Duties for Unfulfilled Obligations
If block-wise export obligations are not met as prescribed, importers are obligated to pay the proportional duty for the unfulfilled portion, along with specified interest. This payment should be made within three months from the block’s expiry.
Notification for Submission of Proof
As per the Board’s instructions, defaulters may receive notices for the submission of proof of discharge of obligations. Importers/exporters are encouraged to interact with the Regional Authorities (RA) of the Directorate General of Foreign Trade (DGFT) for cases pending with them. In cases where proof is not submitted for EODC/redemption certificates, enforcement action, including the enforcement of bonds/guarantees, may be initiated.
Cases with Deficiency Letters
For cases where the DGFT issues deficiency letters for customs duty payments with applicable interest due to excess imports, duty quantification details will be provided to importers/exporters/customs brokers to facilitate payments. The same information will also be communicated to the RA of DGFT to ensure the issuance of EODC.
Confiscation and Penalties
Non-fulfillment of post-import conditions can lead to confiscation of goods under Section 111(o) of the Customs Act 1962, with penalties levied under Section 112(a) of the same act. SCNs (Show Cause Notices) may be issued to determine confiscation or penalty liabilities. Any imposed redemption fines and penalties are subject to the appellate process and decisions.
Conclusion
The introduction of these Standard Operating Procedures (SOPs) by the Chennai-II (Import) Commissionerate marks a significant step towards streamlining export obligation monitoring under the EPCG and Advance Authorization schemes. Importers, exporters, and customs brokers should familiarize themselves with these procedures and ensure compliance to avoid potential duty payments, interest, and penalties. The proactive approach of issuing notices and quantification details aims to facilitate the discharge of obligations and maintain transparency in trade practices. Customs associations and stakeholders are encouraged to spread awareness of these developments among their members, promoting a better understanding of these regulations within the trade community.
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Government of India
Ministry of Finance
Department of Revenue
Office of the Commissioner of Customs, Chennai-II (Import)
Custom House, No. 60, Rajaji Salai, Chennai – 600 001.
File No.: CUS/AG/PN/21/2023-A/M Date: 08-09-2023
Public Notice No. 32/2023
Sub: Standard Operating Procedures (SOP) regarding monitoring of Export obligation fulfilment under EPCG and Advance authorization scheme-Reg.
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In order to streamline the procedure regarding monitoring of Export obligation fulfillment under EPCG & Advance authorization scheme and facilitate trade, following standard operating procedure (SOP) regarding Export obligation Monitoring Cell (EODC) is notified with immediate effect:
1. Export Obligation Monitoring Cell (EODC) is monitoring the export obligations under EPCG and Advance Authorisation Schemes. The Notification No. 26/ 2023 – Customs dated 01.04.2023 provides duty exemption under EPCG scheme subject to the conditions prescribed in terms of Chapter 5 of the Foreign Trade Policy and Notification No. 21/2023 — Customs dated 01.04.2023 provides duty exemption under Advance authorization license subject to the conditions prescribed in terms of Chapter 4 of the Foreign Trade Policy.
2. In case of EPCG scheme, the installation certificate from the jurisdictional Asst./Dy. Commissioner of GST or independent Chartered Engineer is to be submitted by importer within six months of completion of imports of capital goods. In case of imports of spares, installation certificate is to be submitted within three years of completion of imports. In case the installation certificate is issued by Chartered Engineer, the correctness of the installation certificates shall be verified on a random basis through concerned GST Division. This random selection will be decided by ADC (EODC) and the importer/exporter will be informed through e-mail stating that the case is selected for detailed checking.
3. Relevant Customs Notifications governing implementation of EPCG and Advance authorisation scheme, provides that the exporter should discharge the export obligation within the specified time limit or with such extended period as may be permitted. The Notification issued under the EPCG scheme also stipulates that in case of non-fulfilment of block-wise export obligation, the importer should pay the proportional duty of unfulfilled portion of export obligation along with specified interest from the date of clearance of the goods and such payments needs to be made within 03 months from the expiry of said block.
4. As per Board’s Instruction dated 14.10.2016 issued vide F.No-605/71/2015-DBK, the provisions of para 5.14(c) of Handbook of Procedures 2015-20 (Para 5.13(c) Handbook of Procedures, 2023) provides that, “Where EO of the first block is not fulfilled in terms of the para 5.14(a) of Handbook of Procedures 2015-20 (Para 5.13(a) Handbook of Procedures, 2023), except in cases where the EO prescribed for the first block is extended by the Regional Authority subject to payment of composition fee of 2% on duty saved amount proportionate to unfulfilled portion of EO pertaining to the block, the authorization holder shall, within 03 months from the expiry of the block, pay duties of Customs (along with applicable interest as notified by Department of Revenue) proportionate to duty saved amount on total unfulfilled EO of the first block”.
5. Further, in view of the time taken by DGFT in issuance of EODC, it has been provided in Board’s Circular No 16/2017-Cus, dated 02.05.2017 issued vide F. No. 605/85/2016-DBK, that the practise of issuance of SCN at the first stage itself may be replaced by issuing of simple notice to defaulters. Accordingly, EODC section shall issue simple notice to the licence/authorization holders for submission of proof of discharge of Relevant Customs Notifications governing implementation of EPCG and Advance Authorisation obligations. In case where the licence/authorization holder submits proof of their application having been submitted to DGFT, the matter may be kept in abeyance till the same is decided by DGFT. Regular interaction with RA’s of DGFT should be used to pursue such cases. However, in cases where the licence/authorization holder fails to submit the proof of their application for EODC/redemption certificate, extension/clubbing etc., action for recovery may be initiated by enforcement of Bond/BG. In view of above, it is evident that only where the license holder submits evidence that there is no action pending on their part and the action is pending on the part of DGFT, should recovery action be kept in abeyance.
5.1 The cases where deficiency letter is issued by RA’s of DGFT for payment of customs duties with applicable interest for excess import, duty quantification should be provided to importer / exporter / Customs Brokers for making payments. Further, same needs to be communicated to RA’s of DGFT for issuance of EODC.
5.2 In all other cases where the DGFT has put the licenses under Denied Entity List (DEL) or Show Cause Notice (SCN)/ Order-in-Original is issued recovery action to be initiated by way of issuance of SCN.
6. As per the conditions of the said Notifications, the importer is legally bound to produce evidence regarding fulfillment of export obligation against the said Licence within 30 days of the date of Expiry of the Export Obligation Period. Therefore, the importer is liable to pay duty along with interest at the applicable rate in respect of the goods (imported under such export promotion schemes) in terms of the conditions of the said Notification read with conditions of the Bond executed by the importer in terms of Section 143 of the Customs Act read with condition of such Advance Authorisations / EPCG Licences. Section 143(3) of the Customs Act provides that if the thing is not done within the time specified in the bond, the AC or DC of Customs shall, without prejudice to any other action that may be taken under this Act or any other law for the time being in force, be entitled to proceed upon the bond in accordance with law. Accordingly, it is evident that in case of default, the amount of duty along with interest is payable immediately by the license holder. For this purpose, if such amount is not paid immediately on demand by customs, the same is to be recovered by encashment of securities provided or in terms of section 142 of the Customs Act 1962 which also includes that such amount can be recovered by detaining and selling any goods which are under the control of officer of Customs.
7. It is a settled law that in case of non-fulfilment of post import conditions, the goods are liable for confiscation u/s 111(o) of the Customs act 1962 and penalty is leviable u/s 112(a) of the said act. Accordingly, in cases where goods appear liable for confiscation or license holder / concerned person appear liable to penalty, SCNs may be issued for the purpose of determining said aspects i.e. liability to confiscation or imposition of penalty. The amount of redemption fine and penalty imposed vide order of the adjudicating authority, if any, is recoverable subject to appellate procedure / decisions.
8. All Trade/ Customs broker associations are requested to take note and publicize the contents of this Public Notice among their member/constituents.
9.. This Public Notice should be considered as Standing Order for the purpose of Officers/Staff of Chennai II (Import) Commissionerate, Chennai.
10. Difficulties, if any faced by the Trade/Importers/Customs Brokers in implementation of the above may be brought to notice of the undersigned through email: [email protected].
Signed by
KSVV Prasad
Date: 08-09-2023 15:51:31
Commissioner of Customs, Chennai-II
To
All Concerned.
Copy to:
1. The Chief Commissioner of Customs, Chennai Zone for kind information.
2. All the Pr. Commissioners/Commissioners of Customs, Customs Zone
3. All the ADC/JC/Dy/Assistant Commissioners of Customs, Chennai-II
4. Deputy Commissioner (EDI) for uploading on Chennai Customs website.
5. CHS- for displaying Notice Board.
6. Master file
