The Hindu Business Line : Non-receipt of benefits — Sanitary castings exporters appeal to Commerce Ministry

EXPORTERS of sanitary castings have made fresh representations to the Commerce Ministry on the issue of non-receipt of benefits following the conversion of free shipping bills into DEPB (Duty Entitlement Passbook) bills, particularly for shipments effected between November 1, 1997, and August 31, 2001.

While the trade says that their demands are legitimate and should be considered, the Department of Revenue has not reconciled to this view.

Ministry of Commerce sources point out that DEPB benefits with retrospective effect, much after the exports have been carried out, are unlikely to be considered favourably.

Mr K.T. Chacko, Director General of Foreign Trade (DGFT), told exporters here recently that conversion to DEPB bills was already a sensitive issue with the Revenue Department, and the matter had been thoroughly discussed.

Informed sources in the engineering exports sector, citing an EEPC (Engineering Export Promotion Council) circular of October 31, 1997, said sanitary castings exporters were actually prevented from filing DEPB/shipping bills, as countervailing duty (CVD) orders were invoked by the US Commerce Department at that time, and the case was fought in the US court.

The CVD order was subsequently revoked from January 1, 2000. And on June 20, 2001, the US court dismissed the US producers' appeal of the injury phase of the Sunset Review, which was promptly intimated by EEPC to exporters concerned and the Department of Commerce.

Following this, the sanitary castings exporters started claiming DEPB from September 1, 2001. It is pointed out that for the period November 1, 1997 to August 31, 2001, sanitary castings exporters had filed free shipping bills under the instructions of EEPC.

Trade sources point out that even the Department of Revenue circulars of 2003 and 2004 had clearly indicated that conversion of these bills may be allowed in such cases where ample evidence is provided that the exporter was prevented from filing the DEPB shipping bill either by the DGFT/Ministry of Commerce or the Customs Authority. It is suggested that since no case of countervailibility was found, as admitted by the US courts, the sanitary castings exporters should now be rightly allowed the benefits of the DEPB scheme for the interim period (November 1, 1997 to August 31, 2001), during which CVD orders were being contested in the US courts.

Exporters say that the said EEPC circulars were binding on them and the council being an autonomous body under the ministry, there was sufficient proof to substantiate that exporters were denied the DEPB benefits.

Meanwhile, exporters of sanitary castings, manhole covers and cast iron products have sought enhancement of DEPB rates, which have been slashed from a high of 9 per cent to 3 per cent (for all three products), on the ground that import duty on major inputs has been drastically reduced from 15 per cent to 5 per cent for pig iron, and from 5 per cent to 0 per cent for scrap.

Exporters say that during 2003-04, when duty for pig iron and scrap was 20 per cent and 5 per cent respectively, for the actual user, the DEPB rates were only around 9 per cent. It is felt that the correct neutralisation rate warranted a much higher DEPB rate, taking into account the value addition at 75 per cent (for cast iron products).

Exporters have urged DGFT to re-fix the value addition norms and enhance DEPB rates realistically to 5 per cent to the extent of duties suffered on major inputs such as pig iron.

It is suggested that duties on other inputs such as met coke, refractory, paint and packing materials should also be factored in. It is stated that all long-term contracts by castings exporters are executed after taking into account DEPB benefits.