CHAPTER 12
MINISTRY OF HEALTH AND FAMILY WELFARE

The Company suffered a loss of Rs.35.40 lakh due to non-availing of customs duty benefit under the Exim Policy.

The Government of India (GOI) introduced a new scheme viz. “Duty Entitlement Pass Book” (DEPB) with effect from 1 April 1997 in the Exim Policy 1997-2002. Under the scheme, an exporter-company was eligible to claim duty credit as a specified percentage of the ‘Free on Board’ value of the exports made by it. The imports under DEPB could be cleared without payment of basic customs duty against the credit thus availed within a period of 12 months. The DEPB was transferable to third parties on post-export basis in case the exporter had no matching imports during the validity period to avail the credit.

DEPB credits amounting to Rs.42.79 lakh were received by Hindustan Latex Limited (Company) in 1998-99 against export realisations. The Marketing Division of the Company sent the same to the Company’s production units for availing duty free import of raw materials. Out of this, the Company was left with unutilised/unsold licences aggregating to Rs.35.40 lakh (October 1998 - January 2000) at the end of the licence period thereby resulting in loss of revenue for an equal sum on non-realisation of their sale proceeds. A test check revealed the following irregularities:

The DEPB had validity till 12 January 2000. It was neither put to use nor attempts were made to sell it until 3 January 2000. When it was finally put on sale a week ahead of its validity, there were no takers and therefore, the Company could salvage it for Rs.2.73 lakh only, resulting in loss of Rs.7.38 lakh. The Company did not offer valid reasons for holding the DEPB for 11 months and 3 weeks.

The DEPB had validity till 30 October 1999. DEPB credit was initially sold to M/s. Shangrilla Apparels Limited, Mumbai on 23 September 1999 hardly a month ahead of its expiry. Since a new customs attestation procedure was introduced during that period, the buyer returned the licence for the customs attestation on 5 October 1999. This was sent for customs attestation on 8 October 1999. By the time the customs attestation was received and forwarded to the buyer, the licence had expired. Hence the Company refunded money realised earlier to the buyer, entailing loss to the former.

This licence was valid until 6 November 1999. It was utilised to the extent of Rs.3.50 lakh only. The licence for the remaining value, Rs.22.68 lakh was kept with the clearing agent in anticipation of further imports. The Company got it back on 24 February 2000 after its expiry (6 November 1999) resulting in loss of Rs.22.68 lakh owing to poor monitoring.

For similar reasons, six other DEPBs aggregating Rs.2.67 lakh also remained unutilised/under utilised, since the value of the DEPBs depleted and could not be sold as there were no takers.

While confirming the above, the Company admitted (May 2002) that there were lapses at different levels in periodic monitoring of utilisation and disposal of DEPB credits earned. The Company agreed to improve the system by which it would be possible to review the status of DEPB licence in future on a monthly basis.

The matter was referred to Ministry in June 2002; their reply was awaited (September 2002).