Circular No. 45/2007-Cus.
Government of India
Ministry of Finance
Department of Revenue
19th December, 2007
All Chief Commissioners of Customs,
All Chief Commissioners of Customs & Central Excise.
All Commissioners of Customs/Customs (Prev.)/Customs &
Central Excise/Central Excise.
DG, CEIB, New Delhi.
DG, Central Excise Intelligence/ DGRI/ DG (Export Promotion) /DGI/ DG,
NACEN/ DG(Systems & Data Management),
Chief Departmental Representative, Customs, Excise & Service Tax
Appellate Tribunal, West Block-2, R.K. Puram, N. Delhi
Subject : Misuse of Target Plus Scheme (TPS) – Scope and Coverage of Goods to be imported under TPS – Reg.
I am directed to invite your attention to the above-mentioned subject and to say that in recent months several cases of alleged misuse of the benefits under TPS have been noticed by the DRI. It has been found that the items imported under the TPS have had no ‘broad nexus’ with the products exported and neither these can be considered as ‘inputs’ for the manufacture of export products. Further, the investigations revealed that the imported goods were subsequently sold in the local market in violations of the provisions of the TPS. The DRI suspects that the above mentioned modus-operandi may be widespread and not limited only to a few cases.
4. The matter has been examined by the Board. In terms of para 3.7.6 of the Foreign Trade Policy (FTP), the duty credit earned under the TPS may be used for import of any inputs, capital goods including spares, office equipment, professional equipment and office furniture provided the same are freely importable, by an importer for his own use or for the use of his supporting manufacturer(s) as declared in ‘Aayat Niryat’ Form. Paragraph 3.2.5(III) of Handbook of Procedures 2005-06 provides that the licensing authority shall at the time of issuance of the duty credit entitlement certificate endorse the name of the associate manufacturer/supporting manufacturer/job-worker on the certificate as declared by the applicant. Further, in terms of the said paragraph, the goods imported under TPS shall have a ‘broad nexus’ with the products exported. In terms of condition no.3 of notification Nos. 32/2009-Cus dated 8.4.2005 and 73/2006-Cus. dated10.7.2006 the certificate and the goods imported against it shall not be transferred or sold.
3. The Board had clarified, vide Circular No.21/2007-Cus. dated 21.5.2007, that the words ‘inputs’ and ‘use’ may not be brushed aside and have to be in focus for the intended import. Together, these words indicate that the item sought to be imported should be an ‘input’ in the manufacture of the exported products which is required for ‘use’ by the exporter or the supporting manufacturer, as the case may be. For this purpose, the intended input must have a relationship with the export product. Whereas SION will act as a prima facie evidence of ‘inputs’, the exporter is not debarred from satisfying the authorities that there is a ‘broad nexus’ between the intended import item as an ‘input’ with the export product, both falling within the same product group. It was also clarified that the holder of TPS certificate is permitted to import an item under the TPS and get the same processed into possible resultant products only if the same has a ‘broad nexus’ with the product group as an ‘input’ in the export product and is required to be used as an ‘input’ in the product exported for which the TPS benefit is sought.
4. It is further clarified that under the TPS the exporter can import, within the entitlement, items in quantities in excess of that mentioned in SION or other items in the product group provided that, in either case, they form ‘inputs’ and are ‘used’ by him.
5. In view of the position explained above, imports under TPS may be carefully scrutinized with reference to the provisions of the FTP, Handbook of Procedures, the customs notifications and Board’s Circular referred to above so as to ensure that the laid down provisions regarding ‘inputs’, ‘broad nexus’ and ‘use’ and ‘supporting manufacturer(s)’ are complied with.
6. These instructions may be brought to the notice of the trade by issuing suitable Trade/Public Notices. Difficulties faced, if any in implementation of the Circular may be brought to the notice of the Board at an early date.
Receipt of this Circular may kindly be acknowledged.