CUSTOMS AND CENTRAL EXCISE PROCEDURES

CUSTOMS;

The Customs Act was formulated in 1962 to preVent illegal imports and exports
of goods. Besides, all imports are sought to be subject to a duty with a view to affording
protection to indigenous industries as well as to keep the imports to the minimum in the
interests of securing' the exchange rate of Indian currency.

Duties of customs are levied on goods imported or exported from India at the rate
specified under .thecust<?m.s.Tariff Act, 1975 as amended from time to time or arty other
law for the time"b,~(ng i~,f9X@.·.f,or the purpose of exercising proper surveillance over
imports and' expoTis, the Central Government has the power to notifY the ports and'
airports for iheuniqading of the imported goods and loading of the eXported goods, the
places for 'clearance of goods imported or to be exported, the routes by which. above
goods may pass by land or inland water into or out of Indian twd the ports which alone
shall be coastal ports.

Types of Duties: ." .'. "."

Basic Duty: This is the basic duty levied under the Customs Act. The rate varies for
different items - _ from 5% to 40"10.

Additional Duty (Countervailing Duty -CYD): This additional duty is levied under
section 3 (1) of the Custom Tariff Act and is equal to excise duty levied on a like product
manufactured or produced in India. If a like product is not manufactured or produced in
India, the excise duty.that "Yould be leviable on that product had it been manufactured or
produced in India is the duty payable. If the product is leviable at different rates, the
highest rate among those rates is the rate applicable. Such duty is leviable' on the.value of
goods plus basic custom dutY payable.

Additional Duty to compensate duty on inputs used by Indian manufacturers. This

Additional Dutyislev!~d ~ndeqection 3(3) of the Customs Act. It CiIll be charged on all
goods by the. central goyerttmeni. to counter balance excise duty leviable to raw materials,
comp'oneritii·~i1d.;otherlilpu(~.slmilar to those used in the production of such good.

Anti-dumpifl~~;ty: Sometimes, foreign sellers abroad may export into India goods at
prices below the amounts charge!-by them in their domestic markets in order tQ capture
Iridian markets to the detnment dfJndian industry. This is known as dumping. In order to
prevent dumping, the Central Govfmment may levy additional duty equal to the margin
of dumping on such articles, if the goods have been sold at less than normal value.
Pending determination of margin of dumping, such duty may be provisionally imposed.
After the exact rate of dump ing duty is finally determined, the Cenl~al government may
vary the provisional rale of dumping duly. Dumping duty can he i.mposed even when
goods are imported indirectly or after changing the condition of goods. There are
however certain restrictions on imposing dumping duties in case of countries which are
 signatories to the GATT or on countries given "Most Favoured Nation Status" under'
agreement. Dumping duty can be levied on imports on such countries only if the Central
Government proves that import of such goods in India at such low prices causes material
injury to Indian industty.
Export Duty: Such duty is levied on export of goods. At present very few articles such as
skins and leather are subject to export duty. The main purpose of this duty is ·to restrict
exports of certain goods. The Central Government has been granted emergency powers to
increase import or export duties if the need so arises. Such increase in duty musl be by
way of notification which is to be placed in the Parliament within the session and if it is
not in session, it should be placed within seven days when the next session starts
Notification should be approved within IS days .
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CENTRAL EXCISE: . .,:.~~
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The Central. Excise duties are the largest source of revenue for the COUlitt y.
Approximately 30% of the total revenue receipts are collected from Central Excise
duties. The levy and collection of Central Excise duties is under the authority ofCclltrnl
Excise Act, 1944. Section 3 (also known as the charging sect.ion) provides Ill!' the IcyI'
<, ,...;" .·findcoJicction-of.CQnlraFExciscdllt)i,' . . '{>' . ? ... , ···,,·::l2,;;>'.,:;'\ ..•.. ,. . • . . • •

The rate and amount of duty as well as the items on which duties are levied ate those
which arc indicated in the ('entral Excise Tmill' Act, 19R5 and the schedule thetein. The
taxable event for Central Excise duty as per Section 3 ofCEA (Central Excise Act) 19·14
is the manufacture or production of goods.

It means that Central Excise duty is leviable as soon as the goods are manufactured or
produced. The items on which the excise duty is levied are known as excisable goods.

For the purpose of adtl1inistrative convenience the actual collection of duty is done at the
time of removal of goods from the place of manufacture of production. The rate of duty,
which is levied, is the rate of duty applicable to such goods or which is itt rorce at thl'
time of actual removal.

Additional Excise Duty (A ED): - This duty is levied on certain specified goods in lenns
or various other
. . .statures
: ~ .such as:

• Additiqnal Duties of Excise (Goods of special importance) ACT, 1957

• . AdditionaJ Pu~ies of Excise (Textiles and Textile Articles) ACT, 1978

Central Excise Control: Following types of control have been proscribed for the
levy and collection of Central Excise duties: -

• Physical Control'
• Self Removal Procedure
 Physical Control: .", Under the physical control system the n;Janufactured goods are
removed form. the I place of manufacture under the supervisioft of the Central Excise
officers on after the assessment and payment of appropriate Central I!xcise duty. The
goods are removed on an invoice indicating the duty paid which is countersigned by the
Central Excise officer. The physical control system is applicable .on in respect of
manufacturerS of cigarettes and matches.
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,. Self Removal Procedure: Under the Self-Removal Procedure (SRP) the goods are
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); removed on payment. of duty and against invoices signed by the assess. The actual
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assessment of the duty paid is done afterwards by the Central Excise officers on monthly
I:· returns filed by the assessees. In this case much more responsibility has been vested on
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. the Msessees to pay the duty correctly and remove the goods only on Pllyment ofthe duty

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'" assessed by him:. However, in this system the assesses is required to', file a declaratkm
(Rule 173B ofCER 1944) giving classification of the goods, tariff heading, rate of duty
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and the exemption notification availed of if any. He is also required' to sell the goods
against an invoice at prices, which are in aCCQrdance with Section 4 of the Central Excise
.Act 1944. The Self-Removal Procedure also provides thatthe assessees should maintain
; _. . _ _ _ . records of production, rel11ovals, raw material,MODVAT accounts, accounts of PLA.
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Monthly returns are scrutinised by the Central Excise Officers so as to ensure proper
payment of duty on the goods manufactured and removed. .

I IMPORT PROCEDURES:
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.Castoms. $.((lJiop, - Vnported goods are permitted to be unloaded only. ~ specified places.
: Siihllarly, goods ,can be exported only from specified area. In view of,this, definitions of
-'c,ustoms Station' is important.
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I Customs area means all area of Customs Station and includes any area where imported
gdods or export goods are ordinarily kept pending clearance by Customs authorities.
Thus, 'Customs AI:ea' could include some area even outside the :'Customs Station'.
Customs Station means (a) customs port (b) inland container depot,(c) customs airport
and (d) land customs station.
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Procedure by Importer - The importer importing the goods has follow prescribed tq
procedures for import Py
ship/air/road. (There is separate procedure, for goods imported
as a baggage or by ppst.)

Bill of Entry - This is a very vit!!l and important document which every importer has to
submit under section 46. The ~ of Entry should be in prescribed form. Bill of Entry
should be submitted in quadtuPJicate - original and duplicate for customs, triplicate for
the importer and fourth copy is rileant for bank for making remittances.

'. ,lJnd.e~ ~PI; ~Ylltl'lJ11,) mU:of Entry is actually printed on computer in triplicate only after
--'6u'rdfcharge;ordeds'glven. Duplicate copy is given to importer. '. .
 Types of lJill of Entry - Bills of Entry should be of one of three types. Out of these, two'
types are for clearance from customs while third is for clearance from warehouse .

.BILL OF ENTRY FOR HOME CONSUMPTION - This form, called 'Bill of Entry for
Home Consumption', is I.Ised when the imported goods are to be cleared on payment of
full duty. Home consumptioll fH!K111S use within Illdia. It is white coloured and hence
often called 'white bill of entry'~~ ,
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BiLL OF ENTRY FOR WAREHOUSING - If the imported goods are not required
immediately, importer may like to store the goods in a warehouse without payment of
duty under a bond and then. clear from warehouse when required on payment of duty.
This will enable him to defer payment of customs duty till goods are actually required
by him. This Bill of Entry is printed on yellow paper and often called 'Yellow Bill of
Entry'. It is also called 'Inio Bond Bill of Entry' as bOnd is executed for transfer of
goods in warehouse without payment of duty.

BILL OF ENTRY F()R EX:-B~ND CLEARANCE - The third type is for Ex-Bond
Clearance.' Tllis' fs' use'd' fof C1eanince from the warehouse on payment of duty and is,
."printedon'~een'paper~Th~goods are classified'indivaIOe'ig'rassessoo.:tW'thtitime of ",";,,':
clear~iice"frorii customs port. Thus, value and classification IS not required to be
determined in this bill of entry. The columns in this bill of entry are similar to other bills
of entry. However, declaration by importer is not required as the goods arc already
assessed. '

Filing. of Bill of Entry - Normally, Bill of Entry is filed by CHA on behalf of the
importer. Customs .work at some ports has been computerised. In tiJat case, the Bill of
Entry has to be filed electronically, i.e. through Customs El)I system through
computerisation of work. Procedure for the same has been prescribed vide Bill of Entry
(Electronic Declaration}Regulations, 1995. .

Documents to be submitted by Importer - Documents required bt'customs authorities

'are required to be ~bmitted to enable them to (a) check the goods (b) decide value and
classification of goods and. (c) to ensure that the import is legl}lly permitted. The
documellts that are essentially required are: (i) Invoice (ii) Pl!cking List (iii) Bill of
Lading I Delivery Order (iv) GATT declaration form duly filled in (X) Importers I C( lAs
declaration duly signed (vi) Import Licence or attested photocopy,. ~hen clearance is
under licence (vii) Letter of Credit I Bank, Draft wherever necessary, (vii) Insurance
memo or insurance policy (viii) Industrial License if required (ix) Certificate of country
eferigin. if Rr~rerel]tj.'}hrl\tQlis;:<\I~imed. (x) Technicalliterature.Jxi);Test report in case
0.f9hf(ITl!Gals,{~ij).Ad'{~l)ce LicenSe I DEPD in original, where appliCable (xiii) Split up
oft!X~I\I((iRf;~p.Nes, components and machinery (xiv) No commissil?~ declaration. - A
dec\a{!ltion inpiescribed form about correctness of information should be submitted.
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Electronic submissio,IJ under EDI system - Where EDI system' is implemented, formal
submission of Bill' of Entry is not required, as it is generated in computer system.
Importer should submit declaration in electronic format to 'Service Centre'. A signed
 paper copy of declaration for non-repudiability should be submillcd. llill of Entry
number is generated by system which is endorsed on printed check list. Original
documents are to be submiitcdorily at the stage of examination. '
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A'Ssiis~nfenr of Customs duty - Section 17 provides that assessment of goods will be

made'after BiUIOf Entry is filed. Date stamp of receipt is put on the 'Bill of Entry' and
then it is sent to appraising department either manually or electronically
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There it're'various Appraising groups for different Chapter headings. Each group is under
an Assistant/Deputy Commissioner. Group consists of 'Examiners' and 'Appraisers'.

APPRAISING TIlE GOODS - Appraiser has to (a) correctly claSsify the goods (b)
decide the Value for purpose of Customs duty (c) find out rate of duty applicable asper
any exemption notification and (d) verify that goods are not imported in violation of any
law. He can call for any further"Jlk>cuments that may be required fOl"assessment. If he is
of the opinion that goods h~~ to be examined for appraisal, he will issue an
examination order, usually on thf reverse of Bill of Entry. If such'order is issued, the
Bill of Entry is presented to appraising staff at docks I air cargo complexes, where the
,'goods ai'eexaihiried'in presenCe' of impOrter's' representifrive:'Wss\!ssmt!l1t 'j'S" .finalised' '. ,c;
after getting the report of examination. - Chapter 3 Para 11 aild 12 of CBE&C's
Customs Manual, 2001.

VALUATION OF GOODS - As per rule 10 of Customs Valuation: Rules, the importer

, has to file declaration, about full 'value' of goods. If the assessing officer has doubts
~~9':1.tV!!Hl].!t,~l!,lJ1.d aGY.\J,q~~yqCyalue' as declared, he can ask importer to submit further
'iilfo'i-mation;deiails and documents. If the doubt persists, the assessing officer can reject
th.~~ya.I.li.e",de(Jlared by importer. [rule IOA(I) of Customs Valul!t!on Rules]. If the
iinMrt!;rn'eqti~'sts, the assessing officer has to give reasons for, doubting the value,
decll\1'~~by, ill,lporter. [rule 1OA(2)]. If the value declared by imp(lrter is rejected, the
assessing officer can value imported goods on other basis e.g. value of identical goods,
value of."similar goods etc. as provided in Customs Valuation Rule~. [This amendment
has been,,'wade w.e.f. 19.2.98, as per WIO agreement. However, it has been held that
burden ofproof of under valuation is on department]. - - AsseSsing Officer should not
arbitrarily reject the declared value and increase the assessable vall!e. He should follow
due process of law and issue appealable order.

APPROVAL. OF ASSESSMENT - The assessment has to be approved oy Assistant

Commissioner, if the viilue is more than Rs one lakh. (in cases covered under' fast track
clearance for imports'" appraiser is also authorised tei approve valuation). After the
approval, duty payabl.~ is typed by a "pin-point typewriter" so that it cannot be tampered
with. As per CBE&C circular ~o. IO/98-Cus dated 11-2-1998, Asse!lsing Officer should
sign in full in Bill of Entry followed by his name, preferably by rubber stamp.

ED! ASSESSMENT .:.. In the ED! system, the cargo declaration is transferred to
assessing officer in the groups electronically. Processing is done on,tpe screen itself. All
calculations are done by the system itself. If assessing officer needs,~c1arification, he can

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 raise a query. The query is printed at service centre and importcrreplies through service
centre. Facility of tele-enquiry about status of documents is provided in major customs
stations. Under ED!, normally, documents are inspected only after assessment. After
assessment, copy of Bill of Entry is printed at service centre. Final Bill of Entry is
printed only after 'Out of Charge' order is given by customs officer. .
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PAYMENT OF CUSTOMS DUTY - After assessment of duty, ncc!:ssary duty is paid,

Regular importers and Custom House Agents keep current accOunt with Customs
department. The duty can be debited to such current account, or it can be paid in
cashiDD through TR-6 challan in designated banks.

After payme!)t of dutYidfgoo,ds were alrcady examined, delivery, of goods can be taken
fromc:ustoqians(Port6:ust)after'paying their dues. If goods were not examined before
asse~'Srtiei1t; tli'esl: have~iibli~'submitled for examination in importshed to the examining
staffi,'A(leI''shed'lappraiser gives 'out of charge' order, delivery of goods can be taken
from·custci~ian.'
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'f~f'"'ii"~"1.'t"" if~~)~;~~~4~~;f~;~:~7s:fe~~';:':~':~i:~~6~~;g~:~d~~~~~~(4Y~f~~i~~~i;:;~'i!;:., .i.'i'

assessment.on basis of docume~ followed by inspection and testing of goods.
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"First appraisement system" or 'first check procedllre' is followed if the appraiser is not
able to make assessmel)t on the basis of documents submitted and de~ms that inspection
is necessary. Goods are examined first and then these are assess~. This lIIethodis
followed only if asses~ment is not possible on basis of documen~. -- The importer
himselfmay also. request 'first check procedure', if he cannot give~lrequired details
regarding description I value of goods. He has to make request for first check
examination at the time of filing of Bill of Entry or at dina entry stage in case of EDI. He
has to give reason for seeking first appraisement. The examination qrder is recorded on
Bill ofEritry and then r!-!tumed tQ importer I CHA. It is then presented to import shed for
examination, The shed appraiser I Dock examiner examines ,Jhe goods as per
examination order and records his findings. If samples are required, they are taken out.
In case of EDl system, the report of examination is given in the computer itself. The.
goods are thena_sses~~gt9!f!!ItyPy appraiser,
d~::;l·~.":::·!..~.,_.l.{::'h-':.'H:'-··':·; 'l-h:: ··;~'~.~":j'·;;~i· -.f, r,,~'
lqi<,~'~'f,~e(/flA,fJliaisetile!l( SY.rfein" or 'second check procedllre', y~hich is normall y
fo\!~'x.!W!Ll;ls~~~went is done on basis of documents and then goods Me examined. Such
exat\1l9,lI.l~Q,l} i~:ic.not mandatory. It is done on selective basis on:tbe basis of 'risk
assessment' oLspecific intelligence report. Section 17(4) of Customs Act specifically
provide,scit~at ifinitia'~y_,assessment is done on basis of documents, r~-assessment can be
I done a~e~ examination or testing of goods or otherwise, if it is (Qund subsequent to
examinatipll or testing or otherwise, that any statement made Oll ~iI1 of Entry or any
information supplied is not true in respect of matter relevant to assessment of duty.

First appraisement is generally carried out in following cases - • If cgmplete documents

are not submitted * Goods are to be tested for correct c1assificati?n * Goods are re-
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 imported • Goods are damaged or deteriorated and abatement is claimed • Goods are
abandoned and remission of duty is applied for • When goods are provisionally assessed
* When importer himself requests for examination of goods before payment of duty.
EXAMINATION OF GOODS - Examiners carry out physical examination and
quantitative checking like weighing, measuring etc. Selected packages are opened and
examined on sample basis in 'Customs Examination Yard'. Examination report 'is
prepared by the examiner.

Provisional Assessment ~'Section IS of Customs Act. 1962 provide that provisional

ass~ssm'¢i\t can"b'e' doniqn'folloCWi'ng cases (a) when Customs O{ficcr is satisfied that
irrlp6ft\i{ofexporter is unable to produce document or furnish information required for
assessilien~:(b)-'iHs 'deemed necessary to cany out chemical or Qlher'tesis of goods (c)
when impoiter/exporter has produced all documents, but Customs Officer still deems it
necessary to make further enquiry. In such cases, assessment is done on provisional
basis. Th~11mporter/exp6iter has to furnish guarantOOtsecurity as required, by Customs
Officer for, payment of differel!ce if any.,
GOC><is can,»ecleared after payment of duty" ,,,'q
provisionally i assessed., an~!l~~r \",rbvi,~ing' the ,;:~ritp~~r,~na,I',\3\~~!,~p?e1l,k tb;t;';;~'
,,difference is paid by imiJOrte~ ,or 'refund~to,'him,as Jhe;~i:i may,·b~, ,If(U1~.iinppli~\,tt;:Ol:~;:';i';
goods were warehoused after provisional asSessment. the CuStops Officer I.rt.ay t~!Iire ~""". '
importer to execute a bond for twice the difference in duty,if duty finally assessed is ':"
I: higher [section IS(2)(a)]. The bond is ,c31led as' 'P D Sand' (Provisional Duty Bond).
I The bond is with security or surety. Bank guarantee can also be give,\as a security.
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I, Execution of bond am! payment 0/ duty - Once the duty is assessed" the bill of entry is
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returned to importer. It' bond hal?,J,9 be exeCuted, it will be taken in bond section. '
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Payment of duty - If goods, arilo be removed to a warehouse, dl.l\Y payment is not
required. The goods can be ,takeri\o a warehouse under bond, withoHt payment of duty.
,. However, if goods are to be removed for home consumption, payment of customs duty
is, required. CHA or the importer cait take it for payment of CI.Istoms duty. Large
importers an,(\;9HA,h\lve 1?-P,II,!¥'unts with customs. Duty can be p'~d either in cash or
.tI#Ql,lgM)'!?f.;a,~unL;p'\:D..),aCco,u.nt. means provisional duty ,acc,?~Q.t. This is a current
ac,~R\,,-,it,;~iJ!llJll).l'i~O PLA'incentral excise. The importer or CHApays lumpsum amount
in ~~\~iJnt;llrtd gets credit on the amount paid: He can payCllst0!Tl~ duty by debiting
the amp,~Mjn Prp. (Proyisional Duty) account. lrthe .importer dqes Mt have an accoun.t,
he can pay duty" by cash using TR-6 challan. Of co~rse, payment tlu;ol.lgh J'D account IS
very CQ1).yenient and q l . l i c k . ,,

The duty.~hould be paid within live working' ,days (i.e. within five days excll.lding
holidays) aft~r -tl)e 'Dill of Entry' is rctmned to the importer fqr payment of duty,
[section 47(2)]. (Till 11-5-2002. the period allowed was only 2 days).

Disposal if goods are not cleared within ,3D days - As per section,~S of Customs Act,
goods ml.lst be cleared within 30 days after unloading. Customs Officer can grant
extension. Otherwise, goods can be sold after giving notice to importer. However,
 anim~l!i/ pe~ish'able goods and hazardous goods can be sold any time - even before 30'
days;/~ums & runmunition can be sold only with pennission of Centfal Government.

Out of Customs Charge Order - After goods are examined, it is verified that import is
not prohibited and after customs duty is paid, Customs Officer will issue 'Out of
Customs Charge' order under section 47. Goods can be cleared from customs area only
on receipt of such order. This"t(lm 'adjudicating order' within the meaning of Customs
Act, even if it is passed by Apprlijser and not by Assistant Commissioner.
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Demurrage if goods not cleared - Heavy demurrage is payable if goods are not cleared
from port within three days.

Relevant Date for Rate and Valuation of Customs Duty - Section IS of Customs Act
prescribes that rate of duty and tariff valuation applicable to imported goods shall be the
rate and valuation in force at one of the following dates. (a) if the goods are entered for
home consumption, the date on which bill of entry is presen·ted (b) in case of
warehoused goods, when Bill of Entry for home consumption is presented U/S 68 for
'. clearance .from warehouse and (c) in other cases,date of paym~nt of duty:
~.,:.':- ~:;'.~'; :..-J h:;:.;,~:;.~.-;:~:..~J, :,~, . :~':, ~~'i"'- "':~~'~~ ::- .../ ~'-".; <- " ~~. ,;';, ; ...:'. : ii -:, --,.~.: ,:. /:- ',:: ... :,',':' <,\,:\,.-;:.~,,,,,: .:: '~:': '!.: _. ~~.: ;'~':;'~:' '". - -". - -~.'
. EXPORT PROCEDURES:

ExporttQdil countries ~xcept Nepal and Bhutan

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'. ~:~~porter shall furnish bond in Form B-1 and obtain certifiC!l.te in Form.CT-1. A
manufacturer-exporter may furnish annual Letter of Undertaking (no CT-I is required in
this case);

ARE. I .,is the export document for export clearance, which s.hall be prepared in
quintuplicate (5 copies) .. This document shan bear running serial number beginning
from the first day of the financial year. On A.R.E.I, certain declarations are required to
be given by the exporter. These should be signed by the exporter or his authorised agent
An invoice shall also be prepared in terms of rule II of the Central E)(cise Rules. It
should be prominently mentioned on top "FOR EXPORT WITHOUT PAYMENT OF
DUTY".

'The Letter of,Undertaking is to be furnished in the Form: UT-I specified in

Notification No. 42/200 I-Central Excise (N,T.), supra. Any manufacturer, who is an
assessee for the purposes (lfthe Central Excise (No.2) Rules, 200 I, ~hall furnish a Letter
of Undertaking only to the DeputylAssistant Commissioner of CI;ntral Excise having
jurisdiction over his factory from which he intends to export. A .' Letier of Undertaking'
shall be valid for twelve calendar months provided the exporter' 'complies with the
<;onditiQ!l~ ofJ~!l Lf.)t~~,RX~Undertaking, especially the procedure for 'acceptance of .
proarorexpciitvunotirotbislnstru'ction. In case of persistent defaults or non-compliance
cap:sir.gt!lr~t,jprevenue, the manufacturer-exporter may be asked to furnish bond with
. security/syrety'"
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In case of exports under Duty Exemption Entitlement Certificate Scheme (DEEC),
Duty Exemption Pass Book Scheme (DEPB) and claim for Drawback, the
Superintendent of Central Excise shall also examine and seal the cOnsignment and sign
the documents in token of having done so. In exceptional cases, where the exporter has
unblemished track record of compliance (Central Excise) and where there is non-
availability of Superintendent of Central Excise due to leave, vacant post or other
reasonable causes, the jurisdictional Deputy!Assistant Commissioner of Central Excise
maY'permit examination and sealing by Inspector. All other typys of export may be
examined and, sCi!)ed;by the Jnsp.cctor of Central Excise.
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,The Supetthtendent or Inspector of Central Excise, as the ~se may be, will verify
the identity <ifgiiods mentioned in the application and also verify whether the duty sel f-
assess~d is apPf{)priate and that the particulars of the duty payable has been has recorded
in the Daily Stock Account. If he finds that the declaration in ARE. I and the invoices
nrc correct from' the point of view of identity of goods and its assessment to duty, he
shall seal each package or the container ensuring that the goods cannot be tampered with
after the examination, Normally, individual packages should be sealed by using wire and
lead seals and an all-sides-closed container by using numbered One time Lock!Dollle
" ". '.';i'"" ':;C"" v,· seals, oIllin;,sl:Ish :other.· manner 'as·'maybe'·sp~fied.':IJ'y 'tliEf'CdfufuisSl'oileF O'f Cenlr~f"""';;
EX,c,ise by a special or general written order. Thereafter, the said officer shall endorse
and sign each copy of the application in token of having such examination done and put
his stamp with his name and designation below his signature;
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Distribution of ARE,) in the case of export from the factory or warehouse:

Original (First The said Superintendent or Inspector of

Copy) Central Excise shall return to the exporter
immediately after endorsements and
signature ,
.;

.. ;.• " ,'.. '.' ;§S~?r\n.:",~§;e~n?

,- ,.,- .
'. t:~t~i~x~~:ee~~~~n~~~~0;0 ~?:~;:rt~;
. '.-

immediately after endorseinent~ and

signature, .
""d ;·.Triplicate (Third Sent to the bond sanctioning authority,
Copy) either by post or by handing over to the
exporter in a tamper proof seale.d cover
, C aller posting the particulars in· official
records.
Quadruplicate Retain for official records
(Fourth Copy)
Quintuplicate (Fifth Optional copy - The said Superintendent
Copy) or Inspector of Central Excise sll<llI return
to the exporter immediately aller
endorsements and signature.

"" ,

"
 Security or surety with bong

Wherever bond is taken, sufficient security or surety is also required as the per the
notilications issued under rule 19 of the said Rules. In 1996, Uoard had takcn a decision
that in respect of exporters having good track record may be allowed to furnish bond
with nil security or surety. The Board in Circular No.284/118/9,6 dated 31.12.1996
issued an instruction. Now, since the manufacturer-exporters, who;are also assessee of
the Central Excise I?epartment, have an option to furnish 'L\:tter of Undertaking"
(without any security or surety), the question of furnishing of 'security or surety' is
. mainly relate to nlerchant-exporters who are nbt assessees of the Central Excise
Department. In this' scenario, the Board has decided that security (Bank Guarantee or
Cash Guarantee or <::ash Security) or surety need not be insisted upon from Super Star
Trading Houses, Star Trading Houses, Trading Houses and Export Houses. Other
exporters shall be required to furnish surety equal to full bond amount or security equal
to twenty five pcrccnL (2-5%) of the bond amount, along with the bond.
/' I ;J,:J ·iA··.·;·.··iJi· i; . ~,
ProcccWU) fOr cl!)~IlIJ1(;!)j'I9iT1jhQfactory_oo.,."rc.hQU~c.;
" .. j;-:-:" : .... ! .-' - I
,I
";, i M~riuf'a~ttir~r~~x'I5drterwhoh~furhiShed' iiUlterof Undertakingwiliprep~re
the export documents (A.R.E.l and invoice under rule II) for clearance from his factory
of production.

The el'Porter has two optional procedures regarding the manner in which he may
dlear the export consignments from the factory or warehouse or any other approved
premises, namely: -

I. Examination and scaling of goods at the place of dcspatch by a Ccntral Excise

Offi~ !
;. 2. Under self-sealing and self-certification

Sealing of goods arld examination at place of dispatch:

The exporter is requir~d to prepare five copies of application In thc Form ARE-I.
The Form is specified in Annexure-Ito notification No. 4V2001-Eentral Excise (N.T.)
dated 26.6.2001. The goods shall be assessed to duty in thc samemanncr as the goods
for home consumption, though duty is not required to be paid considering clearance is
meant for exportwithdlif"paymentof duty. The duty payable shllll be determined on the
ARE: l'ancHiH,6iCe:'and 'teoordiid in the Daily Stock Account as "duty foregone on
~2cbufitdf Cx'pbi't undbi tulc' 19".

Thll ie'xpotter may request the Superintendent or Inspector of Ce'ntral Excise having
jurisiiltlUbn ove'r the factory.,¢' production or manufacture, warehouse or approved
premises for examination and.:li!laling at the place of despatch 24 hours in advance, or
such shorter period as may be mutually agrccd upon, about the intendcd time ofrel11oval
so that arrangements can be mad~ for necessary examination and sealing.

I'
 Security or surely wiLh bom!

Wherever bond is taken, sufficient security or surety is also required as the per the
Ilolilicaliolls issued under rule 19 of the said Rules. In 1996, lloard had taken a decision
that in respect of exporters having good track record may be allowed to furnish bond
with nil security or surety. The Board in Circular NO.284/)) 8/9,6 dated 31.12.1996
g issued an instruction. Now, since the manufaelurer-exporters, who;are also, assessee of
the Central Excise Qepartment, hav'e an option to furnish 'Letter of Undertaking"
t (without any security or surety), the question of furnishing of. 'security or surety' is
I: 'mainly relate to merchant-exporters who are' nbt assessees of the Central Excise

I Department. In this 'scenario, the Board has decided that security (Bank Guarantee or
Cash Guarantee or Cash Security) or surety need not be insisted upon from Super Star
Trading Houses, Star Trading Houses, Trading Houses and Export Houses. Other
exporters shall be required to furnish surety equal to full bond amount or security equal
10 Iwenly five p&::rcenL (2$%) of the bond amount, along with the bond.
',' ';l .. (;~·; ·iA";'·'-:H'· ~ ·:::.l,>~;" "".-;1':'
pf{)ced~I.e. fQtcle,II!J1.n~ fromJ!1iUlIctOIY_QU'iarehO!lSc.;
,., ... '," .: . , . '_ ',' .': -) .::~\ '.'.~:.','-.;; "). ~': _, it.;'.~:" .,:: " ,,:,,-.,.',~" -~.', :~. ~ ;i:,;, '.>'.,:
>:. J ',. -' " " '"o' '" ", ;.-,' ,': • ,:_'; u • i·, ',::',~>_ .' ,:,~_.;.;,._,-~;
;,;: ;;'!' ,-- ; .... ,.. ;, ' . . '-: -.':" ..- "

"""":c"lii,""ihY';:'X':Mariufa:~ttir~r:~i~brt~;~lio"1i~'furr;~hCid"~rl~tf~''6fund~itiki~g'''~ni''p;~i;~~~ ,c"
the export documents (A.R.E.I and iIivoice under rule 11) for Clearance from his facto!)'
of produelion.

, The el\porter has two optional procedures regarding the manner in which he may
~Iear the export consignments from the factory or warehouse or any other approved
premises, namely: -

I. Examination and scaling of goods at the place of despatch by a Central Excise

II:
,
Officer
2. Under self-sealing and self-certification

Sealing of goods add examination at place of dispatch:

~"

r The exporter' is requiri:rl to prepare five copies of application In the Form ARE-I.
The Form is specified in Annexure-l to notification No. 4212001-(];entral Excise (N.T.)
dated 26.6.2001. The goods shall be assessed to duty in the same manner as the goods
for home corisumption, though duty is not required to be paid considering clearance is
meant for export withdut"payment of duty. The duty payable sh~1I be determined on the
AREJand'iiiv-01ce::aiil:pte'&)fd~d in the Daily Stock Account as "dUly foregone on
~8cb'ufl~Of expoh und&r iiJl!H 9".

Th~i~,*potter may request the Superintendent or Inspector of Central Excise having

jurisdlcUbn over the factory,~ production or manufacture. waiehouse or 'approved
premises for examination and:~!!aling at the place of despatch 24 hours in advance, or
such shorter period as may be mutually agreed upon, about the intended time of removal
so that aliangements can be mad~ for necessary examination and sealing.
 .,..,
......
,.-:i;.,

In case of exports under Duly Exempiion Entitlement Certificate Scheme (DEEC),

Duty Exemption Pass Book Scheme (DRPB) and claim. for Drawback, the
Superintendent of Central Excise shall also examine and seal the cOnsignment and sign
the documents in token of having done so. In exceptional cases, where the exporter has
unbleniished track reCord of compliance (Central Excise) and where there is non-
availability of Superintendent of Central Excise due to leave, vacant post or other
. reasonable causes, the jurisdictional Deputy!Assistant Commissioner of Central Excise
maY'permit examinaHol) and sealing by Inspector. All other tYPes of export may be
examined and,sea!ed;by.the Insp.ector of Central Excise.
. . :.~. .. . ;

.:Tbe Supetij,tendent or inspector of Central Excise, as the ~se may be, will verify
the identity (ifg6ods mentioned in the application and also verify whether the duty sel f-
assessed i.s app[-opriate and that the particulars of the duty payable hllS been has recorded
in the Daily Stock Account. If he finds that the declaration in ARE.I and the invoices
arc correct frolll the point of view of identity of goods and its asSessment to duty, he
I, shall seal each package or the container ensuring that the goods cannot be tampered with
I: after the examination. Normally, individual packages should be sealed by using wire and
"., .• J" ·.C, • c',,:, "" ..,)cad ,S,C<lISllnp ,8l.l;a[I.7,s,\ct,es:closed .'1Ontai!1er~yusiJJ& ~nVrn.ber!!d: p~eJinw:J.:,ockm()ttld!'·· \
'fff1~f··""":··"·~'!!~."···'!?: ;~~~~~:t~n:i~;:'i~~ti:~.·;~!~:t'~~:~yo~;::~~!:~b!,t~:' ~;~~::~~~ti ~~~;:;'
, and sign each copy of the application in token of having such examination done and put
I, his stamp with his name and designation below his signature;
.,
Distribution of ARE. L in the case of export from the factory or warehouse:

Original (First The said Superintendent or Inspector of

Copy) Central Excise shall return to the 'exporter
immediately after endorsements and
signature
I
,.
I . '.':i ", ..' J~~~4fl\Wb'; 1~~,e~,~~, Th~ said S~perintendent or 1nspector of
I Copy)" . Central EXCise shall return to the exporter
immediately after endorseine~t,~ and
i:
'"'! 'f:';';.;j')
I "J,.'
. ;':iI::g ~ h-t~.;:· signature. .
l
Ct • •

",,'.,\ i;,Trilllicate (I'hird Sent to the bond sanctioning liuthority,

i Copy) either by post or by handing ov'er to the

I ~
t· l
exporter in a tamper proof sealed cover
after posting the particulars in official
records.
Quadruplicate Retain for official records
(Fourth Copy)
Quintuplicate (Fifth Optional copy - The said Superiiltendent
Copy) or Inspector of Central Excise shall relurn
to the exporter immediately after
endorsements and signature.

:\ .• ,- ...~
';;'.-:,
"
 Despatch of goods by self-sealing and self-certification:

Self-sealing an~ self-certification is a procedure by which the exporter who is a

manufacturer or owner of a warehouse, may remove the goods for export from his
factory or warehouse without examination by a Central Excise Officer. This procedure
will also be permitted in the caS~s where a merchant-exporter procures the goods
directly from a factory or warehouse. In both cases, the manufacturer of the export
goods or owner of the warehouse shall take the responsibility of sealing and
certification. For this purpose the owner, the working partner, the Managing Director or
the Company Secretary, of the manufacturing unit of the goods or the owner of
warehouse or a person (who should be permanent employee of the said manufacturer or
owner of the warehouse holding reasonably high position) duly authorised by such
owner, working partner or the Board of Directors of such Company, as the case may be,
shall certify on all the copies of the application (A.RE. I) that the goods have been
sealed in his presence. The exporter shall distribute of the copies of A.RE. 1 in the
fql1\1wJng mal)ner:
, ,,;' '" '-"
"
... . " -."

Original (First copy) and Send to the place of export

II Duplicate (Second copy) along with the goods
_ _ _._0._ ,_ ......
!Triplicate (Third
? ._~. ____ • _ _ • _ _ _ ", _ ••• _ .

co~;)-'~~d' Superintendent or Inspector of

I; Quadruplicate (Fourth copy) Central Excise having
jurisdiction over the factory or
II warehouse within twenty four
hours of removal of the goods
Quintuplicate (Fifth copy) Optional copy - Send to. the
place of export along with the
I I goods

The said Superintendent and Inspector of Central Excise shall verity the particulars
of assessment, the correctness of the amount of duty paid or duty payable, its entry in
the Daily Stock Account maintained under rule 10 of the Central Excise (No.2) Rules,
2001 (the manufacturer or warehouse owner will be required to present proof in this
regard), corresponding invoice issued under rule 11. If he is satisfied with the
particulars, he will endorse the relevant A.R.E. 1 and append their signatures at
specified places in token of having done the verification. In case of any discrepancy, he
will take up the matter with the assessee for rectification and also inform the
jurisdictional Assistant/Deputy Commissioner. Once verification is complete and the
A.RE. 1 is in order, he shall distribute the documents (A.RE. 1) in the following
manner:

Triplicate (Third Send to the bond accepting authority,

copy) either by post or by handing over to the
exporter in a tamper proof sealed cover
 after posting the particulars in official
records. Where manufacturer has given
LUT, triplicate shall be retained' and will
be forwarded to the Deputy/Assistant
Commissioner of the Division along with
Statement, after matching them with
original copies of ARE. Is.
Quadruplicate Retain for Range records (The notification
(Fourth copy) does not specify this distribution of this
. copy)

Examination of goods at the place of export:

Ii
Ii
Ii The place of export may be a port, airport, Inland Container Depot, Customs
"i+"i'''i'i.,.,,14:~<; i Sf,;f?Rtf~,)%\9,~ifq:~$S~~W?r.~,.·~~~~~pr~:"c'} ".'.' '. .. . ,. "
The exporter shall present together with original, duplicate and quintuplicate
(optional) copies of the application (A.R.E. 1) to the Commissioner of Customs or other
duly appointed officer - normally goods are presented in the designated export shed.

The goods are examined by the Customs for the purposes of Central Excise to
establish the identity and quantity, i.e. the goods brought in the Customs area for export
on an ARE. 1 are the same which were cleared from the factory. The Customs
authorities also examine the goods for Customs purposes such as verifying for certain
export incentives such as drawback, DEEC, DEPB or for determining exportability of
the goods.

For Central Excise purposes, the Officers of Customs at the place of export shall
examine the consignments with the particulars as cited in the applic!ltion (AR.E. 1) and
if he finds that the same are correct and the goods are exportable in accordance with the
laws for the time being in force (for example, they are not prohibited or restricted from
being exported), shall allow export thereof Thereafter, he will certify on the copies of
the AR.E. 1 that the goods have been duly exported citing the shipping bill number and
date and other particulars of export and distribute in the following manner:

(i) The officer of customs shall return the original and quintuplicate (optional
copy for exporter) copies of application to the exporter and forward the
duplicate copy of application either by post or by handing over to the exporter
in a tamper proof sealed cover to the officer specified in the application, from
whom exporter wants to claim rebate.
(ii) Quintuplicate ARE. 1 is the Export Promotion Copy and the exporter shall
use this copy for the purposes of claiming any other export incentive.

Procedure relating proof of export and to re-credit against such proof:

 ,
The procedure relating to acceptance of proof of export or the 'validation' of actual

I
!
export has been simplified. The original and duplicate copies of AR.E. I are presented
to the Customs authorities at the place of export [with option for exporter to also present
quintuplicate copy]. The Customs authority certifY the actual export on these documents

I and distributes the copies as specified. ,"

The exporter shall submit a Statement, at least once in a month, alqng with the
Original copies of AR.E. 1 with due certification of export (pass for Shipment Order)
by Customs authorities at the place of export to the Divisional office (through Range)or
in the office of the bond-accepting authority. Other supporting documents shall also be
furnished, namely, Self-attested photocopy of Bill of Lading and Self-attested
photocopy of Shipping Bill (Export Promotion Copy). The Range office or the Office of
the bO,nd-accepting authority immediately on receipt shall acknowledge the Statement.
The exporter is permitted to take credit in his nmning bond account on the basis of copy
of the Statement referred to above, duly acknowledged the Range office or the office of
the bond-accepting authority
--- ".-.,.- .. ,", ,'.,

, • It shall be the ;~~p~~sib'ilityof ~he~~~ Offi~eand DivisiOn Office "orthe' either

bond-accepting authority to verifY the correctness of Statement and ARE. 1 furnished
by the exporter within the shortest possible time. The Statement and ARE.! will be
tallied by the Range Officers with the triplicate copies of ARE. 1 already with them and
the A.R.E.I. or its summary received directly from the place of export (hard copies or
electronic summary or e-mail) within 15 days of the receipt. The Divisional Officer shall
accept the proof of export or initiate necessary action in case of any discrepancy.

Procedures to be followed by Exporter at Customs Station -

Every exporter should take following initial steps -

1. Obtain BIN (Business Identification Number) from DGFT. It is a PAN based

number
2. Open current account with designated bank for credit of duty drawback claims
3, Register licenses I advance license I DEPB etc. at the customs station, if exports
are under Export Promotion Schemes

Exporter has to submit 'shipping bill' for export by sea or air and 'bill of export' for
export by road. Goods have to be assessed for duty, even if'no duty is payable for most
of exports, as 'Nil Duty' assessment is also an assessment. '

Shipping Bill 10 be submitted by Exporter - Shipping Bill and Bill of Export Regulations
prescribe form of shipping bills. It should be submitted in quadruplicate. If drawback
claim is to be made, one additional copy should be submitted. There are five forms: (a) ,
Shipping Bill for export of goods under claim for duty drawback - these should be in
Green colour (b) Shipping Bill for export of dutiable goods - this should be yellow
colour (c) shipping bill for export of duty free goods - it should be white colour (d)
shipping bill for export of duty free goods ex-bond - i.e. from bonded store room - it
 should be pink colour (e) Shipping Bill for export under DEPB scheme - Blue colour.

The shipping bill form requires details like name of exporter, consignee, Invoice
Number, details of packing, description of goods, quantity, FOB Value etc. Appropriate
form of shipping bill should be used.

Relevant documents Le. copies of packing list, invoices, export contract, letter of credit
etc. are also to be submitted. In case of excisable goods, from ARE-I prepared at the
time of clearance from factory shouldalso be submitted.

Customs authorities give serial number (called 'Thoka Number') to shipping bill, when it
is presented.

Excise fOlmalities at the time of Export - If the goods are cleared by manufacturer for
export, the goods are accompanied by ARE-I (earlier AR-4). This form should be
submitted to customs authorities. The Customs Officer certifies. that the goods under this
.' . , .' form •hlly~.iildeedbee!l,exported, This form: hasth~n.to,be,·sllbmitteqJo.Maritime· (", ..... ,.,: i
Comm\ssioner [orobtiiiiiiiig'proof of export'. The bond executed by M!ihufacturer-
exporter with excise authorities is released only when 'proof of export' is accepted by
Maritime Commissioner or Assistant Commissioner, where bond was executed.

Duty drawback formalities - If the exporter intends to claim duty drawback on his
exports, he has to follow prescribed procedures and submit necessary papers. The
procedures are discussed in the chapter on 'Export Incentives'. He has to make
endorsement of shipping bill that claim for duty drawback is being made. If he fails to
do so due to genuine reasons, Commissioner of Customs can grant exemption from this
provision. [proviso to rule 12(I)(a) of Duty Drawback Rules].

G R /SDF / SOFTEX Form under FEMA - Reserve Bank of India has prescribed GR I
SDF,form under FEMA. "G R" stands for 'Guaranteed ReceipC form, while SDF stands
for 'Statutory Declaration Form'). SDF form is to be used where shipping bills are
processed electronically in customs house, while GR form is used when shipping bills
are processed manually in customs house.

Other documents requiredfor export - Exporter !liso has to prepare other documents like
(a) Four copies of Commercial Invoice (b) Four copies of Packing List (c) Certificate of
Origin or pre-shipment inspection where required (d) Insurance policy. (e) Letter of
Credit (f) Declaration of Value (g) Excise ARE-IIARE-2 form as applicable (h) GR I
SDF form prescribed by RBI in duplicate (i) Letter showing BIN Number.

RCMC certificate from Export Promotioll Coullcil - Various Export Proinotion Councils
have been set up to promote and develop exports. (e.g. Engineering Export Promotion
Council, Apparel Export Promotion Council, etc.) Exporter has to become member of
the concerned Export Promotion Council and obtain RCMC - Registration cum
membership Certificate.
 Check in customs - Document submitted is processed by customs authorities, and
following are checked -

.Value and classification of goods under drawback schedule in case of drawback

shipping bills
+Export duty / cess if applicable
.Advance License shipping bills are checked to ensure that description in invoice and
final product specified in Advance License matches. If necessary, samples may be
drawn and assessment may be done after visual inspection or testing
+Exportability of goods under EXlM policy and other laws - Some exports are totally
prohibited under various Acts e.g. items restricted or prohibited under Foreign Trade
(Regulation) Act; antiques; art treasures; Arms; narcotics etc. Some items like tea,
coffee and coir products can be exported only against authorisation/licence under
respective Acts.

Examination of goods before export - After shipping bill is passed by export

, , .. .departwe?t,. tlWgood~ arepresente~ to. shed.. ~~PI'~i~c::~lel)PQrtsl.ip g9~\<;, ~or,e1Ca,mi.!ll!!iQn... '_,;,,' <,
Goods will be exammed by exammer. ThIS mspectlon IS necessary (a) to ensure that
prohibited goods are not exported (b) goods tally with description and invoice (c) duty
drawback, where applicable, is correctly claimed,

Let Export Order by Customs Authorities - Customs Officer will verify the contents
and after he is satisfied that goods are not prohibited for exports and that export duty, if
applicable is paid, will permit clearance. (section 51) by giving 'let ship' or 'let export'
order.

GR-I, ARE-I, octroi papers, quota certification for export etc. are also signed.
Exporter's copy of shipping Bill, GR-I, ARE-I etc, duly certified are handed over to
exporter or CRA. Drawback claims papers are also processed.

Processing under EDI system -Under EDI system, declarations in prescribed form are
to be filed through 'Service Centre' of customs. After verification, shipping bill number
is generated by the system, which is endorsed on printed checklist generated for
verification of data. Goods are inspected at docks on the basis of printed check list. All
documents are submitted to Customs Officer along with checklist. If goods and
documents are found in order, 'let export' order is issued. Then two copies of Shipping
Bill are generated - one customs and other exporter's copy, Exporter's copy is generated
only after EGM (Export General Manifest) is submitted by shipping agent. These arc
signed by CHA and customs officer and then by Appraiser. SDF, ARE-I, octroi papers,
quota certification for export etc. are also signed. Exporter's copy of Shipping Bill,
SDF, ARE-I etc. duly signed are handed over to exporter or CHA.

Conveyance to leave on written order - The vessel or aircraft which has brought
imported goods or which carry export goods cannot leave that customs station unless a
written order is given by Customs Officer. Such order is given only after (a) export
manifest i~submitted (b) shipping bills or bills of export, bills of transhipment etc, are
i;
 submitted (c) duties on stores consumed are paid or payment of the same is secured (d)
no penalty is leviable (e) export duty, if applicable, is paid. - - Such permission is not
required if the conveyance is carrying only luggage of occupants.

Coastal goods - Coastal goods means goods transported from one port in India to
another port in India, but dnes not include imported goods. Thus, coastal goods means
goods taken by ship from one Indian port to another. No export or import is involved,
but control is necessary to ensure that coastal goods are not diverted illegally for export.

LOADING OF COASTAL GOODS - The Consignor should submit bill of coastal

goods to Customs Offi~r (section 93). Fon'll of the bill has been prescribed. These will
be loaded by master of vessel only after 'bill of coastal goods' is passed (section 93).
Master of Vessel will carry an 'Advice Book' where entries will be made by Customs
Officer. This 'Advice Book' has to be presented for inspection of Customs Officers; if
called for. After loading, the vessel can leave only after obtsining written order from
Customs Officer. As per notification No 15/98-NT dated 27.2.1998, exemption hasbeen
,'".,;,' ,gt:i!9~~J(}r,~!l!i~!'ry of 'i\4vice BOok' ,at, each.P\lt:t of call.H,owever, the 'Advice Book'
will have tobesubnuttedfotmspecnoifonooard'6Nessel;whe"n'calledforY.; .. ··,';,·· :'.0..· •.•.• ;; :"";.;','

UNLOADING OF COASTAL GOODS - Unloading of coastal goods should be done

only at' Customs 'Port or coastal port appointed by CBEC under section 7 of Customs
Act. On arrival, all bills relating to goods which are to be unloaded will be delivered to
Customs Officer. Unloading can be done only after obtaining permission from Customs
Officer. Customs Officer can inspect goods and ask for questions and documents
relating to goods. Goods will be unloaded at approved place under supervision of
Customs Officer.

100% EOUs:

The EOUs are licensed to manufacture goods within the bonded premises for the
purpose of export. As per the policy, the period of bonding is initially for five years,
which is extendable to another five years by the Development Commissioner. On
completion of the bonding period, it is for the unit to decide whether to continue under, or
to opt out, of the scheme. The imported capital goods are allowed to be warehoused for a
period of 5 years. For other goods, the warehousing period is one year, which can be
extended further by the Commissioner I Chief Commissioner of Customs. On an
application being made by'the unit, extension. of the time limit is granted in all cases
unless there is malafide and diversion ofduty free materials.

Monitoring and Administrative Control:

The EOUs basically function under the administrative control of the Development
Commissioner of the Export Processing Zones, whose jurisdiction has been notified by
the Ministry of Commerce. In all, there are seven Development Commissioners at
Mumbai, Gandhidham, Chennai, Cochin, Vizag, Noida and Calcutta, who supervise the
 !Industrial Licence issued to the unit.

However, the sector specific customs I excise duty exemption notification(s) have certain
additional conditions, which are also required to be followed by the units.

B-17 Bond :

All the EODs are required to execute a single all purpose bond i.e B-17 bond
undertaking themselves to fulfil the conditions stipulated in the exemption notification of
EOD scheme. This bond is taken to take care of the interests of revenue arising out of
goods lost in transit, goods taken into Domestic Tariff Area for job work! repairl display
etc but not brought back etc. The bond is executed with the jurisdictional Assistant
Commissioner of Customs/Central Excise in charge of the unit. The format of the bond is
prescribed vide notification No. 6/98-CE ( NT) dated 2-3-1998. The bond covers the
activities which include, inter alia, transhipment of import lexport goods between port of
,.<l> ....... import/IeXPQrt(~~;~!~';.p~!jlllis~s;.duty~fi;ee ipi.p?rtipro.cure~.ent,c:tr0I)1ptha,Jl1<Jigeno\!s,
s'ources as per relevant notification and warehousmg/storage m the urnt; movement of
du!y-free goods for job work and return; temporary clearance for repair and display in
exhibitions, testing/approvals etc.; and movement of goods against AR-4, AR-3A and
CT-3 etc. and transfer from one warehouse to another. However, it does not cover the
differential du!y amount' against advance DTA sale for which a separate bond is to be
executed. The bond is taken for an amount equal to 25% of the du!y forgone on the
sanqtioned requirement of capital goods plus the du!y forgone on raw materials required
for 3 months. Surety or securi!y equivalent 5% of the bond amount in the form of bank
guarantee is required to be given by the EODs,

Procurement of Goods Indigenously under CT-3 Procedure:

The EODs can procure goods from DTA without payment of Central Excise duty.
Such procurement from DTA is against CT-3, which is issued by the Superintendent of
Customs/Central Excise in charge' of the EOD. Such goods are required to be brought
directly from the manufacturer Iwarehouse into the unit's premises under ARE3 and
examined by the designated officer. After examination of such goods, one copy of ARE3
is sent by registered post to the jurisdictional Central Excise authorities as a Re-
warehousing Certificate in token of receipt of the goods in the unit. To avoid separate
permission every tinle, the EODs are issued 'pre-authenticated CT-3 in booklet form and
against such pre-authenticated CT-3, the EODs are allowed to procure caPital goods, raw
materials, consumables etc. Goods procured from DTA and found to be defective can be
returned to the manufacturer. ( Reference Board's Circular No. 24/91-CX-8, dt.
01.07.1991 and 504170/99 CE, dt. 30.12.99 and Board's mstructions dated 25-7-2001
issued fromF. No. 305/12I12001-FTT) ,

DTAsale:

The EODs ( other than gems & jewellery units) are allowed to sell goods (including
rejects and byproducts) manufactured by them in DTA upto 50% of FOB value of exports
 submitted (c) duties on stores consumed are paid or payment of the same is secured (d)
no penalty is leviable (e) export duty, if applicable, is paid. - - Such permission is not
required if the conveyance is carrying only luggage of occupants.

Coastal goods - Coastal goods means goods transported from one port in India to
,another port in India, but does not include imported goods. Thus, coastal goods means
goods taken by ship from one Indian port to another. No export or import is involved,
but control is necessary to ensure that coastal goods are not diverted illegally for export.

LOADING OF COASTAL GOODS - The Consignor should submit bill of coastal

goods to Customs Offi~r (section 93). Form of the bill has been prescribed. These will
be loaded by master of vessel only after 'bill of coastal goods' is passed (section 93).
Master of Vessel will carry an 'Advice Book' where entries will be made by Customs
Officer. This 'Advice Book' has to be presented for inspection of Customs Officers, if
called for. After loading, the vessel can leave only after obtaining written order from
Customs Officer. As per notification No 15/98-NT dated 27.2.1998, exemption has, been
,', ,gqlllted,for de[jveryof 'Advice Book' at each port C?fca11. However, the .'Advice Book'
wlIl 'have to be submitted for inSpection on bOafil of vessel, when called:.fof,., . . .. :.,:. ';",~:

UNLOADING OF COASTAL GOODS - Unloading of coastal goods should be done

only at"Customs Port or coastal port appointed by CBEC under section 7 of Customs
Act. On arrival, all bills relatiJ:tg to goods which are to be unloaded will be delivered to
Custo~ Officer. Unloading can be done only after obtaining permission from Customs
Officer: Customs Officer can inspect goods and ask for questions and, documents
relating to goods; Goods will be unloaded at approved place under supervision of
,

Customs Officer.
, .
100% EOUs:
..
..:-,. '

The EOUs are licensed to manufacture goods within the bonded premises for the
<'

PUlJlOSIf' of export. As per the policy, the period of bonding is initially for five years,
wlllch ;ts ,extendable to another five years by the Development Commissioner. On
completion of the bonding period, it is for theunit to decide whether to continue under, or
to opt out, of the scheme. The imported capital goods are allowed to be warehoused for a
period .of 5 years. For other goods, the warehousing period is one year, which can be
extended further by the Commissioner / Chief Commissioner of Customs. On an
application being made by the unit, extensionof the time limit is granted in all cases
unless there is malafide and diver~on of duty free ipaterials. '
"
Monitorin~ and Administrative Control:

The EOUs basically function under the administrative control of the Development
Commissioner of the Export Processing Zones, whose jurisdiction has been notified by
the Ministry of Commerce. In all, there are seven Development Commissioners at
Mumb~i, Gandhidham, Chennai, Cochin, Vizag, Noida and Calcutta, who supervise ~e
 L

!Industrial Licence issued to the unit.

However, the sector specific customs 1 excise duty exemption notification(s) have certain
additional conditions, which are also required to be followed by the units.

B-17 Bond:

All the EOUs are required to execute a single all purpose bond i.e B-17 bond
undertaking themselves to fulfil the conditions stipulated in the exemption notification of
EOU scheme. This bond is taken to take care of the interests of revenue arising out of
goods lost in transit, goods taken into Domestic Tariff Area for job work! repairl display
etc but not brought back etc. The bond is executed with the jurisdictional Assistant
Commissioner of Customs/Central Excise in charge of the unit. The format of the bond is
prescribed vide notification No. 6/98-CE ( NT) dated 2-3-1998. The bond covers the
activities which include, inter alia, transhipment of import lexport goods between port of
.. '~", >";;,i':;;·::'lmporllexp6rf anq'ill:litS"'Premises;·:duty-rree imp6rt1prqcureIJ1ent':front,the"indigeii0us,fc, ,,' """>'rii\',,,,
sour,ces as per relevant notification and warehousing/storage in the unit; movement of .
duty~free goods for job work and return; temporary clearance for repair and display in
exhibitions, testing/approvals etc.; and movement of goods against AR-4, AR-3A and
CT-3 etc, and transfer from one warehouse to another. However, it does not cover the
differential duty amount against advance DTA sale for which a separate bond is to. be
executed. The bond is taken for an amount equal to 25% of the duty forgone on the
sanctioned requirement of capital goods plus the (Juty forgone on raw materials required
for 3 months. Surety or security equivalent 5% of the bond amount in the form of bank
guarantee is required· to be given by the EOUs.

Procurement of Goods Indigenously under CT-3 Procedure:

The EOUs can procure goods from DJ'A without payment of Central Excise ,duty,
Such procurement from DTA is against CT-3,which is issued by the Superintendent of
Customs/Central Excise in charge of the EOU. Such goods are required to be brought
directly from the manufacturer Iwarehouse into the unit's premises under ARE3 and
examined by the designated officer. After eXamination of such goods, one copy of ARE3
is sent by registered post to the jurisdictional Central Excise authorities as a Re-
warehousing Certificate in token of receipt of the goods in the unit. To avoid separate
permission every time, the EOUs are isSued pre-authenticated CT-3 in booklet form and
against such pre-authenticated CT-3, the EOUs are allowed to procure capital goods, raw
mat~rials, consumables etc. Goods procured from DTA and found to be defective can be
returned to the manufacturer. ( Reference Board's Circular No. 24/91-CX-8, dt,
01.07.1991 and 504170/99 CE, dt. 30.12.99 and Board's instructions dated 25-7-2001
issued from F. No. 30511211200!-FTT)

DTAsale:

The EOUs ( other than gems & jewellery units) are allowed to sell' goods (including
rejects and byproducts) manufactured by them in DTA upto 50% of FOB value of exports
 functioning of the EODs and eight Export Processing Zones/Special Economic Zones in
the country. The Development Commissioners of the EPZS/SEZs are the Licensing
Authorities in respect of units under the EOD Scheme, as per specified territorial
jurisdiction as indicated in the Export and Import Policy.

The provisions of the Customs and Central Excise law in respect of the EODs are
administered by the Commissioners of Customs and Central Excise, who work under the
control of Central Board of Excise & Customs. The work relating to EODs is handled by
the staff of jurisdictional Commissioner of Central Excise. However, in the case ofEODs
located in port cities/towns or within the municipal limits of port cities/towns, the work is
handled by jurisdictional Commissioner of Customs, Seaport. (Reference Board's -
Circular Nos. nI2000-Cus, dated 31-8-2000 and 87/2000-Cus, dated 2-11-2000.)

Customs Bonding ofEODs :

I The premises of EOD are approved as a Customs bonded warehouse under the

l
warehousing provisions of the Customs Act. The manufacturing and other operations are
-. ',' , .
':.~
~', .
. carried out ui:idercuston:is~bond,and the.:UIDt beacing::appropriat~:charges. f0l11()fficeWOJli.;',:C:"'l;.d ,,:--
; cost recovery basis. In case of units in Aquaculture, Horticulture, Floriculture, Granite
quarrying etc exemption from bonding is given for administrative reasons with certain
other safeguards being put in place to check tliat duty free benefits where availed are not
abused/The EODs are required to execute a multipurpose bond withsuretyl security with
,:,;
_
jurisdictional Customsl Central Excise officers.

General Conditions 0

- The facility of ty free import (eXtending exemption both from basic &
countervailing duty) is sub ct to certain general conditions in accordance with the EXIM
PolicfMid these are summ as follows:

T~.iQ9ds are required to be orted into the EOD premises directly. However, Granite Ql
agrictilfure and allied sector uni are allowed to supply Itransfer the capital goods and the
farm"~!fields with prior permission of stoms.
Prior·-to undertaking import 1 local pro ement duty free, the unit is required to get their pre:
bonded. The unit is also required to execu a B-17 bond with suretyl security with jurisdicti.
Central Excise officers and take out a licence u er section 58 of the Customs Act, 1962.
The;goods, except capital goods and spares, are uired to be utilised within a period of one
such period as may be extended by the Customs auth ·ties.
The importer is required to maintain a proper accou of the import, consumption and ut:
imported!iocally procured materials and exports made a d submit them periodiCally to the
Commissionerl Customs. .
The importer is required to achieve minimum NFEP/export perfo nce as per the provisions of:
The importer is required to abide by the terms and conditions the Letter of PermissionII
General Conditions of Duty free Import:

The facility of duty free import (extending exemption both fro~ basic & countervailin'g:duty) is subject to certain general
conditions in accordance with the EXlM Policy and these are summed up as follows:
~:,

The goods are required to be imported into the EOD premises directly. However, Granitt):;puarrying units,
agriculture and allied sector units are allowed to supply Itransfer the capital goods and,tj1e inputs in the
farms/fields with prior permission of Customs. :r:~;:.
", .~

Prior to undertaking import I local procurement duty free, the unit is required to get their premises customs
bonded. The unit is also required to execute a B-17 bond with suretyI security with jurisdi~onal Customsl
Central Excise officers and take out a licence under section 58 of the Customs Act, 1962. \.
The goods, except capital goods and spares, are required to be utilised within a period of <iiie year or within
such period as may be extended by the Customs authorities.
,
r ~."

The importer is required to maintain a proper account of the import, consumption and,·:'titilisation of all
importedllocally procured materials ,..od exports made and submit them periodically to ·the Development
Commissionerl Customs. '.;
The importer is required to achieve minimum NFEP/export performance as per the provisions.6fFTP.
_,1,_,

The importer is required to abide by the terms and conditions of the Letter of Permissio\llLetter of Intent
!Industrial Licence issuedto the unit. '\.
. .(.
';,;...
However, the sector specific customs I excise duty exemption notification(s) have certain additional conditions, which are also
required to be followed by the units. ..
.-'
B-17 Bond:

All the EODs are required to execute a single all purpose bond i.e B-17 bond undertaking themselves to fulfil the conditions
stipulated in the exemption notification ofEOD scheme. This bond is taken to take care ofthe in~erests of revenue arising out of goods
, ' " , " ' , '
lost in transit, goods taken into Domestic Tariff A\"~ for job work:! repairl display etc but not brought back etc, The bond is executed
with the jurisdictional Assistant Commissioner or'¢ustoms/Central Excise in charge of the unit. The format of the bond is prescribeq
vide notification No, 6/98-CE (NT) dated 2-3-199~, The bond covers the activities which include, inter alia, transhipment of import
lexport goods betWeen port of import/export and ;4nits' premises; duty-free import/procurement from the indigenous sources as per
relevant notification and warehousing!storage in the unit; movement of duty-free goods for job work and return; temporary clearance
for repair and display in exhibitions, testing!approyals etc,; and movement of goods against AR-4, AR-3Aand CT-3 etc. and transfer
from one warehouse to another. However, it dods not cover the differential duty amount against advance DTA sale for wlnich a
separate bond is to be executed. The bond is taken for an amount equal to 25% of the duty forgone on the sanctionedrequirement of
capital goods plus the duty forgone on raw materi#1s required for 3 months, Surety or security equivalent 5% of the bond amount in
the form of bank guarantee is required to be given!:iy the BOUs, '
."
, ,
Procurement of Goods Indigenously under CT-3 P~6cedure :
:$
The EOUs can procure goods from DTA wi~9ut payment of Central Excise duty, Such procurement from DTA is against CT-3,
which is issued by the Superintendent of Customs/Central Excise in charge of the EOn Such goods are required to be brought directly
from the manufacturer Iwarehouse into the unit's pf!lmises under ARE3 and examined by the designated officer, After examination of
such goods, one copy of ARE3 is sent by regi~tered post to the jurisdictional Central Excise authorities as a,Re-warehousing
Certificate in token of receipt of the goods in the unit, To avoid separate permission every time, the EOUs are issued pre-authenticated
CT-3 in booklet form and against such pre-auth~t;lticated CT~3, the EOUs are allowed to procure capital goods, raw materials,
consumables etc, Goods procured from DTA and:found to be defective can be returned to the manufacturer, ( Reference Board's
Circular No, 24/9l-CX-8, dt. 01.07,1991 and 504170/99 CE, dt. 30,12,99 and Board's instructions dated 25-7-2001 issued from F, No,
305/l2l/2001-FTT) .,',.

DTA sale:

The EOUs ( other than gems & jewellery units) are allowed to sell goods (including rejects and byproducts) manufactured by
them in DTA upto 50% of FOB value of export&,on payment of concessional duty subject to achievement of prescribed NFEP,
However, the DTA.sale facility is not available for.Certain,prpqll~s.such.as,motof;car;al~0holicliquor, tea (except instant,tea),books:
etc, The EOUs are allowed to remove the goods int~iDTA on a invoice, The.invoice is used"both as a transport document and also as a
document for determining the assessable value, The::EOUs can pay the duty bydeposirlb'g''ijle same in an authorized bank or the duty
can also be debited from the Personal Ledger Accoijht if an account current is maintained,
.:;:
..
~.
 ,~.

Valuation of Goods Sold in DTA :

, -
In terms of section 3 of the Central Excise Act, 1944, the excise duty leviable on goods mij.llufactured in an EOUIEPZ unit and
cleared into Domestic Tariff Area is the amount equal to the customs duty leviable under section 12 of the Customs Act, 1962 or
under any other law for the time being· in force on like goods produced or manufactured outside:India, if imported into India, Thus, the
measure of excise duty leviable on goods manufactured in EOU/ EPZs is worked out exactly. in the same manner as applicable to
imported goods. . j,:, .
.;.':."'.
On fulfillment ofNFEP (Net Foreign Exchange Earnings as Percentage of Exports) the EOUs other than gem and jewellery units,
are allowed to sell goods including rejects (upto 5% of FOB value of exports), waste, scrap"byproducts and services in DTA upto
50% of FOB value of exports at a concessional rate of duty in an amount equal to 50% of Cus~oms duti!'ls. Sales beyond 50% attract
full duties. It may be noted that the words "FOB value of exports" refers to physical exports 'only. Therefore, the value of deemed
exports made by the unit is not considered while determining the FOB value of exports. .'

Goods Manufactured from Indigenous Materials in 100% BOUs:

A concessional duty has been prescribed for goods sold in DTA which are manufactured~iJ.tirely out of indigenous materials. In
such cases, the duty charged is the effective rate of excise duty which is leviable on like goods Iilanufactured & cleared by DTA units.
(Reference: notification No.8/97-CE dated 1-3-97).

SPECIAL ECONOMIC ZONE (SEZ) :

Special Economic Zone (SEZ) is a specifically delineated duty free enclave and .shall be deemed to be
foreign territory for the purposes of trade operations and duties and tariffs.:
~!\"
Goods and services going into the SEZ area from DTA shall be treated a,s.,exports and goods and services
coming from the SEZ area into DTA shall be treated as if these are bein~<i!nported.

For development, operation and maintenance of.intrastruQtqre facilitie(in SEZs, the developer shall be
."'J. •
eligible for the following entitlements:
(a) Income Tax exemption as per 80 IA of the Income Tax Act.
·:t
(b) Import! procure goods Without payment of Customs/Excise duty.
,~~!

(c) Exemption from Service'J:'ax

T:
(d) Exemption from CST. ,i;i

SEZ unit may import/procUre from the DTA without payment of duty all types of goods and services,
including capital goods, whether new or second hand, required by it for its activities or in connection
therewith, provided they ru:e:not prohibited items of imports in the ITC(HS). However, if any permission
is required for import under. any other law, the same shall be allowed with the approval of the Board of
Approval. Goods shall incliide raw material for making capital goods for use within the unit. The units
shall also be permitted to iniport goods required for the approved activity, inc1ucling capital goods, free of
cost or on loan from clients,. ..

In case of doubt as to whetlIer the item is required by the unit for its activities or in connection therewith,
the decision of the concerned Development Commissioner shall be final.
, .

The import shall be subject'to the following conditions:

(a) The goods shall be imported into the premises of the unit.

(b) The procedure as prescnbed under Customs/ Excise rules for SEZ will be followed and general bond
executed with CustomslExcise authority..

(c) Goods already imported/shipped/ arrived before the issue of Letter of Permission (LOP)lLetter of
Intent (LO!) are also eligible for duty free clearance under the SEZ scheme provided customs duty has not
been paid and the goods have not been cleared from customs:' .. c· ,',

SEZ units may procure goods required by it without payment of duty, from bonded warehouses in the
 ~~~.
DTA set up under the Policy and/or under Section 65 of the CustOI]IS Act ::!liom International Exhibitions
held in India. ~t'
'j:J~'
;~.

SEZ units, may import/procure from DTA, without payment of duty, all'J:Ypes of goods for creating a
central facility for use by units in SEZ. The Central facility for software de.J¢,!~pment can also be accessed
by units in the DTA for export of s o f t w a r e . : : :•.

Gem and Jewellery units may also source gold/ silveri platinum through the.~ominated agencies .
.,';:.

SEZ units obtaining gold/silveri platinum from the nominated agencies on;loan basis shall export gold/
silver/platinum jewellery within 60 days from the date of release. This s~~l not however apply to the
outright purchase of precious metal from the nominated agencies. .f"
-:,'
SEZ units may import/procure goods and services from DTA without pay'ment of duty for setting up,
operation and maintenance of units in the Zone. ..:.
J, .~~; :
Goods, except capital goods and spares, shall be utilized within the approval;period of 5 years .
•!.:..;.
;--'.

DTA Sales : ;~;

.:!f/.
,.....
(a) SEZ unit may sell goods, including by-products, and services in DTA ii;.accordance with the import
policy in force, on payment of applicable duties. . 'i"
'·6)·
DTA sale by service/trading unit shall be subject to achievement ofpositive''tffiE cumulatively. Similarly
for units undertaking manufacturing and services! trading activities against ;i;;single LOP, DTA sale shall
be subject to achievement ofNFE cumulatively. ;,':'

Scrap/WlISte/remnants/rejects arising out of production process or in connedion there with may be sold in
the DTA on payment of applicable duty. ,ii;

Scrap/dust/sweeping of gold/silver/platinum may be sent to the Government. of India MintIPrivate Mint

from the SEZ units and returned to the.m in standard bars in accordance with'the procedure prescribed by
 the Customs authorities otjnay be permitted to be sold in the DTA on payment of applicable Customs
duty, on the basis of gold/siiver/platinum content, as may be notified by Customs authorities ..
" ;.~

ACES:

The Central Board of Excise and Customs has taken initiative to use Information and Communication Technology to
transform its relationship with the citizen. It seek~ to empowerassessees through access and use of information, from the comfort of
their home or office. The department is guided in this initiative by two principles -
Delivering services in ways that better reflect what people and assessees need or want from the department;
Making the department and its services more accessible anywhere, anytime basis.

In order to fulfill this need and as a part of its assessee friendly initiatives, Automation of Central Excise and Service Tax
(ACES), the new centralised and web based software application has been made available by the Central Board of Excise and
Customs. It can be accessed at httpllwww.aces.gov.in.Itis designed to provide the assessees an electronic interface with the
Department and aims at reducing paper work, visits to the Departmental offices and improving transparency, accountability and
efficiency in indirect tax administration. ACES has been launched in the Mangalore Central Excise Commissionerate on 31.10.2009.

Benefits of ACES are -

• Online registration and amendment,of registration details

• .'
Electronic filing of documents such ,as returns, claims, intimations and permissions.

• Online tracking of the status of applications, claims and permissions

• Online facility to view documents like registration certificates, returns, SCNs, OlOs etc.

• Internal messaging system for fastei'communicati6n

, .. ' ..

• Application accessible from anywhere, anytime (24x7) through the internet.

------.--------------------~-----------------------------------------------
 .- ~,.

• Online authentication ofPAN with the Income Tax data base

, '
• Assistance of "Know your location" for choosing correct jurisdictional office. '.'
"/'

• Online selflearning tutorials (LMS), user manuals and FAQs for help in using Aciis.