The finance ministry notified a scheme for refund of 4 per cent additional duty of Customs levied under Section 3(5) of the Customs Tariff Act, 1975 (known as SAD) in respect of goods which, after importation, are resold on payment of appropriate sales tax or value added tax (VAT).
Suitable mechanism was also made that in such cases, no credit of such SAD will be available. Notification number 102/2007-Cus. dated September 14, 2007, was issued in this regard.
Through Circular number 6/2008-Cus. dated April 28, 2008, the Central Board of Excise and Customs (CBEC) clarified that in case the SAD was paid at the time of import through duty entitlement passbook (DEPB), the amount eligible for refund should be re-credited to the relevant DEPB scrip, instead of refunding SAD in cash. At that time, in this column it was pointed out that a situation where the DEPB has already been transferred to another party or has expired has not been dealt with by CBEC.
Later, CBEC issued circular number 6/2009-Cus. dated February 9, 2009, allowing re-credit of SAD paid through duty credit scrips issued under other schemes such as the Focus Market Scheme (FMS) and Focus Product Scheme (FPS), but the issue regarding refund/re-credit in situations where the duty credit has been transferred or has expired remained unresolved.
Now, the Director General of Foreign Trade (DGFT) has issued policy circular (number 22/2009-14 dated February 3, 2010, prescribing a rather round about procedure for re-credit of relevant duty credit scrip but remains silent about situations where the relevant duty credit scrip has expired.
Till recently, the Customs were re-crediting the duty credit scrip when the refund of SAD paid by debit to duty credit was due. Now, DGFT says that the duty credit scrip holder including the transferee shall submit the original copy of the relevant duty credit scrip, scheme-wise consolidated certificate (credit note) issued by the Customs authority at the port of registration along with the forwarding letter to the regional authority who had issued the scrip for making suitable endorsement of re-credit. But CBEC is yet to issue any instruction asking the Customs to issue any scheme-wise consolidated certificate (credit note).
The DGFT circular also deals with the procedures to be followed in cases where the original duty credit scrip, after partial utilisation, has been transferred to another importer and the earlier importer wants to get the re-credit facility for the 4 per cent SAD component. Time limit of three months from the date of Customs certificate (credit note) for claiming re-credit has been prescribed.
The good point about the circular is that in case the validity of the scrip is less than six months on the date of submission of request for re-credit to the regional authority, the scrip may be revalidated for six months from the date of endorsement for utilisation of the re-credit amount.
The simplest course would have been to let the practice of Customs re-crediting the duty credits continue where the duty credits have not been transferred.
For transferred duty credits and expired duty credits, the procedure of issuing a fresh duty credit on the basis of Customs certificate could have been prescribed. The procedure now prescribed by DGFT involves an extra step, unnecessary documentation and need to approach the regional authority, thereby imposing unnecessary costs.