TaxTMI 
TaxTMI 
Duty Free Import Authorization (DFIA) Scheme - availment of facility under rule 18 (rebate of duty paid on materials used in the manufacture of resultant product) or sub-rule (2) of rule 19 of the Central Excise Rules, 2002 or Cenvat credit under CENVAT Credit Rules, 2004 under Notification number
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....Credit Rules, 2004 (here in after referred to as the 'said facilities') in respect of raw materials used in the manufacture of goods exported towards fulfillment of export obligation (EO) under Duty Free Import Authorization (DFIA) scheme, as well as duty free imports against the Authorization so obtained in terms of the DFIA scheme, simultaneously. 2. The matter has been examined by the Ministry. The DFIA Scheme was introduced in the Foreign Trade Policy (FTP) in 2006 and it allowed, inter alia, duty free import of inputs for manufacture of export goods and transfer of the Authorization or the inputs imported against it after completion of the EO subject to fulfillment of certain conditions. One of the conditions stipulated in paragraph 4.4.7 of the FTP (2006) was that no Cenvat credit facility shall be available for inputs either imported or procured indigenously against the Authorization.Condition(v) of the corresponding customs notification No.40 / 2006- Cus dt 1.5.2006, issued to implement the DFIA scheme, accordingly provided that the EO would be discharged by exporting resultant products, manufactured in India which were specified in the said authorization and in respect o....
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....A scheme and the conditions laid therein it appeared that the authorization holder cannot avail Cenvat credit on the inputs used in the manufacture of the goods exported under the DFIA scheme as well as duty free imports under the DFIA simultaneously as it amounts to double benefit and against the spirit and object of the scheme. 5. Finally, the position that emerged after the discussions between the DOC / DGFT and the DOR was that unintended benefits may have occured in cases where the duty free inputs, imported / procured subsequent to completion of EO using indigenously procured inputs and on which Cenvat credit has been availed of by the exporter, are transferred or used in the manufacture of non excisable /exempted /nil duty goods. The transferee in such cases obtains the duty free raw materials and escapes the levy of excise duty on finished products in domestic market sale. The position holds good even under actual user imports if the replenished materials are utilized in the manufacture of non-excisable/exempted/nil-duty products. 6. The DOC/ DGFT therefore modified the provisions of the DFIA Scheme in FTP 2007 and 2008. Para 4.4.2 of the FTP-2008 now states that where C....
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.... term 'dutiable goods' has been defined in the explanation to the notification and would mean all excisable goods which are not exempt from Central Excise duty and which are not chargeable to 'nil' rate of central excise duty; (ii) if the materials are imported against an authorisation transferred by the Regional Authority, or the imported materials are transferred with the permission of Regional Authority, then the importer has to pay an amount equal to the additional duty of customs. In case, the duty is not paid then interest @ 15% from the date of clearance of the said materials till the date of payment has to be paid; (iii) the importer also has an option to pay additional duty of customs on the imported materials and clear his goods without furnishing any bond as specified in condition No. (iiia) of the notification number 17/09-Cus dated 19.2.09. This additional duty of customs so paid shall be eligible for availing CENVAT Credit under CENVAT Credit Rules, 2004. (b) In respect of imports made after the discharge of export obligation in full, and if 'said facilities' have not been availed, then the imported materials can be cleared without furnishing a bond specified in ....
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....is would mean collection of all duties of customs which were exempted in the notification no. 40/06-Cus while permitting duty free imports. Further, this action shall be taken in respect of all duty free imports affected during the years 2006-07, 2007-08 and 2008-09; (b) appropriate action to safeguard revenue may be taken in case imports /domestic procurement against Authorizations have been transferred. As per para 4.4.6 of the FTP (2007), this transfer should have taken place after payment of additional duty of customs / excise duty, as the case may be. It needs to be verified whether the practice as specified in the FTP was actually followed for the years 2007-08 and 08-09. If not, action to recover revenue needs to be taken accordingly; (c) appropriate action to safeguard revenue may be taken in case the Authorization itself has been transferred. As per para 4.4.6 of the FTP(2007) and para 4.72 of the HBP, this transfer should have taken place after payment of additional duty of customs / excise duty, as the case may be. It needs to be verified whether the practice as enjoined in the FTP has actually been followed for the years 2007-08 and 08-09. If not, action to recover r....