Excise Clearance for Exports

Central Excise Duty is an indirect tax levied on goods manufactured in India for home
consumption. When the goods manufactured in India are exported, they are exempt from
excise duty. Detailed procedures have been prescribed to ensure that goods cleared and
got exemption from excise are actually exported out of India.

  FEATURES OF CENTRAL EXCISE 

Central excise duty is a tax levied on the production or manufacture of goods in India,
intended for domestic consumption. Entry 84 of List I of the Seventh Schedule of the
Constitution of India, read with Article 246, empowers the Central Government to levy
duties of excise on tobacco and other goods manufactured or produced in India except
alcoholic liquors for human consumption, opium, narcotics, etc., but including medical
and toilet preparations containing alcohol, opium or narcotics. Power to levy excise duty
on alcoholic liquors, opium and narcotics is vested with the State Governments under
Entry 54 of List III of Seventh Schedule to the Constitution.
The law governing central excise is contained in the Central Excise Act, 1944. Section
3 of the Act, known as the charging section, empowers the central government to levy
and collect a duty of excise on all excisable goods and at the rates set forth in the Central
Excise Tariff Act, 1985.

 C HARGEABILITY OF E XCISE D UTY

By way of summary we may say that excise duty is payable on movable goods
manufactured or produced in India for home consumption provided they are included in
schedules to Central Excise Tariff Act, 1985 and are marketable. A brief description of the
different requirements of the above definition follows.
1. Goods
The word ‘goods’ is not defined in Excise Act. By reference to the definitions in other
enactments like Sale of Goods Act and the description in the Excise Tariff Schedule, it can
be easily inferred that only movable goods are liable to excise. Immovable properties fall
outside its purview.
2. Manufactured or produced
Excise duty can be levied only for manufacture or production. Manufacture involves a
process/processes to achieve this. As a result a new product emerges after manufacture.
Cutting of a log into different size does not result in a new product and hence is not
manufacture.
Production does not involve processing, but may involve spending of human energy
and effort to make an item fit for human consumption.
In certain cases, activities like labelling or re-labelling, packing etc. are done in big
factories. These do not result in manufacture in proper sense, but are included in the
Tariff schedule for the purpose of levy. This process is known as deemed manufacture.
About 30 items are included in the Central Excise Tariff as excisable goods under the
category of deemed manufacture.
3. In India
Manufacture or production should be carried out in India. Excise law does not apply to
these activities carried outside India. According to Customs Act, ‘India’ includes the
territorial waters, i.e., up to 12 nautical miles from the Indian shoreline. Excise duty is
leviable for production within this area. The exclusive economic zone of India extends up
to 200 nautical miles from Indian shoreline. Excise duty is applicable at the designated
areas in the Continental Shelf and Exclusive Economic Zone of India. The off-shore drilling
of oil by ONGC attracts excise duty under this provision.
4. For home consumption
Excise duty is leviable only on goods meant for consumption in India. This means goods
meant for exports are exempted from excise duty. However, to ensure that goods
exempted are actually exported, specific procedures have been laid down to claim the
exemption.
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5. Excisable goods
Not all goods manufactured and consumed in India are subject to excise duty. They
become excisable goods only when they are included in schedules to the Central Excise
Tariff Act, 1985. The schedule classifies the excisable goods under 20 sections and 96
chapters. Each chapter is divided into headings and subheadings. The classification is
based on the Harmonised System of Nomenclature (HSN) developed by the World
Customs Organisation (WCO), an internationally accepted product coding system with
commercial and judicial recognition.
6. Marketable
To be subject to excise duty, the goods manufactured or produced should be marketable.
There must exist a wholesale market for the product. The goods should be something that
can ordinarily come to the market to be bought and sold. The marketable good is
excisable even if it is used by the manufacturer as intermediary for final products (captive
consumption). For example, yarn manufactured by a composite mill and used by it for
manufacturing cotton attracts excise duty.

 T YPES OF E XCISE D UTY

The following four types of duties fall under the umbrella of excise duties.
1. Cenvat
Central value added tax (Cenvat) is leviable on all goods that are included in the first
schedule to the Central Excise Tariff Act. Cenvat was earlier known as basic excise duty.
Cenvat may be levied on (a) ad valorem basis, or (b) specific rate basis.
When the duty is ad valorem, it is levied at a specific percentage on the value of the
excisable goods. Currently a uniform rate of 16% is prescribed for all excisable goods.
Duty at specific rate is levied on certain goods only. They are based on physical
measurements—the unit or weight or volume of the excisable good. For instance the duty
may be Rs. 100 per kg of the product.
2. Special excise duty
Special excise duty is levied on few items that are included in second schedule to Central
Excise Tariff Act. Items like pan masala, motor vehicles, aerated soft drinks attract special
excise duty. If a commodity attracts Cenvat at 16% and special excise duty at 16%, the
total duty payable is 32%.
3. Additional excise duty
Additional excise duty is levied either to curb the consumption of a commodity or to
generate revenue. It is levied on specific products and commodities and authorised by
separate statutes. Coffee, medicinal toilet preparations and textile articles are examples
of goods on which additional excise duty is collected.
4. Cesses
Cess is a tax imposed on specific class of goods for a special purpose. Cess is collected
separately and should be used by the authorities for specified purposes only. Cess is
charged on few items like rubber, tea and textile machinery. With effect from July 2004,
an education cess at 2% of the excise duty has been imposed.

 V ALUATION FOR E XCISE

Where the excise duty is payable ad valorem, it is payable on the value of the goods
manufactured or produced. The value of the goods for the purpose of excise duty is
determined on any of the following bases as may be appropriate:
(a) Tariff value
(b) Maximum retail price
(c) Transaction value.
1. Tariff value
For certain goods tariff values have been fixed as per Sec. 3(2) of Central Excise Act. The
tariff value is fixed by the government from time to time. For instance, tariff value for pan
masala packed in retail packs of less than 10 gram has been fixed at Rs.

2. Maximum retail price

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Where the central government has made it statutory to declare the retail sale price on the
package of any product, and that product is excisable, then the excise duty is payable on
the basis of the maximum retain price so declared less abatement as announced by the
government. The abatement is declared taking into account the amount of excise duty,
sales tax and other taxes suffered by the good.
3. Transaction value
Where the good is not covered by the previous two provisions, the duty is payable on the
transaction value. Transaction value is the invoice value plus any amount the buyer is
liable to [pay on behalf of the assessee by reason of or in connection with the sale.
Examples of such payments are materials supplied by the buyer, advertising, marketing
organisation expenses, storage, outward handling, warranties and commission borne by
the buyer. Assessment on the basis of transaction value is subject to fulfilment of the
following conditions:
(a) The goods are sold for delivery at the time and at the place of removal. Place of
removal is the factory or warehouse registered under excise. The goods are not
sold at the time and place of removal when they are captively consumed or
distributed as free sample or transferred to depots or branches.
(b) The buyer and assessee are not related. They are related when:
(i) they are inter-connected undertaking;
(ii) they are relatives;
(iii) the buyer is a distributor of the assessee;
(iv) they have mutual interest in the business of the other.
(c) Price is the sole consideration for the same. Any other consideration, in cash or
kind, has to be added back. The transaction should be at arm’s length and on
principal to principal basis.
When any of the above conditions is not fulfilled, the valuation has to be done as per
the Central Excise Valuation Rules. Specific provisions have been made to take care of
each deviation from the requirement.

 R EGISTRATION
The following two categories of persons are required to get registered with the Central
Excise authorities under Section 6 of the Central Excise Act:
(i) Producers or manufacturers or persons engaged in any process of production or
manufacture of excisable goods.
(ii) Wholesale traders, commission agents, brokers, private warehouses who may
deal in excisable goods.
Further under Rule 9 of the Central Excise Rules, 2002, every person, who otherwise
use excisable goods should also get registered. Exporters who use excisable goods should
also get registered to avail the duty exemption or rebate.
Exemption. Units in export processing zones, manufacturers of excisable goods
chargeable to nil excise duty, and small scale industries (with clearances less than “Rs.
100 lakhs) are exempt from excise duty registration requirements.
• Procedure
The application for registration in Form A! in duplication along with (i) sketch of the
boundaries of the factory, (ii) write up on the manufacturing process, (iii) partnership
deed/board resolution/ memorandum of association/power of attorney, (iv) attested copy
of PAN allotment letter, and (v) tariff classification of al excisable goods dealt with. The
registration certificate in Form RC will be issued within seven days. The certificate or a
copy should be exhibited in a conspicuous part of the premises. The registration
certificate issued has permanent status and is valid till suspended or removed by the
authority concerned or surrendered by the person concerned.

 R EMOVAL P ROCEDURES
The excisable goods can be removed from the factory/warehouse only after the excise
duty due on them is paid. The presence of the excise officials in the factory to permit the
removal is required in case of cigarettes. For all other goods their presence is not
necessary. The goods can be removed by the manufacturer under invoice system on self-
removal basis.
For the purpose of excise, serially numbered invoices are prepared in triplicate to be
used as under:
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(a) Original for buyer;

(d) Duplicate for the transporter; and
(e) Triplicate for assessee.
Where more than three copies are prepared the extra copies should be marked.
For the goods removed during a month, the excise duty should be paid on or before
5th of the next month. The duty should be paid by using TR-6 challan at the designated
banks.
The assessee is expected to maintain a Daily Stock Account in which the details of the
manufacture of excisable goods and their removal are recorded on a daily basis. Separate
record should be maintained for individual item of excisable goods.
The duty can be paid in cash or by Cenvat credit. The details of excise duty due and
paid should be recorded in Personal Ledger Account. Duty paid through TR-6 challan and
Cenvat credit are credits in the account. The duty due on the goods removed is debit to
the account.
A monthly return in Form ER1 should be submitted by 10th of every month to the
Superintendent of Central Excise containing details of production, removal etc. during the
previous month. Copies of PLA and TR-6 challans should accompany the return.

 C ENVAT SCHEME
The Central Value Added Tax (Cenvat) is intended to avoid the cascading effect of the
excise duty paid at different stages of production. Cascading effect refers to the fact that
the excise duty is levied at each stage on the cost and therefore the total burden is very
high. For instance, let the excise duty levied at 10%. A component costing Rs. 100 is
purchased by the manufacturer. The cost including excise duty is Rs. 110. The
manufacturer sells the final product for Rs. 200. The excise duty payable is Rs. 20 making
the cost of the product Rs. 220 to the buyer.
Cenvat allows the excise duty paid at the previous stage to be refunded when the
duty at the final stage is paid. In our example, the manufacturer knows that Rs. 10 of
excise suffered by the input is refundable to him. The actual cost of the input to him is Rs.
100. He can price his final produce at Rs. 190, which attracts excise duty of Rs. 19. The
final cost of the product to the customer is Rs. 209 as against Rs. 220 calculated earlier.
In practice, the Cenvat paid on the input is not refunded. Instead it is given as a credit
to the manufacturer who can use such credit to adjust towards the Cenvat due on the
final product.
Cenvat credit is available to manufacturers/producers, but not to traders. The credit is
available in respect of inputs as well as capital goods used in the manufacture of the final
product.
Credit can be taken for the following duties: (i) Cenvat, (ii) special excise duty, (iii)
additional excise duty, (iv) national calamity contingency duty, and (v) countervailing
duty (under Customs Act). In case of inputs the credit can be taken immediately on
receipt of the goods. For capital goods immediate credit can be taken up to 50% and the
balance in subsequent years.
Generally Cenvat credit is not permitted when the final product is exempt from duty.

  EXCISE CLEARANCE FOR EXPORTS 

Export goods are exempt from excise duty. The exporter can opt for either:
(a) export without payment of duty; or
(b) export under claim of rebate, after payment of the duty.
Excise duty on inputs used in the manufacture of finished goods for exports is also
exempted. Here too, the exporter can opt for:
(a) procuring the inputs without paying excise; or
(b) paying duty on inputs and claiming rebate on export of finished goods.
Export of finished goods and procurement of inputs for export goods under rebate is
governed by rule 18 of the Central Excise Rules, 2002. Claim of rebate of excise duty
after payment, both on finished goods and on inputs, is covered by rule 19 of the said
Rules.

 E XPORT W ITHOUT P AYMENT OF D UTY

The exporter can opt for removal of goods from the factory and export them without
payment of duty on the finished goods.
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• Conditions
The permission is granted on the following conditions:
(i) The cleared goods are exported within six months from the date of clearance
from the factory/warehouse.
(ii) When the export is from a place other than registered factory/warehouse, the
excisable goods are in original packed condition and identifiable as to their
origin.
(iii) If the exporter is the manufacturer of the goods exported, he furnishes annual
letter of undertaking to the Deputy/Assistant Commissioner of Central Excise
that the goods removed will be exporter within the prescribed time and proof of
export will be furnished by him.
(iv) If the exporter is a merchant exporter (and therefore not an assessee under
excise duty), he furnishes to the Deputy/Assistant Commissioner of Central
Excise or the Maritime Commissioner1 the general bond in form B-1 and obtains
from the excise authority certificate in form CT-1. The bond will be for a sum at
least equal to the duty estimated on the exports to be made. CT-1 will be issued
in multiples of 25 copies covering a period of one to three months. The
manufacturer exporter can also opt for issuing a bond instead of furnishing
annual letter of undertaking.
(v) If the export does not materialise within six months from date of clearance,
within further 15 days, the exporter should make self assessment and deposit
the excise duty and interest on the goods cleared.
• Documentation
A manufacturer exporter should prepare (a) ARE1 form and (b) invoice. Entries should be
made in the Daily Stock Account. In addition, a merchant exporter should submit CT-1
certificate completing Part II.
ARE 1 Form
The application for removal of excisable goods should be made in form ARE !. The form is
required to be prepared in quadruplicate. Optionally, it can be prepared in quintuplicate,
the fifth copy to be used for claiming export incentives, other than excise rebate.
The copies should follow the colour pattern as under:
(i) Original - White
(ii) Duplicate - Buff
(iii) Triplicate - Pink
(iv) Quadruplicate - Green
(v) Quintuplicate - Blue
It is sufficient if the copies of the form contain a colour band on the top or right hand
corner in accordance with the above colour scheme. Thus the forms can be printed on
different colour papers as indicated above or they can be printed on white plain/computer
stationery and colour band affixed thereon.
Where the removal of goods is under the bond executed by the merchant exporter,
ARE1 form should be signed both by the manufacturer and merchant exporter.
Invoice
The manufacturer should prepare an invoice in triplicate with the legend “FOR EXPORT
WITHOUT PAYMENT OF DUTY” prominently mentioned on the top. The invoice should
contain details of (a) registration number, (b) description and classification of goods, (c)
time and date of removal, (d) quantity and value of goods, (e) rate of duty, and (f) duty
payable on the goods (though exempted). Other details like name and address of the
assessee and consignee and mode of transport may also be included, although these are
not mandatory. Each invoice is serially numbered.
The assessee may maintain only one invoice book both for removal for home
consumption and for exports. Or, he may maintain a separate book for exports with a
distinct number series.
Daily Stock Account
Duty assessed on the basis of transfer value should be determined on the ARE 1 and
invoice and recorded in the Daily Stock Account as “duty foregone on account of export

1
Maritime Commissioner means the Commissioner of Central Excise under whose jurisdiction
one or more of the port, airport, land customs station or post office of exportation is located.
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under rule 19”. This value may be same as or differ from the FOB value indicated by the
shipper on the shipping bill.
Even when the export is made by a merchant exporter, the manufacturer should
record the clearance in his Daily Stock Account indicating, inter alia, the invoice
number/date, ARE 1 number/date and duty payable, but foregone.
CT-1 Certificate
Where the export is by a merchant exporter, he should utilise one of the CT-1 certificates
received by him on executing the bond and complete its Part II. Here he provides the
description of goods for procurement from a particular factory or warehouse, provisional
value of procurement and provisional duty involved.
The merchant exporter maintains a “Running Bond Account” which is credited with
the amount for which the bond is executed. On export and submission of CT-1 certificate,
the duty element as determined above will be debited provisionally to be converted into
final debit within seven days from the date of removal of goods. At the time of debit the
exporter should ensure that the debit in the Running Bond Account does not exceed the
credit therein.
• Removal of Goods at place of despatch
The exporter has two options for removal of goods from the factory/warehouse. The
goods can be removed:
(a) With examination and sealing of goods by a Central Excise Officer; or
(f) Under self sealing and certification by the manufacturer.
Removal under sealing by Central Excise Officer
The following procedure is followed for removal of goods for exports under supervision of
Central Excise Officer:
2. The exporter should request the Superintendent or Inspector of Central Excise (CE
Officer) concerned for examination and sealing at the place of despatch 24 hours in
advance about the intended time of removal.
1. The CE Officer will verify the identity of goods, check whether the duty self
assessed is appropriate and that the particulars of the duty payable has been
recorded in the Daily Stock Account.
2. Where necessary the CE Officer may draw three samples. Two sets of the samples,
duty sealed, will be handed over to the exporter for delivery to the Customs Officer
at the point of export. The third set of sample is retained by the CE Officer for his
record.
3. The CE Officer will then seal each package or container ensuring that the goods
cannot be tampered with after the examination.
4. The CE Officer will endorse and sign and stamp each copy of ARE 1 in token of
having done such examination.
5. Copies of ARE 1 form are then distributed as under:
(a) original, duplicate and quintuplicate copies are returned to the exporter;
(b) triplicate copy is sent to the bond sanctioning authority; and
(c) quadruplicate copy is retained for official records.
Removal under self sealing by Manufacturer
Removal of goods for export without examination by a CE Officer is possible for exports
by manufacturer exporter as well as by merchant exporter. In both cases, the
manufacturer of the export goods or owner of the warehouse should take the
responsibility of sealing and certification. The procedure prescribed in this respect is as
follows:
1. The owner, the working partner, the Managing Director, or the Company Secretary,
of the manufacturing unit of the goods, or the owner of the warehouse or a person
duty authorised by such owner, working partner or the Board of Directors of such
company should certify on all the copies of ARE-1 that the goods have been sealed
in his presence.
2. The exporter should send the original, duplicate and quintuplicate copies of ARE-1
along with the goods to the place of export.
3. He should forward the triplicate and quadruplicate copies of ARE-1 to the CE Officer
within 24 hours of removal of goods.
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4. The CE Officer will verify the particulars of the assessment, the correctness of duty,
its entry in the Daily Stock Account and invoice. He will then endorse the ARE-1 for
correctness and affix his signature.
5. The CE Officer will forward the triplicate copy of ARE-1 to the bond accepting
authority or the authority to whom letter of undertaking has been furnished, either
by post or by handing over to the exporter in a tamper proof sealed cover. The
quadruplicate copy is retained for office records.
• Clearance at port of export
The procedure for clearance of the goods at the port of export is similar for those
removed with examination by the CE Officer and for those under self certification by the
manufacturer. The only difference is the extent of inspection of the goods by the
Customs offices at the port before they are allowed for export.
1. At the port of export, the exporter will present the goods to the customs authorities
along with the original, duplicate and quintuplicate copies of ARE 1 form.
2. The goods will be examined by the customs that they are the same that were cleared
under ARE 1.
3. Where the goods were sealed by the CE Officer at the place of despatch, the
Customs Officer will inspect the goods with reference to the declarations in ARE 1
and satisfy that the seals are intact. These goods are normally not opened at the
port unless the seals are found to be tampered with or there is specific intelligence.
4. Where the goods were cleared under self certification, certain percentage of
packages/containers will be opened by the Customs Officer at the port on the basis
of examination norms.
5. If sample drawn by the CE Officer at the time of removal is provided along with the
goods, the Customs Officer will check the export goods with the sample before
allowing export.
6. The Customs Officer verifies that the details of goods are correct and the goods are
exportable in accordance with the laws for the time being in force, and will allow
the export thereof.
7. The Customs Officer will thereafter certify on the copies of the ARE 1 that the goods
have been duty exported.
8. Duly certified ARE 1 forms are dealt with as under:
(d) original and quintuplicate copies are returned to the exporter;
(e) duplicate is forwarded, either by post or by handing over to the exporter in a
tamper proof sealed cover to the CE Officer with whom the exporter has
furnished a bond or a letter of undertaking.
9. The exporter can use the quintuplicate copy of the ARE 1 for claiming any export
incentive other than excise rebate.
• Proof of Export
Subsequent to export, the exporter has obligation to provide the CE Officer with proof of
export.
1. As a proof of export, the exporter should submit a monthly statement along with
the original copies of ARE 1 form carrying certification of export by Customs Officer
and self attested photo copy of bill of lading and shipping bill.
2. In case of non export within six months or discrepancy, the exporter should deposit
the excise duty along with interest within 15 days of the expiry of the stipulated
period.

 E XPORT U NDER C LAIM OF R EBATE

The exporter can pay the excise duty on the export goods and claim later rebate of the
duty. This facility ca be availed both by manufacturer exporters and merchant exporters.
The world rebate is used in preference to refund because the repayment of duty may be
made to a person who has not originally paid the duty. This is the case when a merchant
exporter claims the rebate.
Excise duty rebate is available for exports to all countries except Nepal. For exports to
Nepal rebate is paid to the Government of Nepal and not to the exporter.
• Conditions
The facility is available subject to the following conditions:
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3. The excisable goods should be exported after payment of the duty directly from a
factory or warehouse except as otherwise permitted by the Central Board of Excise
and Customs by a general or special order. “Payment is duty” is satisfied once the
exporter records the details of removal in the Daily Stock Account, whereas the
duty is paid on fortnightly or monthly basis. The payment can be through cash or
PLA or Cenvat credit.
4. The excisable goods should be exported within 6 months from the date of removal or
such extended period as may be permitted by the Commissioner of Central Excise in
individual case.
5. The market price of the excisable goods at the time of exportation should not be
less than the amount of rebate of duty claimed.
6. Amount of rebate claims should be a minimum of Rs. 500.
7. The export of the excisable goods should not be prohibited under any law in force.
• Procedure for Clearance
The procedure for removal of goods at the factory or warehouse and clearance at the port
of export are the same as described under removal without payment of duty. Since the
goods are exported after payment of duty no execution of bond or letter of undertaking is
required.
• Claim of Rebate
The procedure for claim of rebate of excise after export is as follows:
8. The claim should be made within one year from the date of export.
9. Application for rebate should be made to the Deputy/Assistant Commissioner of
Central Excise or Maritime Commissioner. The exporter should indicate on the ARE-
1, at the time of export of goods, the authority with which he intends to file claim of
rebate.
10. There is no specific format of claim of rebate. The application can be made on the
letterhead of the exporter containing details of the ARE-1 numbers and dates,
corresponding invoice numbers and dates, amount of rebate on each ARE-1 and its
calculations. The application should be accompanied by:
(i) Original copy of ARE-1;
(ii) Invoice;
(iii) Self attested copy of shipping bill; and
(iv) Self attested copy of bill of lading.
11. The rebate sanctioning authority will compare the ARE-1 received from the exporter
with the duplicate received from customs to ensure that goods were actually
exported, and with the triplicate received from the CE Officer to ensure that the
goods are duty paid. On satisfaction, he will sanction the rebate in part or full.
12. In case of any reduction or rejection of the claim, an opportunity will be provided to
the exporter to explain the case and a reasoned order will be issued.
13. The rebate sanctioning authority should point out deficiency, if any, in the claim
within 15 days and give further 15 days for exporter to reply. The claim should be
disposed of within 2 months.

 E XPORT W ITH D UTY U NPAID ON INPUTS

The exporter can acquire as inputs excisable goods without such inputs suffering excise
duty. The export of finished goods will also be exempted from excise duty. This facility is
available even when the finished goods exported are not excisable.
This facility is not available:
(a) for export of finished goods under claim of Duty Drawback;
(b) for exports made in discharge of export obligation under advance licenses;
(c) where Cenvat credit is availed for inputs;
(d) for merchant exporters.
• Conditions
The facility is available subject to the following conditions:
(i) The manufacturer should register himself under rule 9 of the Central Excise
Rules, 2001; and
(ii) The procedure specified in the Central Excise (Removal of Goods at Concessional
Rate of Duty for Manufacture of Excisable Goods) Rules, 2001 should be
followed, mutatis mutandis.
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• Procurement of inputs
The procedure for procurement of input for manufacture of export goods without payment
of duty is governed by the provisions of the Central Excise (Removal of Goods at
Concessional Rate of Duty for Manufacture of Excisable Goods) Rules, 2001.
14. The manufacturer should make an application in quadruplicate in Form at Annexure
I to the Rules, to the Assistant/Deputy Commissioner of Central Excise. Separate
application should be made in respect of each supplier of subject goods.
15. The manufacturer should execute a general bond or security for such amount as
determined by the Assistant/Deputy Commissioner of Central Excise.
16. The application will be countersigned by the Assistant/Deputy Commissioner of
Central Excise who will certify therein that the manufacturer had executed a bond
to the satisfaction of the authority in respect of the end use of the subject goods
and indicate the particulars of such bond.
17. Of the copies of the application certified by the Assistant/Deputy Commissioner of
Central Excise, one will be forwarded to the jurisdictional range superintendent of
the supplier, two copies handed over to the manufacturer and one copy retained for
office records.
18. The manufacturer should forward a copy of the approved application to the
supplier. On the basis of the application, the supplier can avail the benefit of
exemption notification and arrange supply of the goods to the manufacturer.
19. The supplier should record on the application, the removal details such as the
number and date invoice, description, quantity and value of subject goods and the
amount of excise duty exempted.
• Manufacture in bond
The conditions imposed on manufacture for export of finished goods with duty exempted
inputs are as follows:
20. The manufacturer should file a declaration about the ratio of inputs in the finished
goods and the rate of duty payable on excisable goods to be procured without
payment of duty. Where there is more than one export product, separate statement
of the input-output ratio may be furnished for each export product.
21. The Assistant/Deputy Commissioner of Central Excise will verify the correctness of
the ratio of input and output mentioned in the declaration, if necessary by calling
for samples of finished goods, or by inspecting such goods in the factory of
manufacture.
22. If, after such verification, Assistant/Deputy Commissioner of Central Excise is also
satisfied that there is no likelihood of evasion of duty, he will grant permission to
the applicant for manufacture and export of finished goods, and countersign the
application for procurement of the material free of duty, as mentioned earlier.
23. Input-output norms notified under the Foreign Trade Policy may be accepted by the
Department unless there are specific reasons for variation, or where some of the
inputs are covered by such norms.
• Procedure for Export
The procedure for removal of finished goods from the factory and their clearance at the
port of export is as follows:
24. Form ARE-2 should be used as application for removal and export of goods. The
procedure prescribed for ARE-1 application relating to removals, distribution of
documents at the place of despatch and place of export, acceptance of proof of
exports etc., mutatis mutandis, applies to ARE-2 also.
25. Only a manufacturer exporter can claim benefit of input stage rebate. This is not
extended to merchant exporters.
26. Samples will be drawn by the Customs Officers for testing at the place of export in
case the export goods are sensitive nature considering that they are made from
materials bearing high central excise duty.

 E XPORT UNDER R EBATE OF D UTY ON INPUTS

The exporter can opt to acquire the inputs paying the excise duty and claim rebate of
duty on the inputs as well as the finished goods on export. This facility is not available for
exports to Nepal and Bhutan. The rebate on input is available for all finished goods,
whether excisable or not.
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• Where not available

The benefit of input stage rebate cannot be claimed in any of the following situations:
(i) Finished goods are exported under claim of duty drawback;
(ii) Finished goods are exported in discharge of export obligations under an advance
licence;
(iii) Facility of input stage credit is availed under Cenvat Credit Rules;
(iv) The market price of the goods is less than the rebate amount;
(v) The amount of rebate available is less than Rs. 500.
• Procurement of Material
Since there are no claim of removal of goods without payment of duty is made, the
normal procedure for acquiring inputs can be followed here. The manufacturer can obtain
the inputs directly from a registered factory accompanied by invoice under Central Excise
Rules or from dealers registered for the purpose of Cenvat Credit Rules under invoices
issued by such dealers.
• Manufacture in Bond
The procedure is similar to the one described under manufacturing with inputs procured
without payment of excise.
• Export and Claim of Rebate
The procedure for clearance of export is similar to the one described earlier under
manufacturing with inputs procured without payment of excise. Export will be effected on
ARE-2. The claim for rebate of duty should be lodged with the Deputy/Assistant
Commissioner of Central Excise having jurisdiction over the place of manufacture. The
following documents should be presented with the claim:
(i) Original copy of the ARE-2 duly endorsed by the Customs Officer:
(ii) Self-attested copy of Shipping Bill (Export Promotion Copy);
(iii) Self-attested copy of Bill of Lading/Air Waybill;
(iv) Duplicate copy of the Central Excise Invoice under which the Central Excise duty
was paid/ accounted as payable on goods cleared for export. [where rebate of
finished goods are also being claimed];
(v) Duplicate copy of the ARE-2 received from the customs officer in a sealed cover
(if obtained).