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DUTY Entitlement Passbook Scheme (DEPB) benefits exporters by offsetting the incidence of customs duty on the import content of the export product. On the flip side, however, it has been a subject matter of concern for the Customs Department in view of its misuse. Department of Revenue Intelligence (DRI) and field formations have routinely discovered many cases of over-valuation under the DEPB scheme where unscrupulous exporters deliberately resorted to the artificial inflation of the f.o.b values of their exports to avail the scheme's benefits.

To curb such practice, the Central Board of Excise and Customs (CBEC) brought out circulars laying down that wherever the declared f.o.b value is more than the present market value (PMV) as declared by the exporter or as ascertained by the Customs authorities, the present market value shall be the basis for granting DEPB credit.

The trade has not been happy with these norms. Their grouse is that the above instructions have led to harassment by the officers and impacted on the exports. They represented before the CBEC that each and every export consignment is being subjected to market verification, which results in delay in meeting the export commitments. Export promotion bodies have been contending that high value-added products are bound to have f.o.b values higher than the PMV and therefore, the principle of granting DEPB credit on the PMV in every case is not correct.

The board reviewed the matter in consultation with the Directorate-General of Foreign Trade (DGFT). As a consequence, it has now been decided to modify the current instructions that as a general rule, f.o.b value of the exports shall remain the basis for extending the DEPB credit since f.o.b. value is recognised as the basis of export transactions both in the Exim Policy as well as in the Customs Act, 1962.

However, in cases of specific intelligence that the f.o.b. declared is inflated or there is evidence confirming such over-valuation, the field formations should resort to market verification to ascertain the correct market price of the goods.

In addition to the above, market verification can also be initiated "on receipt of intelligence or where the intelligence is gathered in respect of consignments entered for export to sensitive destinations and/or where the goods are sub-standard and it appears that the acceptance of the declared value would result in accrual of substantial unintended DEPB benefits." But it is stipulated that all such cases should be taken up for investigation only with the express written approval of the Commissioner of Customs.

In those cases where it is conclusively proved through the investigations that the f.o.b value had been artificially inflated/manipulated by the exporter to avail of unintended higher DEPB benefits, the DEPB credit entitlement shall be worked out only on the PMV and not f.o.b value.

The board has mandated that market verifications should not be resorted to in a routine manner and should be undertaken only on the basis of "intelligence and concrete evidence". Also, administrative authorities should ensure that market verifications are expeditiously concluded so that no harassment is caused to the trade nor are any exports held up.

D. Murali

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