Absolutely no duty on export goods – Board issues Section 37B order - but what is export under bond?
The policy of not only the Government of India but most governments is that only goods and not taxes should be exported. But sometimes overanxious officers forget this basic philosophy and in any case they have to go strictly by the rules and the Board is really no help – what no help, it is responsible, most of the time for all the confusion. Just look at such a confusion.
Goods can be exported without payment of duty under Rule 19 of the Central Excise Rules. Notification No. 42/2001-C.E. (N.T.), dated 26-6-2001 prescribes the procedure for this export without payment of duty. The basics question is, what is duty? Rule 19 says that any excisable goods may be exported without payment of duty. We would naturally assume this means all duties of excise like SED, AED, CESS etc,. There is no clarity on this in the rules. In the simplification era when the Government deleted rules and brought back the rules in notifications, this duty got defined in the Notification No. 42/2001. This notification stipulated that duty means Excise duty, AED, education Cess, NCCD etc,. But this education cess was included in the meaning of duty only with effect from 10.08.2004, while the cess was effective from 09.07.2004. So for a month there was no mention of education cess in the notification and several notices have been issued to manufacturer exporters to pay education cess on their exports. The logic of the department was that while excise duty and AED were not required to be paid for exports, education cess had to be paid. Because the amounts were not much, many assessees paid up to ‘buy’ peace with the department
After nearly two years and much unwanted litigation, Board has now come up with a Section 37B order that no duty whatsoever need be paid when goods are exported under bond under Rule 19. The whole cause of the litigation was Board’s ignorance of the existence of Notification No. 42/2001 when the 2004 budget was presented. Why should Board go about defining ‘duty’ in the notification and then forget to include a new duty that was introduced in the budget? Board’s definition of duty in the notification includes all duties collected as excise duty; then what was the need to list them? Would not a simple sentence in Rule 19 that duty means all duties collected as excise duties suffice? Should simple things be so complicated with a notification, then forgetting to amend it on time and then issuing a Section 37B order as to make life miserable for all concerned?
Will the section 37B order put the issue to rest? Not at all if nit picking and hair- splitting continue with agile auditors and others in the field. The order says that no duty is required to be paid when goods are exported under bond under Rule 19 of the Central Excise Rules. Sadly Board has again forgotten that manufacturer exporters need not execute a bond. They can export under a Letter of Under Taking (LUT). Now Board’s order says that no duty is required to be paid when exports are under bond. This can be interpreted by the intelligent officer to mean that this facility is not available when goods are exported under LUT! Before another round of litigation starts, Board should clarify that no such litigation should be initiated or will they wait for another couple of years to give this clarification?
Board’s Section 37B Order No. , dated 13-1-2006 and Corrigendum dated 30-1-2006