Export of Rejection Import material

[Guest]

Dear Sir,

We are a manufacturer and we import some RM in our factory in 2012 and we taken the Cenvat Credit on that material. We use these material in manufacture of FG and sell in market after some period we face customer coplain on this product then we testing this product and found that the import material has some defect by which we face the customer complain in market we discuss the import supplier and he also agree that there is some faulty in his product. So now in 2016 we we want to send these balance material which are not using still now.

Please guide how we will send this material to this supplier. on which document we should send.

By paid of excise duty of through ARE-1.

Because as our import is before 4 years re export of import material is not applicable.

So please advise me.

Regards

Swapneswar Muduli

[Rajagopalan Ranganathan]

Sir,

You can remove the defective imported inputs for export without payment of duty under your bond/LUT. Credit earned on the inputs can be utilised for payment of duty on your final products. In this connection please refer to CBEC's Circular No. 345/2/2000 TRU dated 29.8.2000. In para 8 of the said Circular it is stated that "Explanation 10 clause (b) of sub-rule (1) of rule 57AB refers to payment of appropriate duty of excise if the inputs or capital goods are removed as such from a factory. It has been pointed out that there may be a situation where the input or capital goods are exported. Doubt has been expressed whether such export clearances have to be made only on payment of duty. In this context it is clarified that under the excise procedures, a manufacturer can export the goods under bond without payment of duty. This is a facility that is available to the manufacturer under the excise procedure. In such case, the appropriate duty of excise that is payable is 'nil'. Therefore, there is no bar for a manufacturer to remove the inputs or capital goods for export under bond within the Explanation referred to above." Also refer to Chapter 5 Para3.4 of CBE&C's CEx. Manual 2005 which states that "there is no bar for a manufacturer to remove the inputs or capital goods as such for export under bond." You have to follow the normal procedure for export.

[Mahir S]

Swapneswar ji,

You intend to re-export imported goods in the same form without carrying out any processing. In that case, excise duty is not leviable and therefore, the CT-1 or ARE-1 procedure need not be followed.

You can claim drawback of the customs duty paid on the imported goods under Section 74 of the Customs Act, 1962.

You have to follow the procedures laid down in Re-export of Imported Goods (Drawback of Customs Duties) Rules, 1995.

On imported goods that have not been used after import, you can claim drawback of 98 per cent of the customs duty paid. Drawback is available provided you satisfy the Customs authorities that the goods you export are the same as the goods imported under a particular bill of entry.

Also refer to following link regarding Drawback and examination of goods for purpose of re-export of imported goods :

http://bangalorecustoms.gov.in/cus.techso2_2013.pdf

[Guest]

Dear Mihir Ji,

Thank for your advise but our input material are old more than 4 years so Re Export of import material is applicable if we reexport the material with in two year from purchase date.

That is why i am confusing how we will send these material to the supplier ?

Regards

Swapneswar

[Guest]

Dear Rajagopalan Sir,

Thank you very much for such a valuable suggestion but one more thing i want to know.

(1) These material are old of more than 4 years so this rule is applicable in my case or not ?

(2) Can we export the our input with out payment of duty through ARE-1 on which already we have taken the Cenvat credit ? Because as per my knowledge LUT grant by Excise Authority to us only for Export of manufactured Goods from our factory without payment of Duty.

(3) If we export these materials we don't get any money return the supplier has further send us the Good materials.

So how we will submit the Proof of Export to the Excise Department for availing the Excise Benefit ?

Regards

Swapneswar Muduli

[Rajagopalan Ranganathan]

Sir,

Q.1: There is no restriction under Cenvat Credit Rules 2004 that the inputs purchased should be cleared for export is to be done within certain period from date of purchase. The restriction of two year period under Section 74 of Customs Act, 1962 is only for claiming draw back of customs duty paid on the imported goods. You are going to export the input without payment of duty.

Q2.: You can follow the ARE-1 procedure to clear the inputs for export. Since you are exporting the inputs as unfit for use in the manufacture of excisable goods you can do so under LUT executed by you. Cenvat credit taken by you need not be reversed since you are exporting the inputs.

Q.3: Regarding realization of export proceeds you may approach RBI to get an exemption under FEMA clearly explaining the circumstance under which you are exporting the imported inputs. You may also mention that you going to get back equal quantity of inputs back from your foreign supplier and this quantity may be treated as export proceeds.

Q.3: While submitting proof of export you submit the exemption from producing realization of export proceeds obtained from RBI.

[Mahir S]

Sir,

regarding your last query dated 11.01.2016 pertaining to the time limit for such re-export. it is hereby clarified that time limit is not an issue for such re-export of the rejected goods.

The basic problem that you shall face from the excise officer at the time of export of goods from the factory premises and from the Customs officer at the time of export of goods from the port will be that the goods entered for re-export are the same that were imported (identity of the goods), as well as the reasons for non use of such imported goods for such a long period.

[Guest]

Dear Rajgopalan Sir,

Thank you very much for your reply.

But this transaction is purely replacement basis there is no involvement of Revenue that is payment and receipt.

It is just simple we send these material to the supplier and we will get back the same qty of Good material from supplier. So in this case can we clear theses material under ARE-1 or not ?.

Regards

Swapneswar

[Rajagopalan Ranganathan]

Sir,

If you are a trader you may export under Bill of export and export invoice. Since you are registered with Central Excise Department and you are exporting sub-standard inputs back to supplier you have to export it under ARE-1. Otherwise tomorrow the Department may allege credit availed inputs had been removed without reversing the credit availed on such inputs.

[KASTURI SETHI]

Thanks to both experts Sh.Rajagopalan Ranganathan and Sh.Mahir S ,Sirs, for comprehensive replies full of legal force as well as practical feasibility. Fool proof guidance by both experts.

[Mahir S]

Thanx Kasturi ji for the appreciation.

[Rakesh Singh]

Dear Sir,

We are manufacturer of automotive parts. We were imported automotive parts from japan in 2013, but due to some reason it were not used in manufacturing of FG till March-2016, but we have taken input credit of CVD and ADI. Now, We have re-exported the same RM to the supplier in Japan through LUT and also not mentioned any duty amount on ARE-1 at the time of export.

Please advise us what will be the effect if we do not reverse the duty input

Thanking You.

Regards

Rakesh Singh

AI Summary

Export under bond/LUT allows removal of defective imported inputs without payment of excise duty, subject to identity proof. A manufacturer who took Cenvat credit on imported inputs may remove defective imported inputs for export under bond or LUT without payment of excise duty; Cenvat credit need not be reversed if inputs are exported as such. Export from factory premises should be effected under ARE-1 for excise-registered manufacturers to avoid allegations of improper removal. Drawback under Customs is a separate remedy subject to its time limits and proof of identity; officials will scrutinise identity and reasons for long non use, and RBI exemption may be sought for realization requirements.