Circular No. 21/2007-Cus.
F.NO.605/66/2006-DBK
Government of India
Ministry of Finance
Department of Revenue
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New Delhi, the 8th May, 2007.
Sub:
Scope and coverage of goods imported under Target Plus Scheme –
clarification reg.
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I am directed to invite your
attention to the above mentioned subject. 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-Cus dt. 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.
2. 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.
3.
The matter has been examined in consultation with the Ministry of Law
(MOL). After examination of the
provisions of Para 3.7.6 of the FTP
and Para 3.2.5 (II) of the HBP, the MOL has opined that the FTP does not use the
expression “broad nexus” and, therefore, the same cannot be
dissociated from the words “input” and “use” mentioned in the
Policy. The MOL has categorically
stated that the addition in Para 3.2.5 (II) of the HBP is to facilitate the
search for “inputs” and “use” and any interpretation so as to dissociate
the import from the “inputs” and “use” in the export goods would make it
ultra vires the FTP. The MOL
has further stated that the words “inputs” and “use” can 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 items 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 the 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. Ignoring to give
effect to the words “inputs” in the beginning and “own use” towards the
end in Para 3.7.6 of the FTP would mean to render a part of it redundant and
would not be in keeping with the objective and framework of the scheme.
4.
In the light of this, the 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.
5.
The Ministry has accepted the aforesaid opinion of the Ministry of Law.
Accordingly, import of goods against TPS certificates may be allowed
keeping in view the said opinion discussed in paragraphs 3 and 4 above.
6.
These instructions may be brought to the notice of the trade by issuing
suitable Trade/Public Notices. Suitable Standing orders/instructions may be
issued for the guidance of the assessing officers.
Difficulties faced, if any in implementation of the Circular may please
be brought to the notice of the Board at an early date.
(ANURAG BAKSHI )
S.T.O. (DBK)
