Valuation — VBAL scheme — Over valuation of import items in
the application for Advance license
Circular No. 23/96-Cus., dated 19-4-1996
[From F. No. 605/96-DBK]
Government of India
Ministry of Finance (Department of Revenue)
Central Board of Excise & Customs, New Delhi
Subject : VBAL - Over valuation of import in Advance
Licence application.
Commissioner of Customs, Bombay has informed that in a
number of cases the exporters while applying for Value Based Licences often
state inflated unit prices in the application in order to obtain a licence for a
higher CIF value so long as they are able to meet the value addition prescribed.
The licences so obtained are, subsequently used for importing inputs at
prevailing international prices with the result that quantities far in excess of
requirements for export production, based on which the entitlement to CIF was
calculated, can be imported. Thus, in addition to the flexibility permitted
under the scheme for importing any one or more inputs upto full CIF value of
licence except for sensitive items, the exporters through above modus operandi take
unintended benefits under the Scheme.
In terms of Rule 2(1) of the Foreign Trade (Regulation) 2.
Rules, 1993, “value” has the same meaning assigned to it as under Section 2(41)
of the Customs Act, 1962. Therefore, for the purpose of obtaining Value Based
Advance Licence, the exporters are required to declare prevailing international
prices which correspond to valuation as per Customs Act. Since the Licencing
authorities while issuing VABAL indicate quantity and value of all inputs in the
DEEC Book (though quantity restrictions apply only for sensitive items), the
unit price declared for obtaining licence can be determined from the DEEC Book.
In all such cases where the variation between the price declared to the
Licencing authorities and the price declared at the time of actual import is
above 20%, the importer should be asked to substantiate such valuation and
justify that the CIF price declared in the application before the Licencing
authority were the then prevailing international prices. In case importer is not
able to justify the correctness of prices declared before the Licencing
authorities, the matter should be referred to the concerned Licencing authority
for corrective action being taken at their end. Director General, Foreign Trade
has also been requested to issue suitable instructions in this regard.