CUS CIR NO. 48/2003 DATE 06/06/2003

Revised norms for execution of Bond and Bank Guarantee under Advance License and EPCG Schemes - reg.
DGRI has recently reported a serious fraud committed under Advance License Scheme by Importers of POY/PFY fabrics etc. of Mumbai and Gujarat areas. Such unscrupulous importers not only obtained Advance licenses from DGFT authorities, in order to avail BG exemption, they also submitted forged/false CA certificates which were issued by the CAs without verification. As a result it has become necessary to examine the facility of BG concession/exemption extended under earlier DOR Circular Nos.45/96-Cus dated 28.8.96 and 71/98-Cus. dated 15.9.98 and incorporate additional safeguards. Whereas 45/96 grants BG concession/exemption under Advance License and EPCG Schemes to status holders and others, 71/98 grants exemption from BG to manufacturer exporters under Advance License and EPCG Schemes.

2. The issue has been re-examined in DOR and the following revised norms are issued for the purpose of availing exemption from BG under Advance License and EPCG Schemes in amendment of earlier DOR Circular Nos.45/96-Cus. dated 28.8.96 and 71/98-Cus. dated 15.9.98.

3.1 Bond/BG under Advance License and EPCG Schemes shall be furnished in the format annexed to DOR Circular No.71/98-Cus. dated 15.9.98 as hitherto. The bonds shall cover duty ordinarily leviable on the goods but for the exemption. Bond shall be backed by a bank guarantee or cash security or surety. [OLDSurety for the bond shall be in the form of bank guarantee or cash security]. Guarantee from a financial institution like IDBI, ICICI, UTI etc. may also be accepted in lieu of Bank Guarantee.

Bonds/BGs shall be taken as per the following norms for the purpose of permitting clearance of import goods under Advance Licence/EPCG Schemes.

Category of Importer	Quantum of Bank Guarantee
(a) Super Star Trading House, Star Trading House, Trading House, Export House and Public Sector Undertakings.	Nil
(b) Service Providers who are recognized as status holders by the appropriate authority.	Nil
(c) Manufacturer exporters registered with Central Excise who have been exporting during the previous two financial years and have minimum export of Rs.1 crore or more during the preceding financial year.	Nil
(d) Manufacturer exporters registered with Central Excise, who have paid central excise duty of Rs.1 crore or more during the preceding financial year.	Nil
(e) Manufacturer exporters who are not covered under (a), (c) & (d) above.	25%
(f) Others	100%

(Corrected vide CUS CIR NO. 74/2003 DATE 21/08/2003)

[OLD

Category of Importer		Quantum of Bank Guarantee
(a)	Super Star Trading House, Star Trading House, Trading House, Export House and Public Sector Undertakings.	Nil
(b)	Service Providers who are recognized as status holders by the appropriate authority.	Nil
(c)	Manufacturer exporters registered with Central Excise who have been exporting during the previous two financial years and have minimum export of Rs.1 crore or more during the preceding financial year.	Nil
(d)	Manufacturer exporters registered with Central Excise, who have paid central excise duty of Rs.1 crore or more during the preceding financial year.	Nil
(e)	Others	100%]

3.2 BG exemption as specified in Para 3.1 above shall be admissible subject to the following conditions:

(a) The license holder has not defaulted on the export obligation in respect of any advance license/EPCG licence issued to him in the past. The BG exemption shall stand withdrawn if a DGFT or Customs comes across default in export obligation against any Advance License/EPCG License issued.

(b) For the purpose of availing BG exemption in terms of Para 3.1 above, the manufacturer exporter shall submit the export performance certificate {as specified in Para 3.1(c)} issued by jurisdictional Superintendent of Central Excise where his factory is located. In respect of new manufacturer exporters who have paid central excise duty of Rs.1 crore or more during the preceding financial year also {vide Para 3.1(d)}, the relevant certificate shall be issued by jurisdictional Superintendent of Central excise where the factory is located.

(c) The license holder should not have been penalized under the Provisions of Customs Act, Central Excise Act, Foreign Exchange Management Act (FEMA) or Foreign Trade (Development and Regulation) Act during previous two financial years.

(d) In case of the person standing as surety to the bond, bank or a chartered accountant shall certify that he is solvent.

(Corrected vide CUS CIR NO. 74/2003 DATE 21/08/2003)

[OLD(d) In case of the person standing as surety to the Bond, Bank shall certify that he is solvent.]

3.3 In individual cases where DGFT authority/EPCG Committee/ALC/jurisdictional Commissioner of Customs is satisfied that a higher quantum of bank guarantee is justified on account of risk to revenue, 100% BG may be taken by Customs after recording the reasons therefor in file.

3.4 Where an importer so requests, a BG may be taken consignment wise subject to the condition that such consignment-wise BG shall only be acceptable by Customs at the port of registration of the license.

3.5 Bond/BG shall be filed for a minimum period of 3 years with an undertaking to keep the BG alive for the entire period of export obligation viz 8+1 = 9 years or 12+1 = 13 years etc. under EPCG Scheme as the case may be.

3.6 Custom House shall properly maintain Bond/BG registers and ensure that wherever the bank guarantees are not renewed in time, recovery action is initiated by enforcement of the bank guarantee within time. Customs shall also ensure that, wherever required, bank guarantees are renewed well in time.

3.7 In the case of subsidiary company of a parent company of a recognized status, the facility of filing joint bond (bond by the parent company aswell as the subsidiary company holding the license) alongwith BG/Cash security/any other guarantee from financial institutions like IDBI, ICICI, UTI etc., shall also be available. The facility, however, shall be subject to the following conditions:-

(i) The parent company shall necessarily have more than 50% share holding in the subsidiary company.

(ii) The bond shall be jointly signed by the parent company aswell as the subsidiary company and shall be executed alongwith BG/Cash Security/or guarantee from financial institutions like IDBI, ICICI, UTI etc. wherever applicable in terms of criterion laid down. The guarantee shall be in relation to terms and conditions of the Joint Bond.

(iii) The parent company shall stand surety for the subsidiary company that in the event subsidiary company falls to fulfil the export obligation and defaults on payment of customs duty and Interest, the parent company shall make good the Government revenue and the interest. In other words the parent company will be severally and jointly liable for the action in terms of the Band/BG jointly executed by them.

(iv) This facility shall be extended only to those companies which have proven track record and reputation.

3.8 BG exemption specified in pare 3.1 above shall also be available in respect, of past licenses where license holder had earlier filed BG but as on date he is entitled for BG exemption.

4. It shall be the responsibility of the jurisdictional Superintendent of Central Excise that while issuing Certificate about export performance in terms of Para 3.1(c) or about the fact of payment of central excise duty for the purpose of para 3.1(d), he satisfies himself about the genuineness of the declaration being given by the license holder.

5. Suitable Standing Order and Public Notice for the guidance of staff and trade may kindly be issued.

6. Receipt of the Circular may kindly be acknowledged,

Sd/-
(R.K. Talajia)
Officer on Special Duty (DBK)

[F. No. 605/41/2003-DBK]

(Please refer CUS CIR NO. 58/2004 DATE 21/10/2004)

(Please refer Cus. Cir. NO. 79/2003, Dt. 04/09/2003 - Revised norms for execution of Bond and Bank Guarantee under Advance License and EPCG Schemes)

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