RoDTEP and RoSCTL are e-scrips issued by customs in respect of remission of embedded local duties/ taxes/ levies in exported goods. While RoDTEP (Remission of Duties and Taxes on Exported Products) Scheme is in accordance with paragraph 4.01(e) of the Foreign Trade Policy, RoSCTL (Rebate of State and Central Taxes and Levies) scheme is in accordance with para 4.1 (c) of FTP read with Government of India, Ministry of Textiles’ Notification No. 12015/11/2020-TTP, dated the 13th August, 2021. On 14.09.2022, the Government of India vide Notifications 75/2022- Customs (NT) and 76 /2022-Customs (NT) made some small but significant changes in these schemes which are likely to be make the transferability of the scrips easier for exporters as these changes may allay some of the concerns of the transferees.
This scheme was notified by the Government vide Customs Notification No. 76/2021-Cus. (N.T.), dated 23-9-2021 under sub-section (1) of section 51B of the Customs Act, 1962, in accordance with para 4.1 (e) of the FTP.
The objectives and operating principles of the scheme are specified in the para 4.54 of FTP. The scheme’s objective inter alia is to refund currently un-refunded duties / taxes/taxes and levies, at the Centre, State, and local level borne on exported product. As per para 4.54 (ix) of the FTP, “Scheme would be implemented through end to end digitalization of issuance of rebate amount in the form of a transferable duty credit/ electronic scrip (e-scrip), which will be maintained in an electronic ledger by the Central Board of Indirect Taxes and Customs CBIC)”. Further, this para clarifies that the manner of application, time period of application and other matters including export realization, export documentation, sampling procedure, record keeping etc. would be notified by the CBIC on an IT enabled platform with a view to end to end digitalization.
On the Customs side, Section 51-B itself was inserted in the Customs Act vide Finance Act, 2020 w.e.f 27.03.2020. This section provides for the way in which certain duties paid in the manufacture or processing of exported goods will be remitted in the form duty credit in in the electronic ledger (maintained in the customs automated system). Sub-Section 51B (3) provides that the duty credit in the electronic ledger may be used by the person to whom it is issued or to whom it is transferred towards payment of duties, subject to such conditions and restrictions and within such time as may be prescribed.
Thus, the RoDTEP e-scrips are issued for remitting hitherto unrefunded duties/ taxes and levies and the entire process is to be on an end to end digitalization, on the customs automated system, right from the export stage to the utilization of the credit to the realization of the export proceeds. Such duty credit shall be used for payment of the duty of customs leviable under the First Schedule to the Customs Tariff Act, 1975 (51 of 1975) on goods when imported into India.
Transferability of E-scrips The MoF has also issued Electronic Duty Credit Ledger Regulations, 2021 on 23.09.2021, specifying regulations regarding creation, registration, use and validity, transfer, suspension and cancellation of these e-scrips. Regulation 7 inter alia provides that duty credit in e-scrip shall be allowed within the customs automated system from the ledger of a person to the ledger of another person, the ledger of the transferee, including e-scrip and the transactions made therein, shall be visible in the customs automated system to the transferee and the Customs.
Monitoring and Recovery Para 4.57 of the FTP prescribes that the exporter would be required to keep records substantiating claims made under the Scheme. A monitoring and audit mechanism with an IT based Risk Managed System would be put in place to physically very the records of the exporters on the sample basis.
Now what if something goes wrong and it is learnt that excess amount was allowed to the exporter or the exporter fails to realize export proceeds and in the meanwhile transferred these scrips to an unsuspecting transferee. The provisions incorporated in the original Notification No. 76/2021-Cus. (N.T.), dated 23-9-2021 provided that the duty scrip amount could be recovered along with interest under Section 28AA from the exporter under section 142 of the Customs Act, 1962. And, in case, the exporter failed to repay the said amount within a period of fifteen days along with interest so demanded, then the proper officer of Customs may, without prejudice to any action against the exporter, proceed for recovery of the said duty credit amount from the transferee in the manner as provided in section 142 of the said Act. It is pertinent that Section 142 is about coercive recovery.
Such provisions of coercive recovery from the transferee straight under section 142 of the Customs Act, 1962 were quite harsh on the transferee. It would have caused double jeopardy for the transferee, as he would have made payment at time of purchase of the scrip from the exporter at a price, say @ 80-90% of the face value, and then in case of default by the exporter had the specter of coercive recovery looming on his business and assets. These provisions were a dampener in the transfer of scrips.
Now the Government, vide Notification No. 75/2022-Customs (N.T.) Dated: 14th September, 2022 has omitted the provisions relating recovery from the transferee under section 142 of the Customs and regarding suspension of credit account of the transferee as provided in the original Notification No. 76/2021-Cus. (N.T.), dated 23-9-2021. The omitted portion is as crossed below:
4. Recovery of amount of duty credit. – (1)
(2) The duty credit amount that an exporter is so required to repay under sub-clause (1) shall be deemed never to have been allowed, and if the exporter fails to repay the said amount within a period of fifteen days along with interest so demanded, then the proper officer of Customs may, without prejudice to any action against the exporter, proceed for recovery of the said duty credit amount from the transferee in the manner as provided in section 142 of the said Act.
5. Recovery of amount of duty credit where export proceeds are not realised. –
(5) The proper officer of Customs may, without prejudice to any action against the exporter, proceed for recovery of said duty credit amount from the transferee in the manner as provided in section 142 of the said Act.
6. During the pendency of any recovery, as provided in clauses 4 and 5, no further duty credit, on any subsequent exports, shall be allowed to such exporter till the time such recovery is made and any unutilised duty credit with the exporter or the transferee shall be suspended pending such recovery.
This scheme was notified by the Government vide Customs Notification No. 77/2021-Cus. (N.T.), dated 24-9-2021, under sub-section (1) of section 51B of the Customs Act, 1962. This is in accordance with para 4.1 (c) of the FTP (for RoSCTL scrips and procedure regarding the earlier period, one may refer to para 4.95 and 4.96 of FTP).
These scrips are issued against exports of garments (under Chapter 61 and 62) and made ups (under Chapter 63) in Textile Sector, against the shipping bill or bill of export, presented under section 50 of the said Act on or after the 1st day of January, 2021. Such duty credit shall be used for payment of the duty of customs leviable under the First Schedule to the Customs Tariff Act, 1975 (51 of 1975) on goods when imported into India.
As per M.F. (D.R.) Circular No. 22/2021-Cus., dated 30-9-2021, earlier it was intended to subsume the RoSCTL scheme w.e.f. 1-1-2021 in the RoDTEP scheme which was also being introduced w.e.f. 1-1-2021; however, subsequently it was decided to have independent RoSCTL scheme w.e.f. 1-1-2021 to 31-3-2024.
This scheme is also governed by Section 51-B of the Customs Act, 1962. Hence, its credit its credit shall also be maintained in the customs automated ledger in the form of electronic credit ledger as in case of RoDTEP above. The provisions regarding transfer of the scrip, maintenance of this in electronic ledger, recovery in case of default are akin to RoDTEP supra.
The Notification No. 77/2021-Cus. (N.T.), dated 24-9-2021 contained similar provisions regarding recovery from the transferee in case credit has been allowed in excess to the exporter or the exporter failed to realize the export proceeds within the stipulated period, and the exporter failed to pay the duty along with interest demanded . There were similar provisions of coercive recovery from the transferee as in case of RoDTEP explained above.
Now the Government, vide Notification No. 76/2022-Customs (N.T.) Dated: 14th September, 2022 has also omitted the irksome provisions relating to the transferee in the Notification No. 77/2021-Cus. (N.T.), dated 24-9-2021 by making similar omission of clause 4 (2), clause 5(5), and amending clause 5 (6) of the notification dated 23.09.2021.
Further, vide NOTIFICATION No. 79/2022-Customs (N.T.) dated 15.09.2022, the validity period of scrips (also in cases of transfer of scrips) under Electronic Duty Credit Ledger Regulations, 2021 has been extended to two years.
Section 28AAA was inserted in the Customs Act in 2012 to provide for recovery of duties from the person to whom an instrument such as credit duty scrips was issued where such instrument was obtained be means of collusion or willful misstatement or suppression of facts. The proviso to the section 28AAA (1) provides that this action against the person to whom the scrip has been issued would be without prejudice to the action against the importer u/s 28. Further, as per Section 28AAA (4), where the demand u/s 28 has been confirmed against the importer, no order for recovery under section 28AAA will be passed. It is significant to note that the previous corresponding MEIS Notification (NN 24/2015 Cus. dated 08.04.2015) and RoSL Notification (NN 38/2020 –Cus. dated 21.10.2020), which were issued as Tariff Notifications, had no such clauses regarding recovery. It is not clear whether these recovery provisions under the RoDTEP and RoSCTL notifications are for the specific situations mentioned in these notifications, or these supplant Sections 28 and 28AAA, or are these in addition to the provisions of Sections 28 and 28AAA of the Customs Act, 1962. Hence, the matter has nuanced legal implications, and actual application will depend upon the facts of each situation.
Conclusion: Overall, the recent measures as discussed above may lead to some increased liquidity in the transfer of duty credit scrips, as not only weighty clauses of coercive recovery from the transferee in specific cases have been omitted, but also validity period has been extended.
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