IRREGULARITIES IN CUSTOM DUTY PAYMENT 1 What is

IRREGULARITIES IN CUSTOM DUTY PAYMENT

1. What is Custom Duty? • Customs duty is levied on goods imported in India. It is levied on Ports. If goods are imported by illegal means and CD is not paid then these goods are called smuggled goods and liable for prosecution. Only permitted goods can be imported into the country. There are restrictions on quantity and value also so that foreign countries should not dump their cheaper goods here and create unhealthy competition to local manufacturers

2. ORDERS. • (i) EXEMPTION FROM CUSTOM DUTY. As per Ministry of Finance (Department of Revenue), N. Delhi Notification No. 39/ 36 circulated under OFB, Kokata letter No. PLY/Custom/E/C dt. 16. 12. 1999, Govt. has allowed Custom Duty exemption on all Defence Stores material of imported nature and all GMs have been advised to obtain Custom Duty Exemption Certificate duly signed by Jt. Secretary (OF), Ministry of Defence.

• (ii) CUSTOM DUTY DRAWBACK. • Para 10. 16. 1 of OFB Material Management Manual : If any of the contracted stores are, on exportation, entitled to a drawback of Custom Duty in respect of themselves or the raw materials involved in their manufacture, the price to be charged by the Seller should be the net price after the deduction of all the entitled Custom Duty drawbacks. • (iii) REVISED PROCEDURE FOR CD EXEMPTION CERTIFICATE. • As per Ministry of Defence, O. F. Cell, New Delhi U. O. No. OFC/PROJ/230/OFB/COORD dated 16. 10. 1997 certification for exemption of Custom Duty will be done by Director (P&C) after the verification and certification by G. M.

3. PAYMENT OF CUSTOM DUTY BY FIRMS. Imported P&M/ Stores are recorded by Custom Authorities in a Bill of Entry (BE) with amount of Custom Duty paid with date and a challan of duty paid is prepared.

4. EXEMPTION FROM CUSTOM DUTY TO FIRMS. If exemption certificate in the name of G. M. of the concerned Factory is preferred by the Firm, Custom Duty is not charged by Custom Authorities and an entry regarding non payment/ exemption of Custom Duty is made in the B. E.

5. REFUND OF CUSTOM DUTY PAID BY FIRM. If the firm has paid Custom Duty, reimbursement of Custom Duty can be claimed on production of original copy of BE and Challan. Generally, this provision is made in the Terms & Conditions of the Supply Order.

6. IRREGULARITIES. • (i) Not obtaining C. D. Exemption Certificate and thereby avoidable payment of Custom Duty. Some Factories do not avail C. D. Exemption on the plea that they also undertake production for Civil Sector. • (ii) Reimbursement of Custom Duty on the basis of duplicate copy of import documents, i. e. , BE and Challan.

7. AUDIT OF CUSTOM DUTY PAYMENT. • (i) If the Factory has not availed C. D. Exemption, the reasons for the same may be examined. If C. D. Exemption has not been availed on the plea that Factory also undertakes production for Civil Sector, Civil Trade Activities of past few years should be reviewed and it should be checked whethere was sufficient load for Civil Trade Activities. It should also be checked whether total quantum of Civil Trade Target can be achieved with existing P&M/ Stores. • (ii) It should be checked that reimbursement of Custom Duty has been made strictly as per Terms & Conditions of the Supply Order. • (iii) It should be checked that reimbursement of Custom Duty is only on production of Original B. E. and Challan.

8. RAISING OF OBJECTION. Objection should be raised on the following points. • (i) If the Factory has not availed C. D. Exemption. The amount paid as Custom Duty should be regarded as loss to the State and Factory Management should be insisted upon to get the same regularized as a loss under sanction of Competent Authority. • (ii) If exemption of C. D. has not been availed on the grounds of Civil Trade Activities being undertaken by the Factory and no sufficient load for Civil Trade is found or the Civil Trade Targets can be achieved with existing capacity.

• (iii) If the purchases for Civil Trade have not been limited to one machine or minimum number of machines required for Civil Trade Load to avail C. D. Exemption for the remaining machines. • (iv) If reimbursement of C. D. has been made against production of duplicate copy of BE & Challan or the import documents enclosed with the bill appear to be forged/ doubtful, it should be objected to. • (v) If there is breach of any of the Terms & Conditions laid down in the Supply Order. • (vi) Any other irregularity coming to notice.

9. FACTORY REPLY & QIAR. • Reply from Factory Management should be watched and the complete objection along with Factory Reply and Audit Remarks may be compiled in QIAR format.

10. SUGGESTIONS. • The imported Machines & Stores being high value items, the amount of Custom Duty is also high. • There is no provision for direct communication between the Ordnance Factories and the Custom Authorities, which gives an opportunity for reimbursement of Custom Duty by the firms on basis of forged documents. • It is, therefore, desirable to incorporate a provision in each Supply Order for imported Machines & Stores that reimbursement of CD would be subject to written confirmation obtained by the Factory Management from the Custom Authorities regarding payment of Custom Duty by the Firm.

THANKS.