CHAPTER 8

EXPORT UNDER CLAIM FOR REBATE

Part-V

EXPORT UNDER CLAIM FOR REBATE OF DUTY ON EXCISABLE MATERIAL USED IN THE

MANUFACTURE OF EXPORT GOODS
1. Introduction

1.1 The Government has, by Ntf. No.41/2001-CE(NT), dated26.6.2001 [hereinafter referred to as the ‘said notification’] allowed rebate of whole ofthe duty paid on excisable goods, which are in fact materials or inputs for manufactureor processing of other goods, on their exportation out of India, to any country exceptNepal and Bhutan, to be paid subject to the conditions and the procedure specified inthe above-mentioned notification.

1.2 It may be noted that in rule 18 and in said notification, expression ‘export goods’has been used. It refers excisable goods (dutiable or exempted) as well as non-excisablegoods. Thus the benefit of input stage rebate can be claimed on export of all finishedgoods whether excisable or not.

1.3 It may be also noted that materials may be used for manufacture or processing.In other words, any processing not amounting to manufacture (such as packing,blending etc.) will also be eligible for the benefit under said notification.

1.4. The expression ‘material’ shall mean all raw materials, consumables, components,semi-finished goods, assemblies, sub-assemblies, intermediate goods, accessories, partsand packing materials required for manufacture or processing of export goods. Rebateof Central Excise duty paid on equipment and machinery in the nature of capital goodsused in relation to manufacture or process of finished goods being shall not be allowed.

1.5 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.

(iv) The market price of the goods is less than the rebate amount.

(v) The amount of rebate admissible is less then Rs. 500/-1.6The claim for rebate should be filed within the time stipulated under Section 11Bof the Central Excise Act, 1944.

2. Procedures and conditions to be followed

2.1 The manufacturer or processor shall file a declaration (Annexure-24) with theDeputy/Assistant Commissioner of Central Excise having jurisdiction over the factory ofmanufacture describing the finished goods proposed to be manufactured or processedalong with their rate of duty leviable and manufacturing/processing formula withparticular reference to quantity or proportion in which the materials are actually used aswell as the quality. The declaration shall also contain the tariff classification, rate of dutypaid or payable on the materials so used, both in words and figures, in relation to thefinished goods to be exported. Where there are more than one export product, separatestatement of the input-output ratios may be finished for each export product. Theconsumption should be net of recycled materials. Where recoverable wastage aregenerated but not recycled but sold on account of its unsuitability, the same should beclearly reflected in the declaration. The declarant should also enclose, in case of a newproduct or in case where the manufacturer is not regularly manufacturing the exportgoods and clearing for home consumption or export, a write up of manufacturingprocess.

3. Verification and grant of permission

3.1 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.

3.3 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.

3.4 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 is the ARE-2 for claiming rebate.

3.5 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.

3.6 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.

4. Procurement of material

4.1 The manufacturer or processor shall obtain the materials to be utilised in themanufacture of the finished goods intended for export directly from the registeredfactory in which such goods are produced, accompanied by an invoice under rule 11 ofthe said Rules.

4.2 The manufacturer or processor may also procure materials from dealersregistered for the purposes of the CENVAT Credit Rules, 2001 under invoices issued bysuch dealers.

5. Removal of materials or partially processed material for processing

5.1 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 -

(i) for the purposes of test, repairs, refining, reconditioning or carrying out anyother operation necessary for the manufacture of the finished goods and returnthe same to his factory without payment of duty for further use in themanufacture of finished goods or remove the same without payment of duty inbond for export, provided that the waste, if any, arising in the course of suchoperation is also returned to the said factory of the manufacture or process; or

(ii) for the purpose of manufacture of intermediate products necessary for themanufacture or processing of finished goods and return the said intermediateproducts to his factory for further use in the manufacture or process of finishedgoods without payment of duty or remove the same, without payment of dutyfor export, provided that the waste, if any, arising in the course of suchoperation is also returned to the factory of manufacturer or processor;Any waste arising from the processing of materials may be removed on payment ofduty as if such waste is manufactured or processed in the factory of themanufacturer or processor;

6. Procedure for export

6.1 The goods shall be exported on the application in Form A.R.E. 2 specified(Annexure-23) and the procedures specified in Notification No.40/2001-CE(N.T.), dated 26 th June, 2001 shall be followed. In other words, the exporter has option topay duty on finished export goods (if these are excisable) and claim rebate of such duty.He may also export the excisable goods without payment of duty. In both cases, freshA.R.E.1 is not 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/filing of claim etc. shall be followed mutatis mutandis.

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. Presentation of claim of rebate

7.1 The claim for rebate of duty paid on materials used in the manufacture orprocessing of goods shall be lodged only with the Deputy/Assistant Commissioner ofCentral Excise having jurisdiction of the place approved for manufacture or processingof such export goods. The following documents shall be presented with the claim: -

(i) Original copy of the ARE2 duly endorsed by the Customs Officer;

(ii) Duty self-attested copy of Shipping Bill (Export Promotion Copy)

(iii) Duly self-attested copy of Bill of lading/ Air way bill

(iv) Duplicate copy of the Central Excise Invoice under which Central Exciseduty was paid/accounted as payable on goods cleared for export.[where rebate of finished goods are also being claimed]

(v) Duplicate copy of the ARE.2 received from the customs officer in a sealedcover (if obtained).

8. Communication of deficiency in claim

8.1 The Assistant Commissioner of Central Excise should point out deficiency, if anywithin 15 days of lodging of the claim and ask the exporter to rectify the same within 15days. Queries/ deficiencies shall be pointed out at one go and piecemeal queries shouldbe avoided. The claim of rebate should be disposed of within a maximum period of twomonths.

8.2 Rebate of Input stage duty shall be allowed to manufacturer (processor) - exporter or the merchant-exporter, as the case may be, where such inputs are used in the manufacture/processing of export goods and cleared directly from the factory of the manufacturer/processor may export the goods directly himself or through merchant-exporter. Where the goods are exported by merchant-exporter, his name shall be mentioned on ARE 2 and other conditions prescribed in Ntf. No.41/2001-CE(NT), dated 26th June, 2001 should be fulfilled.

(Above para (8.2) has been substituted vide Cir. No. 604/41/2001-CX, dt.29/11/2001)

[Old (Note:- see Cir. No. 602/39/2001-CX, dt.21/11/2001 for para-8.2)

8.2 Only a manufacture or processor of finished goods who exports the goods canclaim benefit of input stage rebate. Benefit of the input stage rebate shall not beextended where export are through merchant exporters.]

9. Accounts & Returns

9.1 The manufacturer shall maintain register of duty paid materials brought to thefactory for manufacture of finished goods for export under claim for input stage rebateand the account for finished goods manufactured and exported. Any officer dulyempowered by the Assistant Commissioner of Central Excise or the Deputy Commissionerof Central Excise in this behalf shall have access at all reasonable times to any premisesindicated in the application. The applicant shall also permit the officer of Central Exciseaccess to any records relating to the production, storage and export of goods.

10. Checks by Customs Officers

10.1 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.

10.2 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

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