CHAPTER 7

EXPORT WITHOUT PAYMENT OF DUTY

Part-II

Export to all countries except Nepal and Bhutan
1. Introduction

1.1 Procedures and conditions for export to all countries except Nepal and Bhutanare specified in notification No. 42/2001-CE(N.T.), dated 26.6.2001. The details arementioned in this part.

1. Conditions

2.1 An exporter shall furnish bond in Form B-1 and obtain certificate in Form CT-1. Amanufacturer-exporter may furnish annual Letter of Undertaking (no CT-1 is required inthis case). The export shall be subject to the following conditions”

(i) The goods shall be exported within six months from the date on which thesewere cleared for export from the factory of the production or themanufacture or warehouse or other approved premises within such extendedperiod as the Deputy/Assistant Commissioner of Central Excise or MaritimeCommissioner may in any particular case allow;

(ii) When the export is from a place other than registered factory or warehouse,the excisable goods are in original packed condition and identifiable as totheir origin;

(iii) The exports of mineral oil products falling under Chapter 27 of the FirstSchedule to the Central Excise Tariff Act, 1985 (5 of 1986) as stores forconsumption on board of an aircraft on foreign run shall be subject toconditions and limitations, to be applied mutatis mutandis, as notified in theNotification No.40/2001-CE(N.T.), dated 26 th June, 2001 issuedunder rule 18 of the said Rules.

3. Forms to be used

3.1 ARE.1 is the export document for export clearance (Annexure-14), which shall beprepared in quintuplicate (5 copies). This is similar to the erstwhile AR.4. This documentshall bear running serial number beginning from the first day of the financial year. Duringthis year, for the sake of continuity, the serial number, as started from 1.4.2001, maycontinue. The stationary for AR.4 Form may be used with modified name “ARE.1” duringthis financial year. On A.R.E.1, certain declarations are required to be given by theexporter. These should be signed by the exporter or his authorised agent. The differentcopies of ARE.1 forms should be of different colours indicated below:

Original	White
Duplicate	Buff
Triplicate	Pink
Quadruplicate	Green
Quintuplicate	Blue

3.2 It will be sufficient if the copies of ARE.1 contain a color band on the top or righthand corner in accordance with above color scheme.

3.2 An invoice shall also be prepared in terms of rule 11 of the said Rules. It should beprominently mentioned on top “FOR EXPORT WITHOUT PAYMENT OF DUTY”.

3.3 The Letter of Undertaking is to be furnished in the Form UT-1 specified in (Annexure-15)to Notification No. 42/2001-Central Excise (N.T.), supra. Any manufacturer, who is anassessee for the purposes of the Central Excise (No.2) Rules, 2001, shall furnish a Letter ofUndertaking only to the Deputy/Assistant Commissioner of Central Excise havingjurisdiction over his factory from which he intends to export. The Letter of Undertakingshould not be furnished to the Maritime Commissioner or any other officer authorised bythe Board. A ‘Letter of Undertaking’ shall be valid for twelve calendar months providedthe exporter complies with the conditions of the Letter of Undertaking, especially theprocedure for ‘acceptance of proof of export’ under this instruction. In case of persistentdefaults or non-compliance causing threat to revenue, the manufacturer-exporter maybe asked to furnish bond with security/surety. For the sake of clarification, it is mentionedthat this Letter of Undertaking should not be taken for each consignment of export.

3.4 The obligation of the manufacturer flows from statutory requirement of exportingthe goods within six months or such extended period as the Deputy/AssistantCommissioner of Central Excise may allow. Failing this, the exporter is required to depositthe requisite sum (duty and interest) suo moto, considering that the manufacturer has todo ‘self-assessment’. Any non-payment within 15 days of expiry of the stipulated timeperiod, shall be treated as arrears of revenue and the Department will proceed torecover the same as ‘sum due to Government’. Suo moto payment within 15 days ofexpiry of the stipulated time period will not be treated as ‘default’.

3.5 On repeated failure of the manufacturer-exporter to comply with the conditionsof the Letter of Undertaking or the procedure for ‘acceptance of proof of export’ underthis instruction, the Deputy/Assistant Commissioner of Central Excise may direct him inwriting that the letter of undertaking is not valid and he should furnish B-1 Bond withsufficient security/surety.

3.6 The Letter of Undertaking shall not be discharged unless the goods are dulyexported, to the satisfaction of the Assistant Commissioner of Central Excise or theDeputy Commissioner of Central Excise within the time allowed for such export or areotherwise accounted for to the satisfaction of such officer, or until the full duty due uponany deficiency of goods, not accounted so, and interest, if any, has been paid.

3.7 Though any exporter (Manufacturer-exporter or merchant-exporter) can furnishbond, the merchant-exporters are necessarily required to furnish bond in the B-1 Formspecified in (Annexure-16) of notification no. 42/2001-Central Excise (N.T.), supra with suchsecurity or surety as may be specified by the concerned bond accepting authority. Thebond shall be in a sum equal at least to the duty chargeable on the goods for the duearrival of export goods at the place of export and their export therefrom under Customsor as the case may be postal supervision. The officer who will accept the bond, will alsobe responsible for discharging that bond upon furnishing proof of export by the exporter.3.8 The bond shall not be discharged unless the goods are duly exported, to thesatisfaction of the Deputy/Assistant Commissioner of Central Excise or MaritimeCommissioner or such other officer as may be authorised by the Board on this behalf within the time allowed for such export or are otherwise accounted for to the satisfactionof such officer, or until the full duty due upon any deficiency of goods, not accountedso, and interest, if any, has been paid

3.9 Certificate ‘CT-1”, as specified in (Annexure-17) have to be obtained by merchant-exportersfor procuring goods from a factory or warehouse. Such certificates need notbe obtained for each consignment but will be given in lot of 25.

4. Bond Accepting Authority

4.1 Bond may be accepted by any of the following officers: -

(i) The Deputy/Assistant Commissioner of Central Excise having jurisdictionover the factory or warehouse or any other premises approved by theCommissioner for storing non-duty paid goods;

(ii) Maritime Commissioners at Mumbai, Chennai, Kolkata, Paradeep,Kandla, Tuticorin, Visakhapatnam and Cochin.

(iii) The Deputy/Assistant Commissioner of Central Excise(Export) as officersauthorised by the Board for this purpose.

4.2 Exporters are required to clearly indicate on the ARE.1 the complete postaladdress of the authority before whom the bond is executed and to whom thedocuments are to be submitted/ transmitted for admission of proof of export.

5. Security or surety with bond

5.1 Wherever bond is taken, sufficient security or surety is also required as the per thenotifications issued under rule 19 of the said Rules. In 1996, Board had taken a decisionthat in respect of exporters having good track record may be allowed to furnish bondwith nil security or surety. The Board in Circular No.284/118/96-CX, dated 31.12.1996 issued aninstruction. Now, since the manufacturer-exporters, who are also assessee of the CentralExcise Department, have an option to furnish ‘Letter of Undertaking” (without anysecurity or surety), the question of furnishing of ‘security or surety’ is mainly relate tomerchant-exporters who are not assessees of the Central Excise Department. In thisscenario, the Board has decided that security (Bank Guarantee or Cash Guarantee orCash Security) or surety need not be insisted upon from Super Star Trading Houses, StarTrading Houses, Trading Houses and Export Houses provided that –

(i) the exporter has not come to adverse notice of the Central Excise orCustoms Department in last three years from the date underconsideration;

(ii) all the formalities required under Central Excise Act and rules madethereunder are regularly complied with by the exporter, especiallyregarding timely submission of proof of export and deposit of duty withinterest in time where proof of export is not received within stipulated timeframe;

(iii) A self-attested copy of the proof of Status (Super Star Trading Houses, StarTrading Houses, Trading Houses and Export Houses) from concernedauthority (Ministry of Commerce and Industry – Directorate General ofForeign Trade) is submitted.

5.2 Other exporters shall be required to furnish surety equal to full bond amount orsecurity equal to twenty five percent. (25%) of the bond amount, along with the bond.

5.3 The bond shall be furnished on non-judicial stamp paper of the value asapplicable in the State in which bond is being furnished.

5.4 Where export is effected by merchant-exporter, the bond has to be necessarilyfurnished. It is open for the manufacturer to furnish bond on behalf of the merchant-exporter.It is clarified that in such cases, the manufacturer will not take a stand thatsince he is responsible for the duty liability, the export should be allowed on the basis ofthe ‘Letter of Undertaking’, which he has already furnished to the Department. In suchcircumstances, the application in Form ARE.1 will be in the name of the manufacturerwho executes the Bond. All other procedures for admission of the proof of export wouldbe the same as in the case of manufacturer-exporters.

5.5 It should be noted that once a manufacturer furnished bond for exports bymerchant exporters, it would be his responsibility to account for the export goods.

5.6 It may be noticed that only General bond (B-1) has been specified. Even wherebond is required for only one consignment, the Form will remain the same. The exportermay get the bond redeemed immediately after he completes the exports and obtainsthe proof of export.5.7 In case of B-1 general bond a running bond account in proforma of (Annexure-18) shall be maintained by the exporter because he is responsible for debit the bond beforepreparation of ‘certificate’ for obtaining goods for export. He shall also take self-credit inthe manner specified in this instruction.

5.8 For the sake of clarity it is informed that the concept of ‘Block Transfer’ has lost itsrelevance in the context of self-debit and self-credit of bond and the new system ofacceptance of proof of export [to be explained in subsequent paragraphs] by theexporter.

5.9 It is further mentioned that where the merchant exporter executes bond, it shallbe necessary that both the merchant-exporter and the manufacturer sign the ARE.1.

6. Procedure for clearance from the factory or warehouse

6.1 A Manufacturer-exporter who has furnished a Letter of Undertaking will preparethe export documents (A.R.E.1 and invoice under rule 11) for clearance from his factoryof production.

6.2 A Merchant-exporter who has furnished a bond shall be provided sufficientnumber of certificates (CT-1), duly signed/certified, in multiples of 25 copies, normallycovering a period of one to three months, depending upon the track record ofcompliance by the exporter. The ‘bond accepting authority’ shall be responsible forverifying and accepting the proof of export and in case of any defaults by the exporter,to recover the sum and enforcing the bond. The certificate should be providedaccording to the volume of exports projected by the exporter (which should also reflectin the amount of bond). The compliance of the exporter in submitting the requisitedocuments towards ‘proof of export’ shall be another criterion.

6.2.1 The second part of CT-1 is very important. The exporter shall determine thedescription of goods for procurement from a particular factory or warehouse or anapproved place of storage, quantum, value of procurement (provisional figures) andduty involved therein (provisional figures – but based on correct rate of duty andcontracted transaction value). This ‘duty’ element will be debited provisionally. Theexporter shall ensure that at the time of debit, sufficient credit is available at that point oftime to cover the said debit. The provisional debit shall be converted into final debitwithin a period of seven days form the date of removal of goods on A.R.E.1, based onthe ‘duty payable’ in goods cleared for export reflected in the said A.R.E.1 and invoice.

6.2.2 The manufacturer shall record the clearance in his Daily Stock Accountindicating, inter alia, the invoice number/date, A.R.E.1 number/date and duty payablebut foregone under rule 19.

6.3 The exporter has two optional procedures regarding the manner in which he mayclear the export consignments from the factory or warehouse or any other approvedpremises, namely: -

1.Examination and sealing of goods at the place of despatch by a Central ExciseOfficer

2. Under self-sealing and self-certification

7. Sealing of goods and examination at place of despatch

7.1 The exporter is required to prepare five copies of application in the Form ARE-1.The Form is specified in Annexure-I to notification No. 42/2001-Central Excise (N.T.) dated26.6.2001. The goods shall be assessed to duty in the same manner as the goods forhome consumption, though duty is not required to be paid considering clearance ismeant for export without payment of duty. The classification and rate of duty should bein terms of Central Excise Tariff Act, 1985 read with any exemption notification and/or thesaid Rules. The value shall be the “transaction value” and should conform to section 4 orsection 4A, as the case may be, of the Central Excise Act, 1944. It is clarified that thisvalue may be less than, equal to or more than the F.O.B. value indicated by the exporteron the Shipping Bill.

7.2 The duty payable shall be determined on the ARE.1 and invoice and recorded inthe Daily Stock Account as “duty foregone on account of export under rule 19”.

7.3 The exporter may request the Superintendent or Inspector of Central Excisehaving jurisdiction over the factory of production or manufacture, warehouse orapproved premises for examination and sealing at the place of despatch 24 hours inadvance, or such shorter period as may be mutually agreed upon, about the intendedtime of removal so that arrangements can be made for necessary examination andsealing.

7.4 In case of exports under Duty Exemption Entitlement Certificate Scheme (DEEC),Duty Exemption Pass Book Scheme (DEPB) and claim for Drawback, the Superintendentof Central Excise shall also examine and seal the consignment and sign the documents intoken of having done so. In exceptional cases, where the exporter has unblemishedtrack record of compliance (Central Excise) and where there is non-availability ofSuperintendent of Central Excise due to leave, vacant post or other reasonable causes,the jurisdictional Deputy/Assistant Commissioner of Central Excise may permit examination and sealing by Inspector. All other types of export may be examined andsealed by the Inspector of Central Excise.

7.5 The Superintendent or Inspector of Central Excise, as the case may be, will verifythe identity of goods mentioned in the application and also verify whether the duty self-assessedis appropriate and that the particulars of the duty payable has been hasrecorded in the Daily Stock Account. If he finds that the declaration in ARE.1 and theinvoices are correct from the point of view of identity of goods and its assessment toduty, he shall seal each package or the container ensuring that the goods cannot betampered with after the examination. Normally, individual packages should be sealed byusing wire and lead seals and an all-sides-closed container by using numbered One timeLock/Bottle seals or in such other manner as may be specified by the Commissioner ofCentral Excise by a special or general written order. Thereafter, the said officer shallendorse and sign each copy of the application in token of having such examinationdone and put his stamp with his name and designation below his signature;

8. Distribution of ARE.1 in the case of export from the factory or warehouse

Original (First Copy)	The said Superintendent or Inspector of Central Excise shall return to the exporter immediately after endorsements and signature
Duplicate (Second Copy)	The said Superintendent or Inspector of Central Excise shall return to the exporter immediately after endorsements and signature.
Triplicate (Third Copy)	Sent to the bond sanctioning authority, either by post or by handing over to the exporter in a tamper proof sealed cover after posting the particulars in official records.
Quadruplicate (Fourth Copy)	Retain for official records
Quintuplicate (Fifth Copy)	Optional copy - The said Superintendent or Inspector of Central Excise shall return to the exporter immediately after endorsements and signature.

9. Distribution of ARE.1 in the case of export from other than factory or warehouse

9.1 Where goods are not exported directly from the factory of manufacture orwarehouse, the distribution of A.R.E.1 will be same as above except that the triplicatecopy of application shall be sent by the Superintendent having jurisdiction over thefactory of manufacture or warehouse who shall, after verification forward the triplicatecopy in the manner specified above.

10. Despatch of goods by self-sealing and self-certification

10.1 Self-sealing and self-certification is a procedure by which the exporter who is amanufacturer or owner of a warehouse, may remove the goods for export from hisfactory or warehouse without examination by a Central Excise Officer. This procedure willalso be permitted in the cases where a merchant-exporter procures the goods directlyfrom a factory or warehouse. In both cases, the manufacturer of the export goods orowner of the warehouse shall take the responsibility of sealing and certification. For thispurpose the owner, the working partner, the Managing Director or the Company Secretary, of the manufacturing unit of the goods or the owner of warehouse or a person(who should be permanent employee of the said manufacturer or owner of thewarehouse holding reasonably high position) duly authorised by such owner, workingpartner or the Board of Directors of such Company, as the case may be, shall certify onall the copies of the application (A.R.E. 1) that the goods have been sealed in hispresence. The exporter shall distribute of the copies of A.R.E. 1 in the following manner:

Original (First copy) and Duplicate (Second copy)	Send to the place of export along with the goods
Triplicate (Third copy) and Quadruplicate (Fourth copy)	Superintendent or Inspector of Central Excise having jurisdiction over the factory or warehouse within twenty four hours of removal of the goods
Quintuplicate (Fifth copy)	Optional copy - Send to the place of export along with the goods

10.2 The said Superintendent and Inspector of Central Excise shall verify the particularsof assessment, the correctness of the amount of duty paid or duty payable, its entry inthe Daily Stock Account maintained under rule 10 of the Central Excise (No.2) Rules, 2001(the manufacturer or warehouse owner will be required to present proof in this regard),corresponding invoice issued under rule 11. If he is satisfied with the particulars, he willendorse the relevant A.R.E. 1 and append their signatures at specified places in token ofhaving done the verification. In case of any discrepancy, he will take up the matter withthe assessee for rectification and also inform the jurisdictional Assistant/DeputyCommissioner. Once verification is complete and the A.R.E. 1 is in order, he shalldistribute the documents (A.R.E. 1) in the following manner:

Triplicate (Third copy)	Send to the bond accepting authority, either by post or by handing over to the xporter in a tamper proof sealed cover after posting the particulars in official records. Where manufacturer has given LUT, triplicate shall be retained and will be forwarded to the Deputy/Assistant Commissioner of the Division along with Statement, after matching them with original copies of A.R.E.1s.
Quadruplicate (Fourth copy)	Retain for Range records (The notification does not specify this distribution of this copy)

11. Export by parcel post

11.1 In case of export by parcel post after the goods intended for export has beensealed, the exporter shall affix to the duplicate application sufficient postage stamps tocover postal charges and shall present the documents, together with the package orpackages to which it refers, to the postmaster at the Office of booking.

12. Examination of goods at the place of export

12.1 The place of export may be a port, airport, Inland Container Depot, CustomsFreight Station or Land Customs Station.

12.2 The exporter shall present together with original, duplicate and quintuplicate(optional) copies of the application (A.R.E. 1) to the Commissioner of Customs or otherduly appointed officer – normally goods are presented in the designated export shed.

12.3 The goods are examined by the Customs for the purposes of Central Excise toestablish the identity and quantity, i.e. the goods brought in the Customs area for exporton an A.R.E. 1 are the same which were cleared from the factory. The Customsauthorities also examine the goods for Customs purposes such as verifying for certainexport incentives such as drawback, DEEC, DEPB or for determining exportability of thegoods.

12.4 For Central Excise purposes, the Officers of Customs at the place of export shallexamine the consignments with the particulars as cited in the application (A.R.E. 1) and ifhe finds that the same are correct and the goods are exportable in accordance with thelaws for the time being in force (for example, they are not prohibited or restricted frombeing exported), shall allow export thereof. Thereafter, he will certify on the copies of theA.R.E. 1 that the goods have been duly exported citing the shipping bill number anddate and other particulars of export and distribute in the following manner:

(i) The officer of customs shall return the original and quintuplicate (optionalcopy for exporter) copies of application to the exporter and forward theduplicate copy of application either by post or by handing over to theexporter in a tamper proof sealed cover to the officer specified in theapplication, from whom exporter wants to claim rebate.

(ii) Quintuplicate A.R.E. 1 is the Export Promotion Copy and the exporter shalluse this copy for the purposes of claiming any other export incentive.

13. Procedure relating proof of export and to re-credit against such proof

13.1 The procedure relating to acceptance of proof of export or the ‘validation’ ofactual export has been simplified. The original and duplicate copies of A.R.E. 1 arepresented to the Customs authorities at the place of export [with option for exporter toalso present quintuplicate copy]. The Customs authority certify the actual export onthese documents and distributes the copies as specified.

13.2 The exporter shall submit a Statement, at least once in a month, in Form specifiedin (Annexure-19) along with the Original copies of A.R.E. 1 with due certification of export(Pass for Shipment Order) by Customs authorities at the place of export to the Divisionaloffice (through Range)or in the office of the bond-accepting authority. Other supportingdocuments shall also be furnished, namely, Self-attested photocopy of Bill of Lading andSelf-attested photocopy of Shipping Bill (Export Promotion Copy). The Range office or theOffice of the bond-accepting authority immediately on receipt shall acknowledge theStatement.

13.3 The exporter is permitted to take credit in his running bond account on the basisof copy of the Statement referred to above, duly acknowledged the Range office or theoffice of the bond-accepting authority

13.4 It shall be the responsibility of the Range Office and Division Office or the otherbond-accepting authority to verify the correctness of Statement and A.R.E.1 furnished bythe exporter within the shortest possible time. The Statement and A.R.E.1 will be tallied bythe Range Officers with the triplicate copies of A.R.E.1 already with them and the A.R.E.1or its summary received directly from the place of export (hard copies or electronicsummary or e-mail) within 15 days of the receipt. The Divisional Officer shall accept theproof of export or initiate necessary action in case of any discrepancy.

13.5 In case of other bond-accepting authority, their office will do this work. The bond-acceptingauthority shall accept the proof of export or initiate necessary action in caseof any discrepancy. He will also intimate about the acceptance of proof of export or anyother action to the Deputy/Assistant Commissioner of Central Excise from whosejurisdiction goods were cleared for export.

13.6 In case of non-export within the six month from the date of clearance for export(or such extended period, if any, as may be permitted by the Deputy/AssistantCommissioner of Central Excise or the bond-accepting authority) or discrepancy, theexporter shall himself deposit the excise duties along with interest on his own immediatelyon completion of the statutory time period or within ten days of the Memorandum givento him by the Range/Division office or the Office of the bond-accepting authority.Otherwise necessary action can be initiated to recover the excise duties along withinterest and fine/penalty. Failing this, the amount shall be recovered from themanufacturer-exporter along with interest in terms of the Letter of Undertaking furnishedby the manufacturer. In case where the exporter has furnished bond, the said bond shallbe enforced and proceedings to recover duty and interest shall be initiated against theexporter.

13.7 In case of any loss of document, the Divisional Officer or the bond acceptingauthority may get the matter verified from the Customs authorities at the place of exportor may call for collateral evidences such as remittance certificate, Mate’s receipt etc. tosatisfy himself that the goods have actually been exported.

14. Functioning of Deputy/Assistant Commissioner of Central Excise (Export)

14.1 Under the normal export procedure, the merchant-exporters including thosemanufacturer-exporters (Project-exporters who have to export bought out goods) haveto procure the excisable goods for export under bond manufactured in different partsof the country. For this purpose, they have to have to furnish either several bonds withthe Deputy/Assistant Commissioner of Central Excise of the suppliers area and submitproof of exports for discharge of such bonds or furnish a bond with the MaritimeCommissioner who are located only at seven ports, namely, Considering that there havebeen tremendous export potentials from the inland areas located at considerabledistance from a sea port and that there have been considerable growth of exportsfrom Inland Container Depots and the Air Cargo Units located in such inland areas, theBoard had appointed an officer in each Commissionerate except thoseCommissionerates in which the Maritime Commissioner is posted as Deputy/AssistantCommissioner of Central Excise (Export) for the purpose of facilitating export under bondby Circular No. 500/66/99-CX, dated 15 th December, 1999, under authority of rule 19 ofthe said Rules read with notification No.42/2001-Central Excise (N.T) dated 26.6.2001.

14.2 Any merchant exporter/manufacturer-cum-merchant exporter can file therequired bond with the Deputy/Assistant Commissioner of Central Excise(Export)under whose jurisdiction his Head Office/factory is located (within the jurisdiction ofthe Commissionerates). In such case the exporter can procure the goods from afactory located anywhere in India.

14.3 For clarification it is mentioned that the Deputy/Assistant Commissioner of CentralExcise (Export) will not deal with the exports where the manufacturer-exporters arepermitted to export by furnishing an Annual Undertaking (UT-1) in lieu of bond.

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