DFIA – How to get goods from E.O.U./DTA units?
Revenue does not respect commerce
The Foreign Trade Policy 2004-09 Annual Supplement 2006 introduced a new scheme called Duty Free Import Authorisation (DFIA scheme). As provided for in all the export promotions schemes, the exporter is allowed to import goods without payment of duty. It goes without saying that when goods can be imported without payment of duty, they can as well be procured indigenously without payment of duty. Actually if an Indian supplier is able to supply goods substituting imports, he should be given all concessions and honours.
The EXIM policy and its later version the Foreign Trade Policy understood and promoted this concept, But often it takes a little while for the Babus of the revenue ministry to give effect to the dreams of the Babus of the commerce ministry. For all the hype they generate, the policy drafted by the commerce ministry is only a dream. The dream can be a reality only when the revenue Babus choose to make it so.
Take the case of DFIA.
Under the Scheme, duty free imports are allowed. However as per para 4.1.11 of the Policy, a DFIA holder intending to source the inputs from indigenous sources/State Trading Enterprises/ EOU/SEZ/ EHTP/STP/BTP units in lieu of direct import has the option to source them against Advance Release Orders denominated in free foreign exchange/ Indian rupees. However, supplies may be obtained against the Authorisation from EOU/EHTP/BTP/STP/ SEZ units, without conversion into ARO.
What does this mean?
++ DFIA holders can get their goods from manufacturers in India based on Advance Release Orders issued by DGFT or on the Authorisation Certificates themselves if they are getting the goods from EOUs.
But will excise authorities allow this? The excise officers are not always impressed with the Foreign Trade Policy; they would insist on notifications from the Revenue ministry.
There are a couple of notifications dealing with exemption to goods supplied to such Export Promotion Scheme holders.
Notification No.44/2001 C.E dated 26.6.2001 allows goods to be cleared without payment of duty for the purpose of use in the manufacture or processing of all articles by a manufacturer who is an holder of a Duty Exemption Entitlement Certificate and an Advance Licence under the Duty Exemption Scheme and their exportation out of India. Under this Notification excisable goods can be cleared without payment of duty to DEEC holders. But this does not cover DFIA. And there is no other notification even remotely dealing with this. The result: DFIA holders cannot get their goods from any manufacturer in India.
What about EOUs? For the EOUs, clearances to DFIA holders are deemed to be exports. Then can the clearances be done without duty? No, No, Where is the notification?
Notification No. , dated 31-03-2003 allows duty free clearance from the EOU to a person holding an Advance License in terms of paragraph 4.1.3 of the Foreign Trade Policy and a person holding Duty Free Replenishment Certificate in terms of paragraph 4.2 of the Foreign Trade Policy.
This also does not cover DFIA. The Result: DFIA holders cannot get their goods from EOUs.
Net Result: A DFIA holder can get his goods duty free from any country in the world except India. Is this what export policy is all about?
The Commerce ministry should have an officer posted in the CBEC and before the Policy is announced, they should get the excise and customs notifications approved and these notifications should be released along with the Policy.
If the Revenue Ministry has such scant respect for the Policy, why should the rest of the world have any faith in the Policy? Is it the Policy of the Government of India or is the Revenue Ministry above the government of India?