4.28

The cases of a bonafide default in fulfillment of export obligation may be regularised by the licensing authority in the manner indicated below:

(i) If the export obligation is fulfilled in terms of value, but there is a shortfall in terms of quantity, the licence holder shall, for the regularisation, pay:-

a) To the customs authority, customs duty on the unutilised value of the imported material alongwith interest at the rate of 15% per annum thereon; and

b) An amount equivalent to 3% of the CIF value of unutilised imported material through a TR in the authorised branch of central bank of India indicating the "Head Account: 1453, Foreign Trade and Export Promotion and Minor Head 102". However, the provisions of this sub paragraph shall not be applicable if the unutilised imported material was freely importable on the date of import.

(ii) If the export obligation is fulfilled in terms of quantity but there is shortfall in terms of value, no penalty shall be imposed if the licence holder has achieved the positive value addition. However, if the value addition falls below positive, the licence holder shall be required to deposit an equivalent amount through TR in the authorised branch of Central Bank of India indicating the "Head of Account-1453 Foreign Trade and Export Promotion- Minor Head –102" so that the 100 times the deposited amount and the FOB value realised in Indian rupees together account for positive value addition over the CIF value.

This shall be calculated with reference to actual quantity of exports and FOB value of realisation with reference to prorata quantity of imports and CIF value. For example, if the export performance is only 50% quantitywise but import has been for the complete CIF value permitted, then the value addition would be calculated on a prorata basis, i.e with reference to 50% of the CIF value of imports. This would accordingly imply that where the licence holder is unable to export, no penalty on valuewise shortfall shall be imposed.

(iii) If the export obligation is not fulfilled both in terms of quantity and value, the licence holder shall, for the regularisation, pay as per (i) and (ii) above.

(iv) In case an exporter is unable to complete the export obligation undertaken in full and he has not made any import under the licence, the licence holder will also have an option to get the licence canceled and apply for drawback after obtaining permission from the Customs authorities for conversion of shipping bills to Drawback Shipping Bills.

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