Government of India
Ministry of Finance
Department of Revenue, New Delhi
Subject: Export of goods under claims of rebate.
Certain doubts have been raised regarding regarding grant of rebate under the old export rules vis-a-vis new rule where the duty paid goods cleared for the home consumption are subsequently processed to make the said goods exportable.
2. In this regard, the Board”s Circular No. 2/75-CX.VI dated 22.1.75 permitted export of excisable goods from duty paid stocks outside the factory premises under claim for rebate of duty provided:
(a) One AR-4 was generated for one gate pass. Similarly a separate AR-4 form is generated if the duty paid consignments have been cleared from different factories.
(b) The particulars of the packages lying stored were verified with the particulars given in AR-4/ AR-4A from in such manner and according to such procedure as may be prescribed by the Collector. Further, the goods should have been in original factory packed condition.
(c) The rebate was granted after verification from the originating range/ CAO to the effect that goods had been originally cleared on payment of duty.
The above instruction did not contemplate the duty paid goods be subject to any processing for which separate provisions existed in the Rules Viz., Rule 191-A of the Central Excise Rules.
3. Notwithstanding the position stated above, it appears that the practice to permit the subsequent processing of duty paid goods for the purpose of claim of rebate of the duty paid on inputs was in vogue in several Commissionerates.
4. While the subsequent processing like cutting, packing etc., was not contemplated or permitted in instructions of 1975, the same was available vide Board”s Circular No. 58/79-CX. VI dated 29.11.1979 to only those goods which were, cleared for export purposes under bond on AR-4/ 4A.
5. The issue has been examined by the Board in the context of the changes effected w.e.f. 1.10.1994 and it is observed that the export under Rule 12(1)(a) read with notification 41/94-CE(NT) dated 22.9.94 as amended, is permissible only when the goods are exporteddirectly from a factory or a warehouse. In other words, the present rules and the notifications issued thereunder do not. allow rebate on export of market purchased goods without any further processing.
However in case subsequent processing is done on goods after their clearance from factory and before export, it is observed that under the new Rules 12 and 13 the term “manufacture” for purpose of said Rules has been defined, “to include process of blending of any goods or making alteration or nay other operation thereon.” Notification 42/94-CE(NT) dated 22.9.94 further provides that duty paid goods can be subjected to tests, repairs, reconditioning or carrying out any other operation subject to certain conditions. Board is therefore of the view that Commissioners of Central Excise may allow subsequent processing of duty paid goods for purpose of export only under Rule 12(1)(b) read with notification 42/94-CE(NT). However, safeguards (as detailed in Board”s Circular NO. 129/40/95-CX dated 29.5.95) should be kept in mind while permitting such processing of the export goods. This Circular inter alia provides that –
(i) Such permission be granted only Commissioner of Central Excise after being satisfied that there is no danger to the revenue.
(ii) Input-Output ratio is declared to Commissioner of Central Excise.
(iii) The materials to be processed are procured directly from the registered factory in which such goods are produced, provided that such goods may be procured from the market also if they are in the original factory packed condition and the evidence of payment of duty of such material is furnished in terms of rule 57GG of Central Excise Rules 1944.
(iv) The export in these cases will be under the proforma AR-5. The AR-5 should be generated only at the place approved by the Commissioner for the processing of duty paid goods. Further, the export also should take place directly from such approved place.
(v) The input packages shall be opened in the presence of Central Excise Officers who shall draw the samples and send them for test. The Excise Officers shall also verify duty paid character, construction/ composition of materials received for processing and the export goods emerging after processing. In this regard, if need be, reference may also be made to the originating range regarding composition and/or technical characteristics of inputs when the description on the Invoice is not sufficient on these details. The export clearance under AR-5 will be only under the supervision of Central Excise Officers.
In case discrepancies are noticed on verification, the export should not allowed under Rule 12(1)(b). Clearance for home consumption in such cases, may however be allowed without payment of duty as the duty has already been paid or the inputs at the time of their clearance from the originating factory. If the exporter wants to export he may be allowed without claim for Rebate but he may avail the drawback route in such cases for export, if the export goods are so eligible. In such cases export would not be allowed on AR-5 but on their own documents.
(vi) The Original and Duplicate copies of the 52-A/ 57GG Invoice is defaced after allowing export.
(vii) Rebate under Rule 12(1)(b) shall be lodged only with the Assistant Commissioner having jurisdiction over the place approved for operation under Rule 12(1)(b) by Commissioner of Central Excise.
6. The exporters can also avail of the cut and pack procedure by taking recourse to the provisions of Rule 13(1)(b) to obtain fabrics without payment of duty directly from the processors and can that cut, pack and export them. This movement of fabrics will take place under Chapter X procedure as prescribed under notification no. 47/ 94-CE(NT) as amended. In this connection the procedure for such operations as prescribed under old Rule 191-B of Central excise Rule read with any instructions issued under the said Rule may be followed till a detailed procedure is prescribed by the Board.
7. As regards waste/ cutends produced as a result of the processing, the same may either be destroyed in the presence of Central Excise officers and duty thereon remitted or the same be removed for home consumption on payment of duty as if manufactured at the place of processing if the exporter is working under Rule 13(1)(b). However, if the exporter is working under Rule 12(1)(b), then no further duty is required to be paid on such waste/ cutends as the central excise duty has already been paid on them at the time of clearance of inputs from the originating factory.
8. It is also clarified that the term “warehouse” appearing in the Rules 12 & 13/ notification issued thereunder would mean any place duly approved by the Commissioner for such operation under Rule 12(1)(b)/ 13(1)(b) where the goods in factory packed condition are processed prior to export.
9. In the above connection, it is clarified that all the circulars and instructions issued under old export rules, including the Circulars No. 2/1975 dated 22.1.75, Circulars 129/40/95-CX dated 29.5.95, 81/81/94-CX dated 25.11.94, 87/87/94-CX dated 26.12.94 issued under the new export rules which are not consistent with these instructions have been superseded. As regards the past cases where the subsequent processing like cutting and packing of duty paid goods have been permitted under the old rule 191-A, the rebate claims should be checked and wherever the description/ composition of export goods does not tally with the goods cleared on payment of duty, necessary action under law may be initiated. However, Commissioners must ensure that no genuine exporter is put to any difficulty on this count and their rebate claims processed expeditiously.