Benevolent Board allows duty-paid packing materials into export warehouse, but blatantly denies export benefits
THE CBEC's latest Circular states,
“As per the provisions of Rule 20 of the Central Excise Rules, 2002, the goods can be removed from the factory without payment of duty to a warehouse from where the goods are allowed to be exported. The Board's Circular No. 581/18/2001- CX dated 29.06.01 prescribes the procedure to be followed for movement of goods to and from export warehouse. The purpose of allowing export warehouse is to facilitate export from the country ”
Representations have been received from the Trade and the field formations seeking clarification on the issue as to whether or not the duty paid packing material can be allowed to be brought in the export warehouse used for packing of export goods. The clarification has been sought in view of Para 7.2 of the Board's Circular No. 581/18/2001- CX dated 29.06.01 which provides that duty paid goods are not permitted to be brought into the warehouse. It has been stated that packing materials are normally procured in small quantities and the suppliers find it difficult to follow the bond procedure.
So the Board has very kindly agreed that duty paid packing material can be brought into the export warehouse, but exporter would not be allowed to claim export benefit like rebate for the duty paid on the said packing material. Pray, WHY?
Circular No. 900 amends Circular 581 dated 29.06.2001, to insert the following after Para 7.2:
“However, an exporter desirous of bringing duty paid packing material required for packaging of other material in the warehouse, may submit a written request to the jurisdictional AC/DC of the Division, who may grant the permission for a period of one year at a time. The exporter will maintain proper account of such goods and shall not claim any export benefit like rebate of duty paid on the said material.”
On the one hand in the circular at para 2 it states that the objective/purpose of export warehouses is to facilitate exports, while on the other hand it bars exporters from claiming export benefit of duty paid on the packing materials received by them. When the exporter is required to maintain proper account of such goods, why should the department bar the exporter from claiming export benefit of duty paid on the packing material received by them directly without following the bond procedure? Is it not against the policy of the Government that only goods and services are to be exported but not incidental taxes on such goods and services? If export benefits are disallowed on packing material will it not burden the exporter and impact the price of export goods and thereby the exporters' competitiveness in the world market. Luckily for the exporter the Board did not mention denying drawback claims – or is it included in ‘export benefit'?
Maybe this is intended for purchase of small quantities of packing materials, but should a 21st century Board look like denying even small benefits.
First of all, the stipulation that duty paid goods are not permitted to be brought into the warehouse, is wrong and beyond the scope of Rule 20 of the Central Excise Rules. How can you prevent duty paid goods being brought into the warehouse? Of course what they meant was duty paid packing material. Otherwise every warehouse is an offender as several duty paid goods like telephones, fans, lights, furniture, cars, trucks, computers, pens, paper, cigarettes and a host of other items are brought into the warehouse regularly. If no duty paid goods can be brought into the warehouse, all these items should be banned! But this stipulation had been there for more than a decade!
We often speak so much about the change in mindset from enforcer to facilitator, but the change never comes. Instead of so emphatically stipulating that export benefits will not be allowed to goods exported, which is self contradictory (when you know that goods are exported, how can you deny export benefits, just because some impossible procedure has not been followed?), Board could have graciously allowed cash refund of the duty paid on packaging material, which would not be even a Crore of Rupees in the whole country, but which would have definitely improved the image of the Department.
But the sentence that exporter would not be allowed to claim export benefit is certainly against the avowed policy of the Government.
CBEC Circular No. 900/20/2009- CX Dated: October 6th , 2009.