Execution of Bank Guarantee / Legal Undertaking for Advance Authorisation / DFIA and EPCG Authorisation

2.20

Before clearance of goods through Customs, Authorisation holder shall execute a BG / LUT with Customs Authorities. In such cases, RA shall endorse the following condition on the licence / Authorisation:

BG / LUT as applicable to be executed with concerned Customs Authorities”.

In case of indigenous sourcing, Authorisation holder shall furnish BG / LUT to RA as per Customs Circular No. 58/2004 dated 31.10.04.

(Paragraph 2.20 has been amended vide PN. NO. 30/2007, DT. 26/07/2007)

[OLD-
2.20 Before clearance of goods through Customs, Authorisation holder shall execute a LUT / BG with customs authorities.

”Bank Guarantee / LUT as applicable to be executed as per relevant Customs Notification / Circular”

In case of indigenous sourcing, Authorisation holder shall furnish BG / LUT to RA as prescribed below before sourcing the material:

(A). Following entities shall be entitled for LUT facility:

1. All Status holders / PSUs;

2. Manufacturer exporter (except Proprietorship and Partnership firms), Registered with Central Excise authority with a minimum export turnover of Rs.1 Crore in preceding year and having exported during previous two financial years.

3. Manufacturer Exporter, registered with Central Excise Authority and having paid Central Excise Duty of Rs.1 Crore or more during preceding financial year.

4. All exporters with an export turnover of at least Rupees 5 crores in preceding licencing year and having a good track record and three years of export performance.

(B) Following shall be required to furnish a Bond supported by BG to extent of 15% of duty saved on excise and education cess, if applicable:

1. Other Manufacturer Exporter not covered under (A) above (except Proprietorships and Partnership firms); exporting for last 3 years, or exporting in any of the last 3 years, based on Certification of their previous years’ exports from Central Excise Authorities

Provided that for any of last 3 years, the unit should be registered with Excise Authorities or State Sales Tax Authorities.

2. Manufacturing companies (as per Companies Act) having not exported in each of preceding three licencing years but fulfilling following criterion:

(i) Registration with Central Excise Authorities and payment of Central Excise duty (unless exempted); and

(ii) Registration with State Sales Tax / VAT Authorities and payment of sales tax / VAT (unless exempted); and

(iii) Minimum investment of Rs 50 lakh in plant and machinery (as in audited Balance Sheet).

(C) Following shall be required to furnish a Bond supported by BG to the extent of 100% of duty saved on excise and education cess, if applicable:

1. Merchant Exporter, all types of Proprietorship and Partnership firms (Other than Status Holders / PSUs and category (A) 4 above);

2. Service providers other than those in category (A) 1 and (A) 4 above

(D) Manufacturer / Merchant Exporters (under (A) & (B) above) falling under any of following two categories based on their risk profile are required to execute bond supported by BG to extent of 100% of duty saved amount on excise and education cess if applicable. This can be prescribed by Head of office not being below rank of Deputy DGFT by recording reasons in writing:

1. Have come under adverse notice of Customs / DGFT / Central Excise for serious irregularities;

2. Having adverse track record in terms of fulfillment of pending export obligation.

In cases where Excise Duty is nil on items of indigenous procurement, BG furnished would be for 25% of basic Customs Duty on same product. BG and LUT should be valid as per terms and conditions incorporated in Appendix 25A & 25B respectively. Validity of BG / LUT is required to be extended in case of extension in EOP. Specific endorsement to this effect shall be made in the Authorisation by RA.

In respect of categories (A) 3, (A) 4 & (B) 1 above, if exporter has not exported for any of the 3 preceding years, 15% BG condition shall be imposed on duty saved amount provided the CIF value does not exceed 200% of domestic turnover or 200% of FOB / FOR value of supplies of preceding licensing year, whichever is higher. Authorisation beyond 200% entitlement shall be subject to 100% BG on duty saved amount for CIF value exceeding 200% entitlement. However, entitlement may be recredited on production of documentary evidence showing fulfillment of export obligation and realization of export / supply proceeds.

In respect of categories at (A) 2 and (A) 4 above, Authorisation Holder would be required to submit Export Performance Certificate issued by a Chartered Accountant as per Appendix 26.

For import / domestic procurement of car under EPCG scheme, 100% BG will be required to be furnished except in case of status holders / PSUs who will furnish BG / LUT as aforesaid.

BG exemption / relaxation as mentioned above shall also be available in respect of past Authorisation where Authorisation holder had earlier filed BG but as on date he is entitled for BG exemption.

In case, firm has already executed BG / LUT for full value of Authorisation covering items indigenously procured, to Customs and furnishes proof of the same, no BG / LUT shall be required to be executed with RA.]