TIOL-DDT 579 · the untouched capture
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<p align="justify" ><b><font color="#663399" size="3" face="Verdana, Arial, Helvetica, sans-serif">TIOL-DDT
579</font></b><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><b><br>
23.03.2007<br>
Friday</b></font></p>
<p align=center ><font color="#006600" size="2" face="Verdana, Arial, Helvetica, sans-serif"><b>Pulses
export – government orders CBI probe.</b></font></p>
<p align="justify" ><font size="2" face="Verdana, Arial, Helvetica, sans-serif">The
BJP has demanded a criminal investigation into the alleged corruption in pulses
exports which were allowed to continue despite ban. Holding Commerce and Industry
Minister Kamal Nath responsible for the alleged pulses export scam, the party
has demanded his resignation.</font></p>
<p align="justify" ><font size="2" face="Verdana, Arial, Helvetica, sans-serif"> Senior BJP leader
Ravi Shanker Prasad said at a press conference in Delhi that if Kamal Math does
not resign, he should be removed. His allegations:-</font></p>
<p align="justify" ><font size="2" face="Verdana, Arial, Helvetica, sans-serif">1.
though the ban on export of pulses was announced on June 22, 2006 to contain
inflation, export opportunity was provided to some traders as the notification
came only on June 27</font></p>
<p align="justify" ><font size="2" face="Verdana, Arial, Helvetica, sans-serif">2.
The notification banning export of pulses was followed by another order on July
4 stating that the ban would not be applicable to the exporters possesing irrevokable
letters of credit on or after June 22.</font></p>
<p align="justify" ><font size="2" face="Verdana, Arial, Helvetica, sans-serif">3.
Though there was a ban on exports and the people were suffering enormously because
of the ever increasing prices, export of pulses not only continued unabated
but its quantity kept on increasing.</font></p>
<p align="justify" ><font size="2" face="Verdana, Arial, Helvetica, sans-serif">4.
this was possible only with the active patronage and cooperation of senior people
in the ministry.</font></p>
<p align="justify" ><font size="2" face="Verdana, Arial, Helvetica, sans-serif">5.
despite ban, export of pulses increased from Rs 442.79 crore for April-August
2006 to Rs 531.57 crore for April-October 2006.</font></p>
<p align="justify" ><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><b>The Ministry
reacts: </b></font></p>
<p align="justify" ><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Union Minister
of Commerce & industry, has ordered an investigation by the Central Bureau
of Investigation into the pulses export matter. In a rebuttal issued yesterday,
the Ministry of Commerce & Industry (Department of Commerce) has stated
that the allegations made at a press conference by a political party are not
correct and that the Department of Commerce had already instituted a CBI inquiry
to look into any wrongdoing that might have been committed by some exporters.</font></p>
<p align="justify" ><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><b>Giving the
facts of the case in chronological order,</b> the Department has stated as below:</font></p>
<p align="justify" ><font size="2" face="Verdana, Arial, Helvetica, sans-serif">In the wake of
rising prices of essential commodities, Cabinet Committee on Prices (CCP) and
Committee of Secretaries were constantly reviewing the prices and domestic availability
of essential commodities including pulses and were taking various decisions
to check the prices of these commodities. </font></p>
<p align="justify" ><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Pulses being
one of the commodities whose prices were rising and there was an urgent need
to take certain decisions to keep them under check, the following decisions
were taken:</font></p>
<p align="justify" ><font size="2" face="Verdana, Arial, Helvetica, sans-serif">i)
Committee of Secretaries (<b>COS</b>) held on 19<sup>th</sup> June 2006 decided
that the Department of Commerce will process the proposal for issuing necessary
orders banning the export of pulses for the next six months.</font></p>
<p align="justify" ><font size="2" face="Verdana, Arial, Helvetica, sans-serif">ii)
In the meeting of <b>CCP</b> held on <b>22<sup>nd</sup> June 2006</b>, it was
decided to ban export of pulses till 31.3.07. The minutes of the decisions of
this CCP, <b>dated 27.6.06</b>, were, received in the Commerce Department on
28.6.2006.</font></p>
<p align="justify" ><font size="2" face="Verdana, Arial, Helvetica, sans-serif">iii)
In the meanwhile, another meeting of the <b>COS</b> was held on <b>27.6.2006</b>
in which it was decided that the Department of Commerce will take immediate
steps of notification for banning export of pulses. </font></p>
<p align="justify" ><font size="2" face="Verdana, Arial, Helvetica, sans-serif">iv)
The Directorate General of Foreign Trade (DGFT) issued notification on <b>27<sup>th</sup>
June 2006</b> itself, banning export of pulses for 6 months w.e.f. 22<sup>nd</sup>
June 2006 (the date of CCP meeting). </font></p>
<p align="justify" ><font size="2" face="Verdana, Arial, Helvetica, sans-serif">v)
This ban was later extended till 31.3.2007 (on receipt of the CCP minutes) by
another notification issued on <b>3<sup>rd</sup> July 2006</b>.</font></p>
<p align="justify" ><font size="2" face="Verdana, Arial, Helvetica, sans-serif">vi)
In another meeting of the <b>COS held on 4<sup>th</sup> July 2006</b>, it was
decided that export of pulses, contracted/LC opened between 22 and 27 June 2006,
will not be permitted by DGFT in view of the CCP decision on 22.6.2006 to ban
exports of pulses and an order to this effect will be issued. Consequently,
<b>DGFT Notification dated 4<sup>th</sup> July 2006</b> was issued.</font></p>
<p align="justify" ><font size="2" face="Verdana, Arial, Helvetica, sans-serif">vii)
On 24.2.2007, Association of Pulses Manufacturers-Exporters of <st1:country-region>India</st1:country-region>,
Indore represented before the Commerce and Industry Minister that some exporters
have been exporting pulses even after the ban and only the small exporters have
suffered from this ban.</font></p>
<p align="justify" ><font size="2" face="Verdana, Arial, Helvetica, sans-serif">viii)
Commerce & Industry Minister ordered immediate inquiry and report. The complaints
were sent to the DGFT and Member (Customs) for the inquiry. </font></p>
<p align="justify" ><font size="2" face="Verdana, Arial, Helvetica, sans-serif">ix)
The DGFT gave his detailed report on 12.3.2007 including finding of a preliminary
investigation by the Department of Revenue Intelligence (DRI). The DRI has suspected
foul play by three exporters, namely, M/s Jetking International, M/s Kohinoor
Foods and M/s KRBL Ltd, who are three main exporters to export after the ban.
The DRI found two “abnormalities” in the documents (a prima-facie manipulation
of the expiry date and the abnormally similar price ($ 600 per ton) shown for
different kind of pulses). They are conducting a detailed scrutiny of the documents
of other exporters. The DGFT suggested <b>a detailed investigation/probe by
CBI</b>. Consequent to the report of DGFT along with the DRI preliminary inquiry
report, Commerce & Industry Minister ordered CBI investigation. The CBI
has been informed vide communication dated 15<sup>th</sup> March 2007.</font></p>
<p align="justify" ><font size="2" face="Verdana, Arial, Helvetica, sans-serif">The Foreign Trade
Policy provides for transitional arrangements as per para 1.5 of the Foreign
Trade Policy (2004-09) which reads as “In case an export or import that is permitted
freely under this Policy is subsequently subjected to any restriction or regulation,
such export or import will ordinarily be permitted notwithstanding such restriction
or regulation, unless otherwise stipulated, provided that the shipment of the
export or import is made within the original validity of an irrevocable letter
of credit established before the date of imposition of such restriction”. Thus
the transitional arrangements flow from the Foreign Trade Policy, and apply
to all changes, unless specifically excluded. In the later orders of the DGFT,
this arrangement has been specifically excluded in order to achieve tighter
control on domestic supplies. It can thus be seen from the above that the allegations
made are not correct.</font></p>
<p align="justify" ><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><b>But why CBI
enquiry? And why not DRI enquiry? Isn’t the DRI better equipped to conduct such
enquiries? And what can the CBI do in this case?</b></font></p>
<p align=center ><font color="#006600" size="2" face="Verdana, Arial, Helvetica, sans-serif"><b>Anti
dumping duty on Sodium Nitrite - extended</b></font></p>
<p align="justify" ><font size="2" face="Verdana, Arial, Helvetica, sans-serif">The anti dumping
duty imposed vide Notification No. 51/2005-Customs, dated the 27 th May , 2005
on Sodium Nitrite, originating in, or exported from, European Union was to expire
on 28<sup>th</sup> March 2007. The Designated Authority has recommended forextension
of the anti-dumping duty for a period of one year from the date of its expiry,
pending the completion of the review.</font></p>
<p align="justify" ><font size="2" face="Verdana, Arial, Helvetica, sans-serif">And the government
has obliged. The duty is extended till 27<sup>th</sup> day of March, 2008, unless
the notification is revoked earlier.</font></p>
<p align="justify" ><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><u><a href="http://www.taxindiaonline.com/RC2/subCatDesc.php3?subCatDisp_Id=23&filename=notification/custom/2007/ctariff07_044.htm" target="_blank">NOTIFICATION
NO. 44/2007-Customs, Dated : March 21, 2007 </a></u></font></p>
<p align=center ><font color="#006600" size="2" face="Verdana, Arial, Helvetica, sans-serif"><b>Anti
dumping duty on Caustic Soda - extended</b></font></p>
<p align="justify" ><font size="2" face="Verdana, Arial, Helvetica, sans-serif">The anti-dumping
duty on Caustic Soda, originating in, or exported from, <st1:country-region>Qatar</st1:country-region>
, imposed <i>vide N</i>otification No.121/2002-Customs, dated the 31<sup>st</sup> October,
2002, was to expire on 28<sup>th</sup> March 2007. The Designated Authority
has recommended forextension of the anti-dumping duty for a period of
one year from the date of its expiry, pending the completion of the review.</font></p>
<p align="justify" ><font size="2" face="Verdana, Arial, Helvetica, sans-serif">So the Anti dumping
duty is extended up to 27<sup>th</sup> day of March, 2008, unless the notification
is revoked earlier.</font></p>
<p align="justify" ><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><u><a href="http://www.taxindiaonline.com/RC2/subCatDesc.php3?subCatDisp_Id=23&filename=notification/custom/2007/ctariff07_043.htm" target="_blank">NOTIFICATION
NO. 43/2007-Customs, Dated : March 21, 2007 </a></u></font></p>
<p align=center ><font color="#006600" size="2" face="Verdana, Arial, Helvetica, sans-serif"><b>EXPORT
VALUATION RULES: A HURDLE RACE FOR GENUINE EXPORTERS</b></font></p>
<p align="justify" ><font size="2" face="Verdana, Arial, Helvetica, sans-serif">One of our expert
commentators wrote in:</font></p>
<p align="justify" ><font size="2" face="Verdana, Arial, Helvetica, sans-serif">The new section
14 stipulates that the transaction value for export goods shall be determined
by the exporter based on the rules made in this behalf. The basic idea is to
curb overvaluation of exports to claim undue export incentives by dubious exporters
who have committed rebate/DEPB frauds. </font></p>
<p align="justify" ><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Unfortunately
these new rules are like a hurdle race for a genuine exporter in this globalized
competitive world where every nation vies with another for a larger share in
the global trade. It’s a race against time for the exporter to clear all the
hurdles in these export valuation rules.</font></p>
<p align="justify" ><font size="2" face="Verdana, Arial, Helvetica, sans-serif"> Transaction value
shall be accepted only if the sale/export is to buyers who have no business
interest in each other and the sale is under competitive conditions. Sale under
competitive conditions essentially means that the exporter and the buyer do
not have any business interest in each other. </font></p>
<p align="justify" ><font size="2" face="Verdana, Arial, Helvetica, sans-serif">This clause of
determining whether the exporter and the buyer have any business interest in
each other will be the biggest stumbling block, because the officer scrutinizing
the value declared by the exporter should normally go by a self declaration
from the exporter in this regard which has the danger of not getting accepted
by the officer and is an incentive for corrupt practices. Further, the new rules
do not have such a provision for the exporter to declare that the export is
to a buyer and that the buyer and exporter do not have any business interest
in each other. </font></p>
<p align="justify" ><font size="2" face="Verdana, Arial, Helvetica, sans-serif">The export rules
gives enormous discretionary power to the officer to reject the transaction
value in the absence of any provision for the exporter to declare that the export
is under competitive condition and the exporter will have to go through the
ordeal of determining the value in terms of rules 4 through 6 of the rules.
The rules provide for the proper office to determine the value (comparison or
computed or residual).</font></p>
<p align="justify" ><font size="2" face="Verdana, Arial, Helvetica, sans-serif">For determination
of comparative value in terms of rule 4, there are certain anomalies which may
hinder the true determination of value for e.g. when the policy of the government
is not to export local taxes rule 4 (3) (vi) talks of PMV inclusive of taxes
which is erroneous – does it mean that true PMV will be deduced by a back calculation
deducting the taxes from the actual PMV – why get into such a messy situation
in the first place; further how can the MRP of the local comparative goods or
the local price in the manufacturer’s price list be the determinative factor
for a commodity meant for export. Usually the quality of an export commodity
differs from that of a commodity meant for domestic sale. In that case how can
the MRP or local price list of a local commodity become the basis for determining
the price of export goods? Sub clauses (vi), (vii) and (viii) do not have any
relevance for determining the comparative value of export goods.</font></p>
<p align="justify" ><font size="2" face="Verdana, Arial, Helvetica, sans-serif">When the value
cannot be determined in terms of rule 4, the proper officer will proceed to
determine the value by computation method by determining various cost elements.
Just imagine the kind of litigation this provision will foment in future. How
can the proper officer certify the various cost elements viz., cost of materials,
processing, design, cost of expenses like transportation, loading, unloading,
insurance etc, above all the controversial element called profit. The determination
of value by computation method should have been left to the exporter with the
proper officer insisting for a certified cost accountant certificate rather
than leave the job of determining the value by computation method in the hands
of the proper officer who has no <i>locus standi</i> to certify the various
cost elements involved in the goods meant for export. Further it does not provide
for determination of value when there is a merchant export or third party export
where the sale is not under competitive conditions.</font></p>
<p align="justify" ><font size="2" face="Verdana, Arial, Helvetica, sans-serif">The residual method
is the most cumbersome of the processes and the least said the better. The Government
can do a world of good if the export valuation rules are stipulated only for
goods which are exported under claim for incentives like drawback or DEPB and
excluding the incentive of rebate claimed towards CENVAT or input stage rebate
of CENVAT rather than bring in an omnibus provision to cover all the exported
goods and to top it all give enormous discretionary power to accept or reject
the transaction value in the hands of a proper officer.</font></p>
<p align="justify" ><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Let us hope that
the Ministry will consider all these factors before notifying the new export
valuation rules. The Ministry should take note of the fact that provisions should
be facilitative measures rather than stumbling blocks for genuine exporters.</font></p>
<p align="justify" ><font color="#FF6666" size="2" face="Verdana, Arial, Helvetica, sans-serif">Until
Monday with more DDT </font></p>
<p align="justify" ><font color="#FF6666" size="2" face="Verdana, Arial, Helvetica, sans-serif">Have
a nice Weekend. </font></p>
<p align="justify" ><font color="#FF6666" size="2" face="Verdana, Arial, Helvetica, sans-serif">Mail
your comments to</font> <font size="2" face="Verdana, Arial, Helvetica, sans-serif"><a
href="mailto:vijaywrite@taxindiaonline.com">vijaywrite@taxindiaonline.com</a>
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