F.No.S/16-Misc.-405/02/Gr.VII
Imp. 20
Exp. 20

PUBLIC NOTICE NO. 72/2002 Date: 07/06/2002

Subject: Changes made in Advance Licence, DFRC, DEPB and EPCG Schemes vide Exim Policy 2002-07.-Reg.

1. Attention of all Importers, Exporters, CHAs and all others concerned is invited to the changes carried out under different export promotion schemes vide Exim Policy 2002-07. Changes have been carried out in DEEC,DFRC,DEPB and EPCG Schemes to remove bottle-necks being faced by the trade. The details of charges effected in each scheme are as follows:

2.1 Advance Licence Scheme

Advance Licence scheme is contained in Chapter-4 and paras 4.1 & 4.1.1 to 4.1.14 of the Exim Policy. In terms of para 4.1.1 of the exim policy advance licence can be issued for permitting duty free import of inputs to be utilized in the export products after making normal allowance for wastage. The Scheme also permit duty free import of fuel, oil, energy, catalyst, which are consumed during the manufacturing process. Duty Free Import of mandatory spares upto 10% of the CIF value of licence can be issued for physical export, intermediate supplies and deemed exports. Annual Advance Licence Scheme has however, been discontinued. Both Advance Licence and the materials imports against it are subject to actual user condition even after fulfillment of export obligation. One departure made in the new Advance Licence Scheme is to abolish DEEC Book. Advance Licence issued under the new Scheme on pre-export basis. (i.e., to say where import takes place before fulfillment of export obligation) would inter-alia contain description, value and quantity of materials permitted against it and value and quantity of export obligaion to be fulfilled; advance licence issued on post-export basis (i.e.,to say after fulfillment of export obligation) in addition would also contain details of exports made against the licence. In respect of Advance Licences issued on post-export basis in doubtful cases, or where investigations have been launched by Customs or other Agencies, Customs may require DGFT authorities to cause verification of the details of exports documents having actually taken place. E.O.Discharge Certificate by DGFT authorities would be issued on the basis of export documents and bank realization certificate in terms of Para 2.25 of the Handbook of Procedure, Vol.I. Redemption of Bond/BG filed against Advance Licence with the Customs would normally be allowed on the basis of EO Discharge Certificate issued by the DGFT authorities. However, in doubtful cases, or where investigations have been launched by Customs or other Agencies, Customs may require DGFT authorities to cause further verification.

Other procedural requirements of the Advance Licence Scheme outlined in earlier Board Circulars issued from time to time shall continue to be followed with the above modifications.

Customs notification Nos.43/2002-Cus dtd 19.4.2002 and 47/2002-Cus dtd.22.4.2002 have been issued to operationalize this Scheme.

2.2 DFRC Scheme

SFRC Scheme was first announced in Exim Policy 2000-2001 with effect from 1.4.2000 DFRC. DFRC Scheme has been continued in Exim Policy 2002-07 with some minor changes. The earlier DFRC Scheme announced in 2000-01 Exim Policy required that for the purpose of allowing DFRC benefit to imported inputs used in the resultant export product, the quality, technical characteristics and specifications of the inputs under import should be the same as those used in the resultant export product. For this purpose the quality, technical characteristics and specifications of each input used in the resultant export product were required to be specified on the shipping bill and at the time of import Customs was required to co-relate it with the input under import so as to allow DFRC benefit to those inputs which were of the same quality, technical characteristic and specifications. Under the new DFRC Scheme such co-relation of quality technical characteristic and specifications has been done away except in the case of items were which are listed in para 4.31 of the Hand Book of procedure volume 1 and DGFT Public Notice no.4/2002-07 dtd.1.4.2002. In respect of such items customs shall continue to ascertain the quality,technical characteristics and specifications of the inputs under import with reference to quality,technical characteristics and specification on the inputs used in the export product as declared on the shipping bill. Quantity of each input shall be permitted in the DFRC licence in terms of SION for the relevant export product as earlier. Licence issued under DFRC Scheme are freely transferable as earlier.

Other procedural requirements of DFRC Scheme as specified in DOR’s earlier Circular Nos.33/2002-Cus dtd.2.5.2000 shall continue to be followed with the aforesaid modificaitons.

Customs Notification No.46/2002-Cus dtd.22.4.2002 has been issued to operationalize this Scheme.

2.3.DEPB Scheme

DEPB Scheme has been continued in the Exim Policy 2002-07 for some more time. Under the new DEPB Scheme, DEPB Scrips would be issued only on post-export basis (i.e., to say on completion of exports) as pre/ export DEPB Scheme has already been discontinued. The provisions of DEPB Scheme are contained in Para 4.3 and 4.3.1 to 4.3.5 of the Exim Policy. One significant change in the new DEPB Scheme is that in terms of Para 4.3.5 of the Exim Policty even excise duty paid in cash on inputs used in the manufacture as per rules framed by Department of Revenue which the earlier DEPB Scheme did not permit. Since the exemption from SAD is no incorporated in DEPB Customs notification itself, henceforth the element of SAD shall also be debited in the DEPB scrip.

The Schedule of DEPB rates are contained in a separate book issued vide DGFT Public Notice no.2/ 2002-07 dated 31.3.2002. In the preamble of the said Schedule general instructions for DEPB rates are specified and Sr. No.1 of the said general instructions specify that DEPB benefit shall not be applicable if the exports have taken place in terms of any sub-serials nos. of said Sr.No.1. General Instructions contained in Sr.No.s 2to 12 should also be carefully gone through before processing/ permitting any export under DEPB Scheme. DEPB Scrips are freely transferable as earlier.

Other procedural requirements of DEPB Scheme, as outlines in DOR Circular No. 10/97-Cus dtd.17.4.97 and subsequent DOR Circulars issued from time to time under DEPB Scheme shall continue to be followed with the above notificaitons.

Verification of DEPB Scrips shall continue to be done by Customs. However, in doubtful cases, or where investigations have been launched by Customs of other Agencies, Customs may DGFT to take suitable corrective action.

Customs Notification No.45/ 52002-Cus,dated 22.4.2002 has been issued to operationlize this Scheme.

2.4 EPCG Scheme

EPCG Scheme is contained in Chapter 5 of the Exim policy 2002-07. 5% Duty EPCG Scheme,which was hitherto in operation, has been continued with some changes. Whereas the normal EO period for EPCG Licence of value not exceeding Rs. 100 crores has been maintained at 8 years, in respect of licences of value Rs.100 crores or more, a longer EO period of 12 years has been prescribed. The four blocks in respect of such EPCG licence would compromise of

1st Block - 0-5 years
2nd Block - 6-8 years
3rd Block - 9-10 years
4th Block - 11-12 years

The new EPCG Scheme also permits granting extension of block-wise EO period more than once during the total EO period by competent authority. In addition, in respect of EPCG Licence having total EP periods of 8 years, the Scheme also permits extension of overall EO period up to a period of 2 years by competent authority. The provision regarding recovery of differential duty and interest in the event of non-fulfillment of block-wise EO period for 2 consecutive blocks has also been done away with. Para 5.5 of the Exim Policy also permits fulfillment of export obligation under EPCG Scheme by Export of goods capable of being manufactures from the capital goods imported under EPCG Scheme. Similiarly, export obligation of same goods (for which EPCG licence is obtained), manufactured or produced in different manufacturing units of the licence holder.

It is reiterated that redemption of Bond/ BG against licence (with Customs) issued under EPCG Scheme should normally be allowed on the basis of EO Discharge Certificate issued by DGFT authorities. However, in doubtful cases or where investigations have been launched by Customs or other Agencies, Customs may require DGFT to take suitable corrective action.

Other procedural requirements of EPCG Schemes as outlined in DOR Circular Nos.39/200-Cus dt.11.5.2002, 80/2000-Cus dated 22.09.2000 and earlier DOR Circulars shall continue to be followed with the aforesaid modifications.

Customs Notificaion Nos.44/2002-Cus dtd.19.4.2002 has been issued to operationlize this Scheme.

2. Any difficulty experienced by the trade in implementing the above may be brought to the notice of this office for further corrective action.

Sd/-
07.06.2002
(C.SEN)
COMMISSIONER OF CUSTOMS(EP)
MUMBAI.

(Authority –Board Circular No.24/2002-Cus dtd.6.5.2.02 issued vide F.No.605/201/2001/DBK)

Attested by
(B.K.SINHA)
ADDL.COMMISSIONER OF CUSTOMS(EP)
MUMBAI

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