Scope and coverage of goods imported under Target Plus Scheme – CBEC issues clarification

By Vijay Kumar

The Target Plus Scheme (TPS) for the Star Export Houses was introduced in the Foreign Trade Policy (FTP) which came into force on 01.9.2004. Under the scheme the exporter gets entitled to rewards in the form of duty free credit based on incremental exports. In terms of para 3.7.6 of the FTP the duty credit may be used for import of any inputs, capital goods including spares, office equipment, professional equipment and office furniture provided the same is freely importable, for their own use or that of the supporting manufacturer(s). In terms of para 3.2.5 (II) of the Handbook of Procedures, Vol.I (2005 edition), goods imported under this scheme shall have a ‘broad nexus’ with the products exported. In terms of condition No. 3 of Notification Nos. 32/2005-Cusdt. 8.4.2005 and 73/2006-Cus.dated 10.7.2006 the certificate and the goods imported against it shall not be transferred or sold.

It has been brought to the notice of the Ministry by the trade that some exporters had obtained duty credit certificates against exports of rice and using these certificates they have imported almonds which, after removal of the shells, have been sold in the market without payment of duty. As dry fruits / almonds cannot be used in the processing / manufacture of rice, it is alleged that the condition of ‘broad nexus’ stipulated in the Handbook is not fulfilled. The ‘actual-user’ condition specified in the Policy and the Customs notification is also violated because almonds, after removal of shells, are being sold in the open market. It has been alleged that the act of importation of almonds which are neither inputs nor capital goods in relation to rice is nothing but misuse of the TPS.

Ministry of Law has clarified that the holder of TPS certificate is permitted to import an item under the TPS and get the same processed into possible resultant products only if the same has a ‘broad nexus’ with the product group as an input in the export product and is required to be used as an input in the product exported for which TPS benefit is sought. The Ministry of Law has also clarified that the term ‘broad nexus’ with the product group is in addition to and not in substitution of the words “inputs” and “own use” in Para 3.7.6 of the Scheme.

CBEC agrees with the Law Ministry and wants the instructions to be followed.

Circular No. 21/2007-Cus dated the 8^thMay, 2007.