One of the highlights of the mini-Exim Policy is the entitlement for duty-free import of fuel under the Duty Free Replenishment Certificate scheme.
The provision is of special interest for exporters who prefer transferable DFRC to non-transferable Advance Licence.
However, the fuel entitlement is subject to strict Actual User conditions. The restriction makes fuel entitlement somewhat less attractive. Moreover, certain other doubts also persist.
The duty-free fuel entitlement under Advance Licence was introduced last year.
Wherever fuel was allowed under the Standard Input Output Norms, the exporters could straightaway claim the entitlement. Wherever the SION did not provide for fuel or wherever the exporters sought Advance License on 'no-norms' basis, duty-free fuel could be claimed as per General Notes for fuel that specified fuel entitlement as a certain part of the FOB value of exports for several broad categories of products.
For example, exporters of bulk drugs could claim duty-free fuel at 5 per cent of the FOB value of exports.
The exporters were also allowed to file 'data sheet' so that SION could be suitably modified for their export products to include fuel. Thus several SION entries were amended last year to include light diesel oil, high speed diesel oil, etc.
The fuel entitlement was, however, restricted only to those who had captive power plant and only such type of fuel was allowed that was specified in the permission for setting up CPP.
The exporter was required to furnish a copy of the permission under Section 44 of the Electricity (Supply) Act, 1948 and a copy of the letter intimating the authority that gave the permission.
A useful provision was that Advance Licence holders could source fuel from domestic producers under Advance Release Orders or Back-to-Back Letters of Credit, instead of importing fuel. The domestic producers could claim deemed export benefits.
Against a disclaimer from domestic producers, the Advance Licence holder could also claim deemed export benefits. The most attractive of the deemed exports benefits was the refund of Terminal Excise Duty on LDO and HSD that could not be claimed as Cenvat Credit.
Many exporters find Advance Licence to be a nuisance because of the strict 'nexus' condition that only those inputs required for use in the manufacture of export products can be imported. So, they prefer DFRC where the 'nexus' condition is restricted to select sensitive items.
, there were demands to allow fuel under DFRC and this year, fuel was allowed under DFRC subject to Actual User condition. The problem, however, is that the deemed exports made against DFRC are not eligible for the refund of Terminal Excise Duty. So, for exporters who use LDO or HSD as fuel, the attraction of the new provision of fuel under DFRC is reduced.
If a conscious decision has been taken to remove the CPP and 'nexus' condition for fuel entitlement under DFRC, it is only logical that the condition is removed for duty-free import of fuel under Advance Licence also.
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