Nepal Restrictions still Linger - Intentional? Will CBEC clarify?

As rightly said, exports to any country except Nepal and Bhutan were eligible for rebate of duty in terms of Rule 18 of the Central Excise Rules, 2002 read with Notification No.19/2004-CE (NT) dated 6.9.2004 (“Notification of 2004”) Exhibit 1. The exception for Nepal and Bhutan was made due to the special treaty entered into between the Government of India and the Governments of Nepal and Bhutan. However, with the revision effected in the said treaty between India and Nepal, the Government sometime in the year 2011, the Government, vide Notification no. 24/2011-CE (NT) dated 5.12.2011, had amended the aforesaid notification of 2004 so as to extend the facility of rebate of duty for exports made to Nepal as well. It is significant to note that the aforesaid notification of 2004 grants rebate of duty on export of all goods including pan masala and chewing tobacco generally except the machine packed pan masala and chewing tobacco. The rebate of duty in respect of machine packed pan masala and chewing tobacco is governed by Rule 14 of the Pan Masala Rules, 2008 and Chewing Tobacco Rules, 2010 read with Notification No. 32/2008-CE (NT), dated 28-08-2008 (Exhibit 3) & Notification No. 22/2010-CE (NT), dated 18-05-2010 respectively. The aforesaid Notifications were also issued, originally, in line with the Notification of 2004 thereby allowed rebate for duty on machine packed pan masala and chewing tobacco on export to any country except Nepal and Bhutan. However, alongside the amendment made in Notification of 2004 to extend the benefit of rebate on exports to Nepal as well, the Government appears to have inadvertently missed out making similar amendment in Notification No. 32/2008-CE (NT), dated 28-08-2008 & Notification No. 22/2010-CE (NT), dated 18-05-2010 respectively.

It is believed that the aforesaid Notification No. 32/2008-CE (NT), dated 28-08-2008 & Notification No. 22/2010-CE (NT), dated 18-05-2010 were required to be amended w.e.f 1.3.2012 so as to extend the facility of rebate of duty on export of machine packed Pan Masala and Chewing Tobacco to Nepal as well. We would like to give following reasons to support our aforesaid understanding;

1. Until 28.2.2012, the export of all goods (including pan masala and chewing tobacco) to Nepal and Bhutan was not eligible for duty exemption/ rebate due to the special trade treaty entered into between India and the said countries. However, with the revision in trade treaty between India and Nepal, the Government, w.e.f 1.3.2012, brought exports to Nepal at par with other countries (except Bhutan). This position was also clarified by the Board vide Circular No. 958/1/2012-CX., dated 13-1-2012. Relevant text of the said circular is reproduced herein below for your kind reference.

“Pursuant to Revised Treaty of Trade between Government of India and Government of Nepal, exports to Nepal have been put at par with exports to other countries (except Bhutan). In this regard, six Notification Nos. 24/2011-Central Excise (N.T.), 26/2011-Central Excise (N.T.), 27/2011-Central Excise (N.T.), 28/2011-Central Excise (N.T.), and 29/2011-Central Excise (N.T.), all dated 5-12-2011 have been issued to amend earlier Notification Nos. 19/2004-Central Excise (N.T.), dated 6-9-2004, 42/2001-Central Excise (N.T.) dated 26-6-2001, 43/2001-C.E. (N.T.), dated 26-6-2001, 44/2001-Central Excise (N.T.), dated 26-6-2001 and 45/2001-Central Excise (N.T.), dated 26-6-2001, respectively. Notification No. 25/2011-Central Excise (N.T.), dated 5-12-2011 has rescinded the earlier Notification No. 20/2004-Central Excise (N.T.), dated 6-9-2004. These amendments abolish the existing DRP for exports to Nepal and puts export to Nepal at par with exports to other countries (except Bhutan). All these notifications have been made effective from 1st March, 2012.”
It is clear from the afore mentioned circular that the Government intended to bring exports to Nepal at par with the all other goods, which undisputedly mean that, w.e.f. 1.3.2013, the Government has extended excise duty exemption on all exports (including pan masala and chewing tobacco) to Nepal without any exception, whatsoever.

2. Secondly, we would like to state that the export of manually packed tins, containing pan masala and chewing tobacco, to Nepal is in any case governed by the normal excise procedure, thus, without dispute, admissible for rebate of duty in terms of Notification No.19/2004-CE (NT) dated 6.9.2004 as amended vide Notification no. 24/2011-CE (NT) dated 5.12.2011 w.e.f 1.3.2012. This position clearly demonstrates the intention of the Government that it is not per se against the grant of duty exemption to product categories namely pan masala and chewing tobacco. Here, it is also pertinent to mention that we are currently exporting pan masala and chewing tobacco (in manually packed tins) without payment of duty under bond without any dispute from the department, whatsoever,


3. The above said intention of the Government is also clearly reflected from the fact that with the onset of compounded levy scheme for machine packed pan masala and chewing tobacco, it simultaneously issued Notifications Notification No. 32/2008-CE (NT), dated 28-08-2008 & Notification No. 22/2010-CE (NT), dated 18-05-2010 respectively to grant rebate of duty on export of such products except exports to Nepal and Bhutan. The exclusion of Nepal and Bhutan, made in the year 2008 and 2010 respectively, for the purpose of rebate in the said notifications was very much in consonance with the general trade policy of the Government of India vis. a vis. the Governments of Nepal and Bhutan. However, w.e.f 1.3.2012, due to the revision in treaty between India and Nepal, the aforesaid notifications, providing rebate procedure for machine packed pan masala and chewing tobacco, were equally entitled to a similar amendment so as to extend the benefit of rebate to exports to Nepal as well.

4. We would further like to bring to your kind notice that the Government, vide Notification No. 25/2011-CE (NT), dated 5.12.2011 (effective from 1.3.3012), has also rescinded Notification No. 20/2004 dated 6.9.2004, which provided special procedure and conditions for exports to Nepal on payment of duty. In other words, w.e.f 1.3.2012, there is absolutely no distinct procedure available for export of any goods to Nepal and the procedures otherwise applicable to other goods equally apply to the product categories in question. Had there been any intention on the part of the Government to disallow rebate of duty on export of machine packed pan masala and chewing tobacco, it could have amended the said Notification No. 20/2004 dated 6.9.2004 (instead of rescinding) to the extent of keeping it alive for the aforesaid product categories.

In view of the above, we believe that the Notification No. 32/2008-CE (NT), dated 28-08-2008 & Notification No. 22/2010-CE (NT), dated 18-05-2010 were also required to be amended w.e.f 1.3.2012 so as to allow rebate of duty for export of Pan Masala and Chewing Tobacco to Nepal.

Suresh Jagirdhar 16/02/2015