Sanjay Dwivedi, Advocate

IMPORT FOR JOBBING

1.

This note discusses procedure for duty free import of goods for job-work under notification 32/97-Cus. This procedure applies if the substantial quantity of raw materials are supplied by the customer and the importer mainly carries out a labour job for him. The procedure is detailed below.

2.

Notification 32/ 97-Cus dated 01.04.97 exempts imports from Customs Duty and Additional Duty (CVD), if the goods are imported for execution of an export order placed on the importer by the supplier of goods for jobbing. In simple words, the notification visualizes job-work by an Indian importer for a foreign customer. The foreign customer sends raw-materials free [i.e. it is not a purchase by the Indian person]. The Indian person uses the raw-materials for carrying out the desired process and returns the resultant item back to the foreign customer. Obviously, there will be no outflow of foreign exchange against the import.

3.

The arrangement should be clear from the contract between the two parties. Though the import will be free, the foreign supplier would have to declare value of the goods for customs purposes at the same time mentioning in his invoice that the supply is free for carrying out jobbing as per terms of the contract/ purchase order.

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4.

The notification 32/97-Cus, specifies certain conditions to be observed. Main conditions are that:

i.

The jobbing is to take place in accordance with the procedure set out in the Customs (Import of Goods at Concessional Rate of Duty for Manufacture of Excisable Goods) Rules, 1996. A brief note on the procedure is given later in this note.

ii.

The foreign supplier should have placed an export order on us and the imported goods should be used in execution of the export order. It means that our foreign customer and the supplier of the import goods need to be one and the same person.

iii. The imported goods should not be utilised for any other purpose. (Our records should prove this)

iv.

Export must take place within six months of the import. Dy. Commissioner of Customs is empowered to extend this period. But in absence of any guidelines for him, it becomes a pure discretion.

v.

The FOB value of exports must be at least 10% more than CIF value of imports. [In case of textile items mere positive value addition is sufficient].

5.

Procedure under Customs (Import of Goods at Concessional Rate of Duty for Manufacture of Excisable Goods) Rules, 1996: These are general-purpose rules. Many exemption notifications require observance of the procedure under these rules. Usually it is prescribed when the exemption is based on end use of the imported goods. The

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notification 32/ 97-Cus also prescribes observance of procedure under these rules.

The CBEC has issued Circular no. 46/96-Cus dated 30/8/96, explaining the procedure and prescribing certain format for the purpose of the above rules. Following steps are to be taken:

Apply for registration under this rule to Deputy or Assistant Commissioner of C. Excise (send application through Range Office). No format of application is prescribed so a letter requesting for registration will be required. (Draft enclosed). Please note that this registration is separately required even if the manufacturer is already registered under C. Excise Act, 1944.

DC/ AC will issue certificate in form Annexure II of the above Circular.

When we are to import the goods, we will have to Execute a bond (format as per Annexure IV). File application as per Annexure III, with DC/AC C. Excise

The DC/AC of C. Excise will accept the bond and countersign the Annexure III. Two copies of the Annexure III will be issued to us: One copy will be given in sealed cover addressed to AC of Customs. This will be presented to Customs with Bill of Entry for claiming exemption Another copy will be given to us for our records.

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Within two days of receipt of the imported goods we should inform to our Range Office in Annexure V.

We are required to maintain a register showing details of imports and its consumption. Bill of Entry wise details should be available.

Since exports are required to be correlated to the imports, we should declare on the ARE-1 and shipping bills that

Following quantity of materials imported under notification 32/97Cus have been used in the quantity being exported under this document

B/E Date

no. Description of the Quantity used material

Please remember that since the imports are duty free, we would not be entitled to drawback benefits.

6.

What is jobbing: The term jobbing has not been defined in the notification. A question does arise whether the job-worker can add his own material in performing the job-work or not. In the context of another notification, Supreme court has explained the term job-work in Prestige Engineering (India) Ltd. V. CCE, Meerut [1994-(054)-ECR -0519 -SC = 1994-(073)-ELT -0497 SC] as under

The Concise Oxford Dictionary assigns several meanings to the expression 'job' but the relevant meaning having regard to the present

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context is "a piece of work especially one done for hire of profit". The expression 'job work' is assigned the following meaning : "work done and paid for the job". The Notification, it is evident, was conceived in the interest of small manufacturers undertaking job-works. The idea behind the Notification was to help the job-workers-persons who contributed mainly their labour and skill, though done with the help of tools, gadgets or machinery, as the case may be. The Notification was not intended to benefit those who contributed their own material to the articles supplied by the customer and manufactured different goods. We must hasten to add that addition or application of minor items by the job-worker would not detract from the nature and character of his work. For example, a tailor entrusted with a cloth piece and asked to stitch a shirt, a pant or a suit piece may add his own thread, buttons and lining cloth. Similarly, a factory may be supplied the shoe uppers, soles, etc. by the customer and the factory applies its own thread or bonding material and manufactures shoes therefrom and supplies them back to the customer, charging only for its work. The nature of its work does not cease to be job-work.

Thus, the job-worker cannot add substantial quantum of material from his side. Circular No 18/2004-Cus dated 20.02.2004 issued by CBEC relies on the above explanation of the term job-work to construe scope of jobbing under notification 32/1997-Cus.

References: 1. Circular No. 46/96-Cus. dated 30/8/96 describes the procedure 2. Circular No 18/2004-Cus, dated Feb 20, 2004 : explains what is jobbing. It relies on judgment of Hon'ble Supreme Court in Prestige Engineering (India) Ltd. Vs. CCE Meerut [1994 (073) ELT 0497 (S.C.)].

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3. Circular No.26/2001-Cus, dated 24-04-2001: DEPB cannot be availed. It is mandatory to mention in the body of the shipping bill that the corresponding import was under 32/97 alongwith details of materials as imported free of duty under 32/97. Destruction of waste discussed in relation to earlier notification 81/95-Cus

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