Waiver of Bank Guarantee

[RAMESH ANANTHAKRISHNAN]

Dear Sir,

 

We are an 100% EOU. Till last year our unit was under Customs control and now it is changed into Central Excise control. Initially we have executed a B17 bond with Bank Guarantee. Since the imports are increased we would like to execute a further bond. Now the issue is Excise Authorities are insisting us to arrange a BG with 2 years validity and also further 2 years claim period whereas the banker is not accepting this further 2 years clause as the standard condition is only 6 months after validity of the BG.

We are also a member in Export Promotion Council. Our turnover crossed Rs.5 Crores only from the current year (2010-11) . In this situation is there any notification to waive BG. If so kindly advise.

[CA Rachit Agarwal]

You have to convince your banker. BG can be issued for the period of 2 years. You have to get the sanction of limits with your bank for allowing open such BG

AI Summary

Bank guarantee validity: extended claim period demands require bank sanction to issue multi year guarantees. An Export Oriented Unit moving from Customs to Central Excise control seeks an additional B17 bond with a bank guarantee. Excise requires a two year guarantee plus a two year claim period; the bank accepts only a six month post validity cover. The adviser advises obtaining the bank's sanction of limits so the bank will issue a two year guarantee; no waiver notification is provided.