FTP - Duty Credit Scrips can be used to Pay Excise Duty on Domestic Procurement
THE Foreign Trade Policy allowed scrips under different schemes of Chapter 3 of Foreign Trade Policy, namely, Focus Product Scheme (FPS), Focus Market Scheme (FMS), Vishesh Krishi and Gram Udyog Yojana (VKGUY) Scheme, Status Holder Incentive Scrip (SHIS) Scheme, Market Linked Focused Product (MLFPS) Scheme, Served From India Scheme (SFIS) and Agri. Infrastructure Incentive Scrip (AIIS) Scheme, for import of goods as per conditions of these Schemes.
The Supplement 2012-13 to the Policy announced on 5th June 2012 allowed these scrips to be utilized for payment of Excise Duty for domestic procurement. Earlier only scrips under SFIS were so permitted for procurement of goods from domestic market. Now all scrips are permitted to source from domestic market so as to encourage manufacturing, value addition and employment.
This was an important measure for import substitution to help in saving of foreign exchange in addition to creating additional employment.
Accordingly, Para 3.17.5(c) of the Foreign Trade policy now states,
“Duty Credit Scrip can also be utilised for payment of Excise Duty on domestic procurement of such items as permitted to be imported under respective scheme”.
This means that the goods can now be procured from the DTA instead of importing them and excise duty can be paid from the scrip. This is what the Foreign Trade Policy states, but you don't get an excise exemption through the Foreign Trade Policy. You can't walk away with goods from a factory without paying excise duty. You need an excise notification and there had to be a procedure. And that was nowhere in sight even after a month of the change in Foreign Trade policy. It was a game of DGFT proposing and CBEC disposing.
Now, the Revenue Department has come up with Notifications exempting the goods and prescribing the procedure.
The salient features:
1. The scrip should be registered with the Customs authority at the port of registration
2. The holder of the scrip, who may either be the person to whom the scrip was originally issued or a transferee-holder, should present the said scrip to the said Customs authority along with a letter or proforma invoice from the supplier or manufacturer indicating details of its jurisdictional Central Excise Officer and the description, quantity, value of the goods to be cleared and the duties leviable thereon.
3. The Customs authority, taking into account the debits already made towards imports, shall debit the duties leviable, but for this exemption in or on the reverse of the said scrip and also mention the necessary details thereon, updates its own records and sends written advice of these actions to the Central excise Officer;
4. At the time of clearance, the holder of the scrip should present the said scrip debited by the said Customs authority to the Central Excise Officer along with an undertaking addressed to the said Officer that in case of any amount short debited in the said scrip he shall pay on demand an amount equal to the short debit, along with applicable interest;
5. Based on the said written advice and undertaking, the said Officer should endorse the clearance particulars and validate, on the reverse of the said scrip, the details of the duties leviable, but for this exemption, which were debited by the said Customs authority, and keeps a record of such clearances;
6. The manufacturer should retain a copy of the said scrip, debited by the said Customs authority and endorsed by the Central Excise Officer and duly attested by the holder of the scrip, in support of the clearance under this notification.
Now, who is this mysterious Central Excise Officer? The Notification says, jurisdictional Central Excise Officer (hereinafter referred as the said Officer). Now Inspector to Commissioner - they are all jurisdictional officers. Can the documents be presented to anyone from Inspector to Commissioner? Why can't they specify the officer?
A great great commendable gesture of the CBEC in this notification is that they have stipulated that the holder of the scrip, to whom the goods were cleared, shall be entitled to avail the drawback or CENVAT credit of the duties of excise against the amount debited in the said scrip and validated at the time of clearance. This single act would ensure avoidance of a mountain of mindless litigation. DDT salutes the Board for the thoughtful legislation.
The Following are the exemption notifications for the various schemes.
1. Focus Product Scheme - Notification No. , Dated: July 9, 2012
2. Focus Market Scheme - Notification No. , Dated: July 9, 2012
3. Agri. Infrastructure Incentive Scrip - Notification No. , Dated: July 9, 2012
4. Vishesh Krishi and Gram Udyog Yojana (Special Agriculture and Village Industry Scheme) - Notification No. , Dated: July 9, 2012
5. Status Holder Incentive Scheme - Notification No. , Dated: July 9, 2012
But are they exempted or duty paid? So far, so good, but are these goods to be treated as exempted or duty paid? When they are allowing credit, obviously they consider them duty paid. They should have amended the CENVAT Credit Rules also to clear the position that these goods will not be considered as exempted.