Misuse of Target Plus Scheme – Board is concerned
In recent months several cases of alleged misuse of the benefits under TPS have been noticed by the DRI . It has been found that the items imported under the TPS have had no ‘broad nexus' with the products exported and neither these can be considered as ‘inputs' for the manufacture of export products. Further, the investigations revealed that the imported goods were subsequently sold in the local market in violations of the provisions of the TPS . The DRI suspects that the modus-operandi may be widespread and not limited only to a few cases.
In terms of para 3.7.6 of the Foreign Trade Policy (FTP), the duty credit earned under the TPS may be used for import of any inputs, capital goods including spares, office equipment, professional equipment and office furniture provided the same are freely importable, by an importer for his own use or for the use of his supporting manufacturer(s) as declared in ‘ Aayat Niryat ' Form.
Paragraph 3.2.5(III) of Handbook of Procedures 2005-06 provides that the licensing authority shall at the time of issuance of the duty credit entitlement certificate endorse the name of the associate manufacturer/supporting manufacturer/job-worker on the certificate as declared by the applicant. Further, the goods imported under TPS shall have a ‘broad nexus' with the products exported. In terms of condition no.3 of notification Nos. 32/2009- Cus dated 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.
The Board had clarified vide Circular No.21 /2007- Cus . dated 21.5.2007, that the words ‘inputs' and ‘use' may not be brushed aside and have to be in focus for the intended import. Together, these words indicate that the item sought to be imported should be an ‘input' in the manufacture of the exported products which is required for ‘use' by the exporter or the supporting manufacturer, as the case may be. For this purpose, the intended input must have a relationship with the export product. Whereas SION will act as a prima facie evidence of ‘inputs', the exporter is not debarred from satisfying the authorities that there is a ‘broad nexus' between the intended import item as an ‘input' with the export product, both falling within the same product group. It was also 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 the TPS benefit is sought.
Now the CBEC further clarifies that:-
++ under the TPS the exporter can import, within the entitlement, items in quantities in excess of that mentioned in SION or other items in the product group provided that, in either case, they form ‘inputs' and are ‘used' by him.
Board wants imports under TPS to be carefully scrutinized with reference to the provisions of the
1. FTP
2. Handbook of Procedures
3. the customs notifications and
4. Board's Circular
so as to ensure that the laid down provisions regarding ‘inputs', ‘broad nexus' and ‘use' and ‘supporting manufacturer(s)' are complied with.
CBEC Circular No. 45 /2007- Cus . Dated 19 th December, 2007.