No.14/005/176/2005
March 5, 2005

Members of the Council

Dear Members,

We wish to inform you that the Council had been seeking amendments in the Customs Notification No.21/2002 dated 1.3.2002 as far as these relates to 3% duty free scheme for leather garments / leather goods and basic customs duty exemption for effluent treatment machinery & equipments, with a view to remove certain interpretation problems in the notified provisions / conditions. After constant follow-up of these matters, the Department of Revenue, Ministry of Finance has now issued a Notification No.26/2005-Customs dated March 2, 2005 in which the following amendments have been made in the basic Customs Notification No.21/2002 dated 1.3.2002:

1 Import of lining & Interlining materials under duty free scheme available for leather garments.

In the 3% duty free import facility available for manufacturer-exporters of leather garments vide Sl.No.167 & 168 of Customs Notification No.21/2002-Customs dated March 1, 2002 read with Condition No.21, the lining and interlining materials are allowed for duty free import with the condition that the import of these items would not exceed 2% of the previous year’s Fob export value. However, there were some interpretation issues in the past, more particularly as to whether 2% is to be calculated on the previous year’s FOB export value or on the 3% duty free entitlement. The Department of Revenue has now amended the Para (b) of Condition No.21, which clarifies the position that import of lining and interlining materials would be permitted to the extent of to 2% of the previous year’s FOB export value and not on 3% duty free entitlement.

2 Comprehensive coverage of all leather products under 3% duty free import facility

Hitherto, certain leather products such as belts, mobile phone covers, desktop materials and other such leather products were not covered under 3% duty free scheme available for leather products and footwear exporters. This was due to the reason that only the description of certain leather goods were specified in Condition No.21(A).

With a view to make all types of leather products eligible for availing 3% duty free scheme, Para (a) and (b) of the Condition No.21A has now been suitably amended, by virtue of which all leather products are now covered for 3% duty free import facility.

3 Basic Customs Duty exemption on Machinery & Equipments for Effluent Treatment Plants

Machinery & equipments required for Effluent Treatment Plants was exempted from Basic Customs Duty vide Sl.No.463 of Customs Notification No.21/2002-Customs dated March 1, 2002 as amended. However, Para (a) of the Condition No.96 attached to this facility specifies that only manufacturers of leather products including footwear can avail the duty exemption, whereas the tanners / CETP companies were not eligible to avail the duty exemption. Based on the Council’s representation, this anomaly was removed and accordingly, Para (a) of Condition No.96 has now been omitted. As such, the machinery & equipment required for effluent treatment plants in leather industry can now be imported without any Basic Customs Duty but subject to the importer furnishing a certificate from an officer not below the rank of Deputy Secretary to the Government of India in the Department of Industrial Policy and Promotion in the Ministry of Commerce & Industry to the effect that goods being imported are required for effluent treatment plant for leather industry.

A copy of the Customs Notification No.26/2005-Customs dated March 2, 2005 covering all the above three amendments is appended herewith for necessary reference & guidance.

Member-Exporters may kindly note the above, and avail the aforesaid fiscal relief measures.

Thanking you,

Yours faithfully,

K Abdul Sattar Khan
Asst Director