pri Advance Authorisation /Duty Exemption Scheme: Why cheating with exporters? Advance Authorisation /Duty Exemption Scheme: Why cheating with exporters?
Rajiv Gupta

This is About Advance Authorisation (AA)/(Duty Exemption Scheme), a WTO compatible scheme used for export promotion all over the world for ages under the aegis of the WTO. Despite this scheme being in operation for more than a quarter of a century, the DGFT & CBEC pretend not to understand the intricacies of  the scheme & implement the same for the benefit of the exporters in a transparent manner through electronic data transmission. Both the DGFT & CBEC are not interested in accepting the digitized documents for the discharge of Export Obligation & redemption. To my mind the only reason is that then there will be no scope for the grant of favours beyond law, which are cash cows for the officials in position at this point of time.

Now, please see how the the scheme continued to perpetuate corruption in the system.

The exporter gives the following information in the AA application.

  1. Details of item to be exported/supplied under the Authorisation
Sl.No. ITCHS Code Export Item Name. Qty UOM FOB/FOR (Rs.) FOB/FOR (in Currency of realisation)
1 29415000 62/2441- Erythromycin Base/Erythromycin
Tech. Spec.: Pharmacopeial Grade as per buyers order
4800.000 KgA 21692160.00 403200.00 US Dollars

The data in above table effectively means is that under the subject AA, the exporter will be exporting 4800 Kg A (Kilogram Activity) of Erythromycin Base/Erythromycin under HS Code 29415000 & earn foreign exchange to the tune of US$ 403200.

This data in respect of the exports is electronically transmitted to the Customs through ICEGATE. The exporter then effects shipments under the supervision of the Customs authorities. There are two distinct procedures completed by the Customs viz. Appraising & Examination before the Let Export Order is allowed. The Customs officials permit exports in full compliance with the terms & conditions of the AA. The data at the Customs end is then collated in respect of all the shipments based on the S/Bs filed by the exporters under the application &/or transmitted individually to the DGFT. Therefore, if you will operate the EOM module on the DGFT website & key in your file number then the data of exports will get auto-populated in the EOM application.  Thus as on date, EOM can be very well completed in respect of exports through the e commerce route. However, both the DGFT as well as the CBEC are reluctant to implement that. The DGFT clearly acknowledges in FTP effective 5.6.12 in paragraph 2.45 that a secure EDI message exchange system for Shipping Bills is in operation & these documents are therefore not required to be submitted physically. Please note that the Chapter 3 entitlements are issued on the basis of data transmitted by the customs through this system only.

 Now, please see that the S/B pertaining to the shipment carries the following material information in respect of the exports.

Shipping Bill

Further, please see that the Chapter 3 entitlement application contains the following information & the entitlement is determined & issued by the software operative on the DGFT website.

(2) : Shipping bill details:

Shipping Bill Format

Thus, it is crystal clear right from the FTP/HBP legal provisions, Application for AA, S/B details & data transmitted by the Customs department to the DGFT that there is complete compliance in terms of what appears in all the documents referred to therefore there is absolutely no scope for rejecting the secured electronic data transmitted by the Customs for carrying out redemption/ Export Obligation Discharge Certificate (EODC).

Not only the above, independently the application for EODC/redemption & the Cenvat declaration authenticated by the Chartered Accountant & the e BRC uploaded by the bankers confirm complete compliance on the part of the exporter. Therefore why the Udyog Bhawan & the North Block elite mandarins hoodwink the whole nation by discarding the secured electronic data transmitted by the Customs for carrying out redemption/ EODC? Why they should pretend that they do not understand that the critical control factors like Quantity & FOB value of exports are sufficient parameters for issuance of redemption/ EODC. What is their vested interest in doing so?

Now, look at the following & let the bureaucracy answer the following truthfully:

A. Are the DGFT/CBEC saying that the legal provisions to monitor the Export Obligation are wrongly specified in the FTP/HBP ? If yes, then why they are not being amended?

B. Are the DGFT/CBEC saying that the AA application does not call for correct & complete information to monitor the Export Obligation? If yes, then why there is no action taken to remedy the situation?

C. Are the CBEC officials saying that the DGFT is not giving correct & complete information to monitor the Export Obligation while transmitting the data to the customs electronically? If yes, then why the DGFT is reluctant to carry out the amendment to remedy the position?

D. Are the DGFT officials saying that the data transmitted electronically specifying the quantity of export & FOB value of exports is not able to establish the EODC/redemption in respect of exports? If yes, then why the DGFT is reluctant to specify in public domain that what is the missing piece of information which the Customs is not willing to part?

E. Is the DGFT trying to say that the Customs officials do not discharge their responsibility diligently & they allow exports in contravention of the AA conditions? If yes, then please disclose that in how many cases the DGFT has taken up the matter for appropriate action & prosecution conducted.

It is for all to see that even a person with little common sense can very well understand that there is complete compliance by the exporter at each & every step but it is by design, the Indian bureaucracy is killing the Indian exporters by increasing their transaction costs so as to serve their own vested interest of perpetuating corrupt practices because nobody ever comes to know what goes on in the .3file & at what cost the favours are granted? Is it then difficult for the Ministry of Law, Comptroller & Auditor General or the Central Vigilance Commissioner to understand & address this? Why this cheating should be tolerated so that corruption continues unabated? It is pertinent to point out that the exporter puts in a Cenvat declaration duly authenticated by the Chartered Accountant & the exporter is audited by the Excise authorities as such then why the DGFT/CBEC are not willing to accept the truth & facilitate the exporters?  Are the DGFT/CBEC not really aware that by fudging the physical documents, there have been innumerable crimes committed therefore a secure electronic transmission is much more safe. If the policymakers pretend that they cannot understand this then they do not deserve to continue & should be sent home. In the corporate world pink slips are handled out for lesser idiocies!

Further, please note that the Indian Customs department is selling the Export Statistics on commercial basis & earning at the cost of the exporters but not willing to provide the data to the DGFT. A sample of the data sold is reproduced below:

Date HS Code Description Destin-ation Port of Loading Unit Quantity Value (INR) Per Unit (INR)
Mar 29 2016 29415000 ERYTHRO-MYCIN BASE USP 23 Turkey Bombay Air Cargo KGS 200 832221 4161

As settled by the law finally, the data sold by the Indian Customs commercially is complete to grant the EODC/redemption because it cannot be the case of the CBEC/DGFT that wrong shipment data is dished out & sold by the Customs.

Please note that the Supreme Court has settled the law that the description of the item in Invoice & in corresponding documents needs to be in Market Parlance therefore once this settled principle is accepted then the DGFT cannot say that the description of the product referred to in the FTP/HBP; mentioned in the Export Invoice; appearing in the S/B; appearing in the data transmission by the Customs to the DGFT (Like Erythromycin Base/Erythromycin) can refer to something different. This is simply governed by common sense therefore why the authorities should defy this & cheat the exporters when the complete chain is distinct & clear & establishes the fulfilment of the export obligation beyond doubt? Why the authorities should even treat the Supreme Court with disdain?

The fact is that in no other country, the exporters are cheated in this manner therefore those countries are far better than us in promoting exports. The competition does not bother the Indian exporters but then the Indian bureaucracy is the biggest worry of the exporters. I remember the remark of a President of an association saying that if we want to kill the competition then we simply need to export the Indian bureaucrats to work in the competing countries & they will destroy every system which facilitates exports in the real sense of the word. When I see the conduct of the Indian bureaucracy, I don’t doubt that but compelled to vouch.

The DGFT has to ensure that the exporter is facilitated as per the mandate of the Parliament & not harassed after completing the export obligation but there is no semblance of facilitation visible. In the first instance, the authorities should first understand & acknowledge that what is the standard & parameter of evaluation & declare it transparently upfront & implement the same religiously.  The bureaucracy talks about reforms & claims wrong credit but what is happening is per force (Without the judicious use of technology, the system will collapse) but there is no real reform which is backed by a good thought process & ahead of its time & till then the Indian exporter continues to be simply pulled down by the Indian bureaucracy.  The article is send to all those responsible & I will respond to any comments.

(Above are personal view of Author and  Author can be reached at

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One Comment

  1. narendra adawadkar says:

    Dear Rajiv you have expressed the real truth. The DGFT authorities act ignorant and keep on putting the irrelevant deficiencies leading to delays in issue of EODC and harassment to the exporter. NoN ISSUE OF EODC leads to alerts from Customs and burden of interest payment of excess imports. The deficiencies are without head and tail with lots of errors and without any reliance of FTP, HBP or Public Notices, circulars. New deficiency – if duties are debited in the MEIS Script then DGFT ask for confirmation from Commissioner of Customs ( who is un-aware) and no body respond to this. Issue remains pending with DGFT and exporter in dark. Another interesting query – If MEIS issued to EOU unit and utilised for Debit, then DGFT raise deficiency for transfer letter from SEZ for utilisation of MEIS script ???

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July 2021