IS IT POSSIBLE TO GIVE LESSER BANK GURANTEE TO CUSTOMS ??

Dear Friends

As we aware execution of Bond and Bank Guarantee (BG) for the purpose of permitting clearance of imported goods under Advance License/EPCG Schemes is mandatory. But there are concessions for certain category of status holders.

Especially a registered member of an Export Promotion Council shall produce a certificate of proof of export performance along with certificate of status of applicant as “Manufacturer Exporter” from the concerned Export Promotion Council can make use of this concession.

Alternatively, the exporter shall produce a certificate of proof of export performance by a practicing Chartered Accountant alongwith certificate of status of applicant as “Manufacturer Exporter” duly authenticated by a practicing Chartered Engineer to the satisfaction of the Assistant Commissioner or Deputy Commissioner.

The Chartered Accountant issuing the certificate will mention his GST code and other registration details in the certificate and such certificates shall certify: • the proof of export performance; during the current financial year and preceding financial year; and • the proof of payment of GST as the case may be, during the current financial year or preceding financial year. In addition to above, Manufacturer Exporter shall submit one of the following documents:

(a) Installation certificate pertaining to earlier imported or domestically procured capital goods, by the Manufacturer exporters, issued by Jurisdictional Superintendent of Central Excise certifying manufacturing activity; or

(b)Installation certificate pertaining to earlier imported or domestically procured capital goods, issued by a Chartered Engineer certifying manufacturing activity. In such cases, Manufacturing Premises shall be post verified by the Jurisdictional Superintendent of Central Excise and Monitoring Cell shall ensure that such verification report is received; or

c) EODC or Redemption letter issued by DGFT (alongwith copy of License) during the current financial year or preceding financial year in respect of earlier Licence issued under Advance Authorisation or EPCG Scheme

In Simple terms, a Manufacturer Exporter can produce RCMC certificate copy and performance certificate from respective Export Promotion Council and can give only 15% Bank Gurantee based on below circular 17/2009    

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Circular - Customs

Norms for execution of Bank Guarantee under specified export promotion schemes- Modifications in Circular No.58/04-Cus dt.21.10.04-reg.

Circular No. 17/2009-Cus.

F.NO.605/61/2007-DBK

Government of India

Ministry of Finance

Department of Revenue

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New Delhi, the  25th  May , 2009.

Sub: Norms for execution of Bank Guarantee under specified export promotion schemes- Modifications in Circular No.58/04-Cus dt.21.10.04-reg.

I am directed to invite your attention to Circular No.58/2004-Cus. dated 21.10.2004 (herein after referred to as 'the said circular') vide which revised norms for execution of Bond / Bank Guarantee (BG) in respect of imports made under the Advance Licence and EPCG Schemes were notified and to say that, representations suggesting the following amendments in the said circular have been received,-

(i) to consider the service exports at par with the physical exports and to extend the benefit   of exemption from  BG to the service providers who fulfill the criteria  laid down in the circular  ;

(ii) to extend the  benefits of the said circular to the imports under DFIA scheme;

(iii) to consider the cumulative turnover of all the units of a manufacturer for the purpose of eligibility for exemption under the circular if all the units are operated under the same  Importer Exporter Code (IE-Code).

2 The above representations have been examined by the Board.  As regards extending benefits provided under para 3.1 of the circular to the service exporters on par with the exporters who are doing physical exports, it is observed that the service providers with foreign exchange earnings of ₹ 50 lakhs or more during the preceding financial year and having a clean track record have already been allowed the facility of 15% BG vide Circular No.30/2005-Cus. dated 12.7.2005. Further, the service providers in the port handling sector who have been appointed as Custodians have been allowed to furnish BG @ 25% vide Circular No.49/2005-Cus. dated 29.11.2005.  It has now been decided to extend the facility of nil / reduced rate of bank guarantee as provided under para 3.1 (a), (d),(e) & (f) of the  said  circular to all the service providers who meet the criteria prescribed in the said paragraph and other criteria of the said circular as amended.

2.1. In view of the modifications proposed at para-2 above, the table in para-3.1 of the circular No.58/2004-Cus shall be replaced with the following table and the note.

 (a) All exporters who have an export  turnover of ₹ 5 crores of goods exported physically or of services in current or preceding financial year and having a good track record of three years of exports     Nil

(b) Public Sector Undertaking    Nil

(c) Star Export House 1[Status Holders recognized under the provisions of the Foreign Trade Policy]           Nil

(d)  Manufacturer exporters / Service Providers registered with Central Excise or the Service Tax authorities, as the case may be, who have been exporting during the previous two financial years and have minimum export of ₹ 1 crore or more during the preceding financial year.            Nil

(e) Manufacturer exporter / Service Provider registered with Central Excise or the Service Tax authorities, who has paid central excise duty/ Service Tax of ₹ 1 crore or more, as the case may be, during the preceding financial year.          Nil

(f) (1) Manufacturer exporters who are not covered under (a),  (b),(c),(d) & (e) above. 15%

     (2) Units in Agri Export Zones (AEZs), 15%

     (3) Established Service Providers who have free foreign Exchange earnings of ₹ 50 lakhs or more during the preceding financial  year and have a clean track record.       15%

(g)  service providers in the port handling sector who are appointed as  Custodians by the  jurisdictional Customs / Central Excise authorities   25%

(h)   Others   100%

Note: The exemption provided at para (g) above shall be applicable only in respect of import of capital goods under EPCG scheme.

3. As regards extending the benefits of the above mentioned circular to the imports under the DFIA scheme, it is observed that the DFIA scheme is akin to the Advance Authorization scheme; both the schemes are operated more or less with the same set of provisions under the Foreign Trade Policy / Hand Book of Procedures. Since the Advance authorization scheme is already covered by the said circular, it has been decided that the benefits of the said circular may also be extended to the imports under DFIA scheme provided they have fulfilled the other criteria of the said circular as amended.

4. As regards considering the combined export performance / duty payment of all the units of a manufacturer operating under single Importer exporter code (IE code) for the purposes of deciding the eligibility of the said importer for benefits under the said circular, it has been felt that the exporter operating under one IE code and having different units is basically one legal entity. Accordingly it has been decided that the combined export performance / duty payment of all the units of a manufacturer exporter operating under a single IE-Code shall be considered for extending the benefits of the said circular provided all such individual units are separately registered with the Central Excise department and they have fulfilled the other criteria of the said circular.

5. These instructions may be brought to the notice of the trade / exporters 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.

Receipt of this Circular may kindly be acknowledged.

Yours faithfully,

(P.V.K. Rajasekhar)

OSD(Drawback

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Notes :

1. Inserted vide M.F. (D.R.) Circular No. 32/2009-Cus., dated 25-11-2009

IMPORTANT CUSTOMS CASE LAWS - Second Hand server is not second hand Computer and should be treated as Capital goods & subsequent important amendment in FTP 15-20

As declared by Karnataka High Court during 2010, Second Hand server is not second hand Computer and should be treated as Capital goods and declared DGFT Circular No. 16/2003 dated 29-9-2003 is not applicable to Second Hand Servers hence does not require a Licence.

But refer below recent FTP circular where ' All electronics and IT Goods " are required prior DGFT Authorisation and brought under policy condition "Restricted "

Notification - DGFT - Foreign Trade Policy

Government of India

Ministry of Commerce & Industry

Department of Commerce

Directorate General of Foreign Trade

Udyog Bhawan

Notification No. 5/2015-2020

New Delhi Dated 7 May, 2019

Subject: Import policy for Electronics and IT Goods under Schedule - I (Import Policy) of ITC (HS), 2017.
S.O. 1701 (E):  - In exercise of powers conferred by Section 3 of FT (D&R) Act, 1992, read with paragraph 1.02 and 2.01 of the Foreign Trade Policy, 2015-2020, as amended from time to time, the Central Government hereby amends Note No 2(c) under the General Notes Regarding Import Policy and inserts Policy Condition No 2 under Chapter 84 and as Policy Condition No. 5 under Chapter 85 of ITC (HS) 2017 as under:

Existing General Note No 2 (c)

Amended General Note No.2 (c)

(c) Import policy for electronics and IT Goods: The import of Notified Goods under the "Electronics and Information Technology Goods (requirement of Compulsory Registration) Order, 2012, as amended from time to time, will be allowed subject to registration with the Bureau of Indian Standards (BIS), or on specific exemption letter from Ministry of Electronics and Information Technology (MeitY) for a particular consignment, as per provisions of Gazette Notification SO No. 3022 dated 11.09.2013. Accordingly, import of unregistered/ non- compliant notified products as in CRO, 2012, as amended is "prohibited'   Import consignments without valid registration with BIS shall be re-exported by the importer failing which Customs shall deform the goods and dispose them as scrap under intimation to MeitY.

(c) Import policy for Electronics and IT Goods: The import of Goods (new as well as second hand, whether or not refurbished, repaired reconditioned) notified under the "Electronics and Information Technology Goods (Requirement of Compulsory Registration) Order, 2012, as amended from time to time, is prohibited unless they are registered with the Bureau of Indian Standards (BIS) and comply to the 'Labelling Requirements' published by BIS, as amended from time to time', or on specific exemption letter from Ministry of Electronics and Information Technology (MeitY) for a particular consignment, as per provisions of Gazette Notification SO No. 3022 dated 11.09.2013. The importer shall re-export such prohibited Goods reaching Customs Ports else the Customs Authorities shall deform the goods beyond use and dispose of the goods as scrap under intimation to MeitY.

Policy Condition: As under Chapter 84 and 85 of ITC (HS) 2017:
The import of Goods (new as well as second hand, whether or not refurbished, repaired or reconditioned) notified under the "Electronics and Information Technology Goods (Requirement of Compulsory Registration) Order, 2012, as amended from time to time, is prohibited unless they are registered with the Bureau of Indian Standards (BIS) and comply to the 'Labelling Requirements' published by BIS, as amended from time to time', or on specific exemption letter from Ministry of Electronics and Information Technology (MeitY) for a particular consignment, as per provisions of Gazette Notification SO No. 3022 dated 11.09.2013.
The importer shall re-export such prohibited Goods reaching Customs Ports else the Customs Authorities shall deform the goods beyond use and dispose of the goods as scrap under intimation to MeitY.
2.  Further, Para 2.31 (l) (a) of Foreign Trade Policy, 2015-20 is revised as under:-

S.No.	Categories of Second Hand Goods	Import Policy	Conditions, if any
	Second Hand Capital Goods
(a)	i.  Desktop Computers ii.  refurbished/ re-conditioned spares of re-furbished parts of Personal Computers/ Laptops iii. Air Conditioners iv. Diesel generating sets	Restricted	Importable against Authorization
(b)	All electronics and IT Goods notified under the Electronics and IT Goods (Requirement of Compulsory Registration) Order, 2012 as amended from time to time.	Restricted.	(i) Importable against Authorization subject to conditions laid down under "Electronics and Information Technology Goods (Requirement of Compulsory Registration) Order, 2012, as amended from time to time. (ii) Import of unregistered / non-compliant notified products as in CRO, 2012, as amended from time to time is prohibited

3.  Effect of this Notification: Import Policy and Policy condition for import of Electronics and IT Goods is laid down.
This issues with the approval of Minister of Commerce and Industry.

(Alok Vardhan Chaturvedi)

Director General of Foreign Trade &

Ex-officio Add. Secy.

Government of India

E-mail : dgft@nic.in

(Issued from F. No. 01/89/180/39/AM-13/PC-2(A)/e-2261)

Note: The principal notification No. 36/2015-2020, dated the 17th January, 2017 was published in the Gazette of India, Extraordinary vide number S.O. 172 (E), dated the 17th January, 2017 and amended vide notification No. 50/2015-2020, dated the 8^th January, 2019 was published in the Gazette of India, Extraordinary vide number S.O. 128(E) dated the 8^th January, 2019.

KARNATAKA HIGH COURT

Other Citation: 2010 (259) E.L.T. 212 (Kar.)

COMMR. OF CUS., BANGALORE VERSUS MICROSOFT CORPORATION INDIA PVT. LTD.

17 of 2008

Dated: - 26 August 2010

EPCG scheme - Circular prohibits import of second hand goods – second hand computer – Held that: - it is clear that the goods imported, that is, personal computers (PCs/Laptops) are the items, which are covered under Annexure- E, the Circular. Therefore, the Tribunal was justified in holding that the Circular do not apply to the servers of me description, which is involved In this case. - no doubt, servers are also computers but servers are computers, which are meant for specific application in a network. They are entirely different from the personal computers and laptop computers, which are actually stand-alone equipments - there is no reason to exclude them from the scope of Capital Goods.

Judgment / Order

N. Kumar and H.S. Kempanna, JJ.

REPRESENTED BY :        Shri Y. Hariprasad, Advocate, for the Appellant.

[Judgment per : N. Kumar, J.]. -

This appeal is by the revenue against the finding recorded by the Tribunal [2008 (224) E.L.T. 322 (Tribunal)] that a Server though a Computer is not prohibited from importing as it does not fall within the meaning of second hand personal computers (Personal Computers/Laptops).

2 The Joint Director General of Foreign Trade issued a Circular No. 16/2003 dated 29-9-2003 to the effect that second hand "personal computers'" (PCs)/Laptops cannot also be permitted for import under EPCG scheme under the provisions of para 5.1 of the Exim Policy, even for service providers. In the instant case, the respondent imported goods described as HP server for testing (data processing equipment) against invoice placed by M/s. Microsoft Corporation, U.S.A. The Department got the equipment inspected by a Chartered Engineer. He opined that the item imported is a model "hp workstation ZX6000" and server appears to have been used for around 3 years and has a residual life of around 10 years.

As the aforesaid Circular prohibits import of second hand goods of the nature mentioned above, the adjudicating authority treated the server as a Computer and as admittedly, it was a second hand computer, he held that, the assessee has violated the Exim Policy under Section 111(d) and 111(m) of the Customs Act and gave an option to redeem the goods on payment of fine of Rs. 50,000/- and imposed penalty of Rs. 20,000/-. In Appeal, the Commissioner of Customs (Appeals) held that, the said server though a computer, is not covered under the said Circular. However, as the assessee did not declare the goods and he gave a mis-declaration, he reduced the fine from Rs. 20,000/- to Rs. 10,000/- The revenue aggrieved by the said order preferred an appeal before the Tribunal. The Tribunal held that, "no doubt, servers are also computers but servers are computers, which are meant for specific application in a network. They are entirely different from the personal computers and laptop computers, which are actually stand-alone equipments. Moreover, in commercial parlance, "servers' are described as 'servers' only and it is also pertinent to note that they don't have the keyboard and monitors. Normally, the servers will be the larger machines having very high memory. The processing speed also will be very high and there are various types of servers for various applications. There is no reason to exclude them from the scope of 'Capital Goods'. So, they are not stand-alone computer, Therefore, the Tribunal dismissed the appeal, and aggrieved by the same, the revenue is before us.

3.We have heard the learned counsel for the appellant.

4. From the aforesaid facts, it is clear that the goods imported, that is, personal computers (PCs/Laptops) are the items, which are covered under Annexure- E, the Circular. Therefore, the Tribunal was justified in holding that the Circular do not apply to the servers of me description, which is involved In this case. In that view of the matter, we do not see any error committed by the Tribunal. No merits. Accordingly, the appeal is dismissed.

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Citations: in 2010 (8) TMI 426 - KARNATAKA HIGH COURT

1.   COMMR. OF CUS., BANGALORE Versus MICROSOFT CORPN. INDIA PVT. LTD. - 2007 (11) TMI 203 - CESTAT, BANGALORE