CHAPTER 7
EXPORT WITHOUT PAYMENT OF DUTY
Part-VI
Manufacture of export goods in bond1. Introduction
1.1 The Board has, by Notification No.
43/2001-CE(N.T.) dated 26.6.2001[hereinafter referred to as the ‘said notification’] notified the conditions, safeguards andprocedures for procurement of the excisable without payment of duty for the purpose ofuse in the manufacture or processing of export goods and their exportation out of India,to any country except Nepal and Bhutan.
1.2 It may be noted that in rule 19 of the said Rules and in said notification, expression‘export goods’ has been used. This refers to excisable goods (dutiable or exempted) aswell as non-excisable goods. Thus, the benefit of input stage rebate can be claimed onexport of all finished goods whether excisable or not.
1.3 It may be also noted that materials, as defined in the said rule 19 may be usedfor manufacture or processing. In other words, any processing not amounting to manufacture (such as packing, blending etc.) will also be eligible for the benefit undersaid notification.
1.4 Removal without payment of duty of equipment and machinery in the nature ofcapital goods used in relation to manufacture or process of finished goods shall not beallowed.
2. Conditions and procedures
2.1 The conditions and procedure for manufacture of export goods in bond shall be,as follows:
(i) The manufacturer or the processor intending to avail benefit of thisnotification shall register himself under rule 9 of the said Rules; and
(ii) The procedure specified in the Central Excise (Removal of Goods at Concessional Rate of Duty for Manufacture of Excisable Goods) Rules,2001 shall be followed, mutatis mutandis. It is clarified that there is no needfor any separate exemption notification for applying this rule.
(iii) The manufacturer or processor shall file a declaration with theDeputy/Assistant Commissioner of Central Excise having jurisdiction overthe factory of manufacture under the Central Excise (Removal of Goodsat Concessional Rate of Duty for Manufacture of Excisable Goods) Rules,2001, and also declare ratio of input and output and rate of duty payableon excisable goods to be procured without payment of duty. Where thereare more than one export product, separate statement of the input-outputratios may be furnished for each export product. The consumptionshould be net of recycled materials. Where recoverable wastage aregenerated but not recycled but sold on account of its unsuitability, thesame should be clearly reflected in the declaration. The declarant shouldalso enclose, in case of a new product or in case where the manufactureris not regularly manufacturing the export goods and clearing for homeconsumption or export, a write up of manufacturing process.
2.2 Verification of Input–output ratio and grant of permission
2.2.1 The Deputy/Assistant Commissioner of Central Excise shall verify the correctness ofthe ratio of input and output mentioned in the declaration filed before commencementof export of such goods, if necessary, by calling for samples of finished goods or byinspecting such goods in the factory of manufacture or process. If, after such verification,the Deputy/Assistant Commissioner of Central Excise is also satisfied that there is nolikelihood of evasion of duty, he may grant permission to the applicant for manufactureor processing and export of finished goods and countersign the application in themanner specified in the Central Excise (Removal of Goods at Concessional Rate of Dutyfor Manufacture of Excisable Goods) Rules, 2001;
2.2.2 It is clarified that for the sake of convenience and transparency, input outputnorms notified under the Export Import Policy may be accepted by the Departmentunless there are specific reasons for variation. However, in case, the input output normsnotified under the Export Import Policy does not include all the materials used in exportgoods, the claim under this scheme should not be denied merely on that ground.
2.3 If for any reason the Deputy/Assistant Commissioner of Central Excise is notsatisfied with reference to the correctness of the consumption norms claimed by theapplicant, especially where the product is being manufactured for the first time in hisjurisdiction, he may permit the manufacturing operations and the verification of theconsumption norms should be completed while the process of manufacture is on. Theverification should be completed before allowing the export of the goods as themanufacturer working under this Scheme is expected to declare the raw materialscostumed in ARE-2.
2.4 The permission granted by the Deputy/Assistant Commissioner of Central Excisecan be withdrawn at any time if any glaring misuse resulting into loss of revenue comesto his notice.
2.5 Any change in the consumption ratio [input-output ratio] should be promptlyintimated by the manufacturer to the deputy/Assistant Commissioner of Central Exciseand the jurisdictional Range Superintendent giving reference of the permission granted.If necessary, the Deputy/Assistant Commissioner of Central Excise may order freshverification.
3. Procurement of material
3.1 The procedure of procurement of material required for the manufacture shall begoverned by the provisions of the Central Excise (Removal of Goods at ConcessionalRate of Duty for Manufacture of Excisable Goods) Rules, 2001.
4. Removal of materials or partially processed material for processing
4.1 The Deputy/Assistant Commissioner of Central Excise may permit a manufacturerto remove the materials as such or after the said materials have been partially processedduring the course of manufacture or processing of finished goods to a place outside thefactory -
(a) for the purposes of test, repairs, refining, reconditioning or carrying out anyother operation necessary for the manufacture of the finished goods andreturn the same to his factory without payment of duty for further use inthe manufacture of finished goods or remove the same without paymentof duty in bond for export, provided that the waste, if any, arising in thecourse of such operation is also returned to the said factory of themanufacture or process; or
(b) for the purpose of manufacture of intermediate products necessary forthe manufacture or processing of finished goods and return the saidintermediate products to his factory for further use in the manufacture orprocess of finished goods without payment of duty or remove the same,without payment of duty for export, provided that the waste, if any, arisingin the course of such operation is also returned to the factory ofmanufacturer or processor;
(c) Any waste arising from the processing of materials may be removed onpayment of duty as if such waste is manufactured or processed in thefactory of the manufacturer or processor;
5. Procedure for export
5.1 The goods shall be exported on the application in Form A.R.E. 2 specified in the
(Annexure-23) and the procedures specified in the Notification No.
42/2001-CE(N.T.), dated 26th June, 2001 shall be followed. It is mentioned that in such cases, fresh A.R.E.1 isnot required because export will be effected on A.R.E.2 itself. But the procedurespecified in the aforementioned notifications relating to removals, distribution ofdocuments at the place of despatch and place of export, acceptance of proof ofexport etc. shall be followed mutatis mutandis.
5.2 The Deputy/Assistant Commissioner of Central Excise should point out deficiency,if any within 15 days of filing of A.R.E.1 duly certified by Customs indicating actual export.Queries/ deficiencies shall be pointed out at one go and piecemeal queries should beavoided.
5.3 Only a manufacture or processor of finished goods who exports the goods canclaim benefit of input stage rebate. This facility shall not be extended where export arethrough merchant exporters.
5.4 The benefit of input stage rebate cannot be claimed in any of the followingsituations:
(i) where the finished goods are exported under Claim for Duty Drawback
(ii) where the finished goods are exported in discharge of export obligationsunder a Value Advance Licence or a Quantity Based Advance Licenceissued before 31.03.95.
(iii) where facility of input stage credit is availed under CENVAT Credit Rules, 2001
6. Accounts & Returns
6.1 The manufacturer shall maintain register of duty free materials brought to thefactory for manufacture of finished goods for export and the account for finished goodsmanufactured and exported. Any officer duly empowered by the Deputy/AssistantCommissioner of Central Excise in this behalf shall have access at all reasonable times toany premises indicated in the application. The applicant shall also permit the officer ofCentral Excise access to any records relating to the production, storage and export ofgoods.
6.2 The colour coding of A.R.E.2 will be as follows:-
Original |
White |
Duplicate |
Buff |
Triplicate |
Pink |
Quadruplicate |
Green |
Quintuplicate |
Blue |
7. Checks by Customs Officers
7.1 Samples will be invariably drawn by the Customs Officers for testing at the placeof export in case the export goods are of sensitive nature considering that they aremade from materials bearing high Central Excise Duty.
7.2 Customs officer responsible for making endorsement in A.R.E.2 shall carefullycheck that exports are not covered under any of the following:
- The Duty Drawback Scheme
- A Value Based Advance Licence issued prior to 31.03.95
- A Quantity Based Advance Licence issued prior to 31.03.95
8. The Deputy/Assistant Commissioner sanctioning rebate shall ensure that therelevant transport copies (duplicate copies) of Duty paying document have beensuitably defaced before payment is made.
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