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BONDS AND LETTERS OF UNDERTAKING

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....ee the performance on the part of obligor. The surety should be for the full value of the bond and the person standing as surety should be solvent to the extent of the bond amount. Under the Contracts Act, the liability of the surety is co-extensive with that of the principal debtor and hence the department is at liberty to enforce the recovery of the dues either from the obligor or from the surety. 2.2 The following are the types of bonds, which are presently in vogue: (a) B1 - General Bond with surety/ security for removal for export of excisable goods without payment of duty for export. The bond is to be filed by the exporters for export of goods without payment of duty. The bond amount should be sufficient to cover the duty liability. The person standing as surety should be solvent to the full amount covered. The security should normally be limited to the 25% of bond amount. Fixation of amount of surety! security is as per Board's Circular No. 284/118/96-CX., dated 31-12-96 However, certain categories of exporters, namely, recognized export houses, holders of RCMC memberships are not required to furnish any bank guarantee/ cash security while executing bond. Board Circul....

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....The surety should be for the full amount and the person standing as surety should be solvent to the extent of the amount covered. The security should normally be limited to 25% of the bond amount. 3.2 In case of exporters, certain specific categories i.e. Super Star Trading House, Star Trading House, Exporters registered with Export Promotion Council & Registered Exporters need not furnish any bank guarantee/cash security while executing export bonds. They may furnish sureties only. This is a modification over the previous instruction contained in Board's Circular No. 284/118/96-CX., dated 31-12-96. Presently, specified categories of merchant exporters namely status holders (Super Star Trading House, Star Trading House, Trading House, Export House) exporters registered with any recognized Export Promotion Councils would be exempt from furnishing security and/or surety with the bond executed by them for export of goods without payment of duty unless they have come to the adverse notice of the Department. 3.3 In the case of E.O.Us obtaining indigenous goods without payment of duty under a notification issued under section 5A of the Central Excise Act, 1994, acceptance of suret....

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....y payable on provisional assessment and the probable duty payable if the highest rate / value applicable for such goods is applied. (ii) The amount of the general bond in Form B-2(Surety)/(Security) should be equal to the difference between the duty payable on provisional assessment and the probable duty payable applying the highest rate/value applicable to such goods for a period of 3 months. If the provisional assessment cannot be completed within the 3 months and longer time is required, say a period of one year, in appropriate cases, differential duty likely to arise during such period shall be the basis/ determination of the bond amount. When the security bond is executed, the amount of security will be generally fixed at 25% of the bond amount. However, in appropriate cases, for special reasons to be recorded, the proper officer under rule 7 of the said Rules may order for a higher security amount. In the event of death or insolvency or insufficiency of the surety / security, the proper officer may demand fresh bond. If the security furnished is found to be inadequate, he may demand additional security also. In the case of provisional assessment, if the assessee fails to mak....

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.... cash, Government promissory notes, post office savings, bank deposits, National Savings Certificates, National Defence Bonds or similar realizable Government papers. Promissory Notes and stock Certificates of the Central Government or a State Government shall be accepted subject to the conditions laid down in clause (ii) of Rule 274 of GFR. (ii) Deposit receipt of bank can also be pledged as security for Central Excise - Bonds subject to certain specific conditions under Rule 274(vi) of G.F.R. The conditions inter alia are: (a) The deposit receipt shall be made out in the name of the pledgee or if it is made out in the name of the pledger, the bank shall certify on it that the deposit can be withdrawn only on demand or with the sanction of the pledgee. (b) The depositors shall agree in writing to undertake any risk involved in the investment and make good the depreciation, if any. (c) The depositors shall receive the interest when due, direct from the bank on a letter from the pledgee authorising the bank to pay it to him. (d) The responsibility of the pledgee in connection with the deposit and the interest on it will cease when he issues a final withdrawal order to the depos....