Exporters not desirous of going through the licensing route, an optional facility is given under DEPB. The objective of Duty Entitlement Passbook Scheme is to neutralise the incidence of customs duty on the import content of the export product. The neutralisation shall be provided by way of grant of duty credit against the export product.

Under the DEPB, an exporter may apply for credit, as a specified percentage of FOB value of exports, made in freely convertible currency.The credit shall be available against such export products and at such rates as may be specified by the Director General of Foreign Trade by way of public notices issued in this behalf, for import of raw materials, intermediates, components, parts, packaging material etc.

The holder of DEPB shall have the option to pay additional customs duty, if any, in cash as well.

Validity

The Depb shall be valid for a period of 12 months from the date of issue.

Transferability

The DEPB and / or the items imported against it are freely transferable. The transfer of DEPB shall however be for import at the port specified in the DEPB which shall be the port from where exports have been made. Imports from a port other than the port of export shall be allowed TRA facility as per the terms and conditions of the notification issued by the Deptt. of Revenue.

Applicability of Drawback

The exports made under the DEPB scheme shall not be entitled for drawback. However the additional customs duty paid in cash on inputs under DEPB shall be adjusted as CENVAT credit or Duty Drawback as per rules framed by the Deptt. of Revenue. In cases, where the additional customs duty is adjusted from DEPB, no benefit of CENVAT / Drawback shall be admissible.

Third Party Exports are also admissible for grant of credit under DEPB.

Both  Merchant  Exporters and Manufacturer Exporters are  eligible   for  DEPB.

The expression ‘Merchant Exporter’ has been defined in para 3.33 of the Exim Policy1997-2002 to mean a person engaged in trading activity and exporting or intending to export goods.

The expression ‘Manufacturer Exporter’ has been defined in para 3.32     of  Exim  Policy 1997 - 2002 to  mean  a   person who exports  goods manufactured by him or intends to export such goods.

The expression ‘Manufacture’ has been defined in para 3.31 of the Exim Policy 1997 - 2002  to  mean  to  make,  produce,  fabricate, assemble, process or bring into existence, by hand or by  machine a  new   product having a distinctive name, character or use and  shall  include   processes, such  as  refrigeration,  animal  husbandry,   floriculture,  horticulture, pisciculture, poultry, sericulture, viticulture and mining.

Exports are made in freely convertible currency

The import policy does not define freely convertible currency.  However, the   Exchange  Control  Manual  published  by  RBI   provides  that  the expression ‘permitted  currency’   would  include  any  freely  convertible currency. This item is used in the Manual to indicate a  foreign  currency which is freely convertible i.e. a currency which is permitted by the rules & regulations of the country concerned into major reserve currency like US dollar, Pound  Sterling  and  for   which  a  fairly  active  market  exists  for dealings  against  the  major currencies.

Export made to Russian  Federation  against  non - repatriable US dollars shall not be covered under the category of freely convertible currency and thus   shall  not  be entitled  for DEPB benefit.  Accordingly, exports made under counter trade agreement and export proceeds realised through ‘Escrow account’ in US$ is not entitled for DEPB benefit.

Exports under DEPB

No exports  shall  be  allowed  under  DEPB scheme unless the DEPB rate of export product is notified.

Any item except those appearing in the negative list of imports are allowed for import without payment of basic customs duty, special duty of customs  as  well   as additional duty of customs, against the credit under DEPB.  The   holder of DEPB shall have the option to pay additional customs duty,  if   any  in cash as well.

Negative List of Imports

The Negative List of Imports consists of three parts:

Part I: It specifies the list of prohibited items. These items are not permitted to be imported at all.   In  other  words  this  is  a   list  of  banned  items of Imports.

Part II:It specifies the list of restricted items whose import is permitted either against a licence or in accordance with public notice  issued  in  this  behalf. Condition of import in respect of certain items have also been specified.

Part III: It  specifies  the  list  of  canalised  items and  the  names of  the canalising agencies through which they can be imported.

The credit under DEPB may also be utilised for payment of customs duty on any item imported under freely transferable special import license.

Clearance of goods from customs

The goods already imported/shipped/arrived in advance but  not  cleared from customs may also be cleared against the DEPB issued subsequently.