Circular No. 52/95-Custom Duty Dated 25/5/1995

Subject : Guidelines for execution of Bank Guarantee under Duty Exemption Scheme and E.P.C.G. Scheme

With the changes effected in the Duty Exemption Scheme and the Export Promotion Capital Goods (EPCG) Scheme in the revised edition of the Exim Policy published on 31st March, 1995 and the revised Handbook of Procedure, Vol. I published on 1st May, 1995, the Bond cum surety/ security under these Schemes is required to be executed by the importers with the Customs authorities. Accordingly, provisions for the same have been incorporated in the Notification No. 79/95-Customs, 80-95-Customs and 81/95-Customs all dated 31st March, 1995 regarding import under Duty Exemption Scheme. Similarly notification under E.P.C.G. Scheme are also proposed to be revised shortly incorporating similar provisions for execution of bond with surety or security.

2.    In order to ensure that there is uniformity in the quantum of Bank Guarantee to be given as surely to bond, the Board has decided to prescribe following guidelines.

3.1    It has been decided that surety to be given with the bond shall always be in the form of Bank Guarantee, Bond to be executed should cover the duty leviable on the goods but for the exemption (i.e.basis duty and additional duty leviable on the goods on merits minus additional duty actually paid). For example if basic duty on the goods imported is 50% and additional duty is 20%, the effective duty recoverable on imports shall be 50% plus 20% on 150% i.e. 80% of assessable value. Since additional duty will actually be recoverable only at the rate of 20% on assessable value (basic Customs duty being exempt), the bond to be executed shall be for the difference between 80% and 20% i.e. 60% of the assessable value. However, the quantum of Bank Guarantee to be executed should be as under :-

3.2    Quantum of bank guarantee prescribed above should normally be followed. Where however the Collector feels that considering past track record of the licence a higher bank guarantee is justified on account of the risks to revenue, he may take such higher bank guarantee amounts. The grounds may be suitably recorded on file. Normally, such higher quantum of bank guarantee would be justified in cases where the party have huge amounts outstanding against them or have repeated cases of evasion of duty against them, etc.

4.1    Under E.P.C.G. Scheme also bond should be insisted upon for the difference between the duty leviable on goods on merits and the duty actually paid on importation. However, the Bank Guarantee to the extent of 50% of the duty saved should, normally be sufficient. Star Trading House, Super Star Trading House, Trading Houses & Public Sector Undertaking may be exempted from Bank Guarantee. The bond and Bank Guarantee should be kept alive for the full period of the export obligation plus one year i.e. for a total six years for import at 15% under E.P.C.G. Scheme and for a period of 9 years for import at zero duty.

4.2    The provision with regard to higher Bank Guarantee in the situations referred to in Para 3.2 shall also be applicable under E. P.C.G. Scheme.

4.3    Where however the D.G.F.T. has indicated a higher amount of bank guarantee to be taken on the Licence then the bank guarantee should be taken for such higher amount.

5.    Custom Houses may issue suitable standing order for information of the staff and Public Notice for information of the Trade. Copies of the standing order/ Public Notice may please by forwarded to Commissioner (Drawback) and Director General of Inspection (Customs and Central Excise).