Circular No. 57/2004-Cus.
21st October, 2004

Government of India
Ministry of Finance
Department of Revenue

Sub :   Eligibility of DEPB benefit on exports in cases where the inputs have been procured under DEPB Scheme-reg.

 Under the DEPB Scheme, the incidence of customs duty (basic) on the deemed import content of the export product is refunded to the exporters.  The refund is provided by way of grant of duty credit against the export product.  The credit is given at notified rates for import of raw materials, components, etc.  The DEPB and/or the items imported against it are freely transferable.

2.  In this connection, a doubt has been raised as to whether the benefit of DEPB would be available to the exports where the inputs used in the manufacture of the export product were imported on payment of duty through DEPB.  The point raised is that since no customs duty has been paid on the inputs by way of cash, the exporter will not be entitled to DEPB on export goods utilizing such inputs.

3.  The matter has been examined by the Ministry.  It is noted that the DEPB Scheme is a post export duty remission scheme, which allows neutralization of deemed import duty charges on inputs used in the export product.  Under the Scheme, the exporter first uses duty paid inputs in the manufacture of the export product and after exports he gets the duty credit at the notified rates.  Thus, instead of refund of duty in cash after exports, a scrip in the form of DEPB is issued against the export product as duty remission.  The exporter is at liberty to utilize the scrip for import of raw materials, components etc. within the credit allowed in the DEPB or he may sell it to any other exporter.

4.  In a case where the exporter sells the DEPB to another exporter, he gets cash of equivalent amount to pay customs duty on the import of raw materials and components.  In this situation, he would be entitled to DEPB on his subsequent exports.  Further, the exporter can sell the inputs imported against DEPB to another exporter for being used in export production.  In this situation also, the latter exporter will be entitled to DEPB on his exports.  Therefore, to deny the DEPB benefit to an exporter who has utilised the DEPB scrip for sourcing his own inputs is not appropriate. As such, the point raised that the  benefit of DEPB should not be allowed in a situation where the customs duty has been paid on the inputs by way of debit in DEPB is devoid of merits.

5.  It is, therefore, clarified that the benefit of DEPB Scheme should be allowed on exports even though the inputs used in the manufacture of the export product were cleared through DEPB route.   The letter F.No.605/11/2004-DBK dated 12.4.2004 of OSD
( Drawback) addressed to CC&CE, Indore stands withdrawn.

6.  A suitable Public Notice and Standing Order may be issued for the guidance of the trade and customs field formations.

 Receipt of this Circular may please be acknowledged.

       P.K. Mohanty
Joint Secretary (DBK)

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Category : Custom Duty (6986)
Type : Circulars (7777) Notifications/Circulars (31996)

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