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Government of India
Ministry of Finance
Department of Revenue Central
Board of Indirect Taxes & Customs
(Directorate General of Export Promotion)
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Circular No. 03/2021-Customs
New Delhi, dated 03rd February, 2021
To,
All Pr. Chief Commissioners/ Chief
Commissioners of Customs/ Customs (Prev.)
All Pr. Chief Commissioners/ Chief
Commissioners of Central Tax/ Central Excise
All Pr. Commissioners/
Commissioners of Customs/ Customs (Prev.)
All Pr. Commissioners/
Commissioners of Central Tax and Central Excise
Madam/Sir,
Subject: -
Systemic improvements regarding modification in the Bond (B-17) Execution
process –regarding
In case of EOU/EHTP/STP, a single all-purpose bond was
notified vide notification no. 06/98-C.E.(N.T.), dated 02.03.1998. This bond
is called B-17(General Surety/Security). Various instructions through
circulars were issued regarding execution of said B-17 bond. Post GST,
revised new B-17 bond was notified vide notification no. 01/2018-C.E.(N.T.),
dated 05.12.2018. It was also clarified vide circular no. 50/2018-Customs
dated 06.12.2018 that all relevant instructions applicable for the old B-17
bond will be applicable, mutatis mutandis, to the new B-17 bond.
2.
Circular no. 14/98 – Customs dated 10.03.1998 clarified that although the
bond is devised to be executed as surety or security bond, it has also been
decided that only surety bond has to be taken from such units. Subsequently,
circular no. 42/98-Customs dated 19.06.1998 acknowledging the fact that some units were not able to organise prescribed individual/corporate surety
equivalent to the bond amount, allowed such units to execute the bond coupled
with a security amount.
3. CBIC vide circular no. 66/98-Customs dated
15.09.1998 further directed that the solvency of sureties may also be
certified by a Chartered Accountant or the Bankers of the surety. And, since
in the law, a limited company is distinct legal entity and the Members of the
Company, including the Directors are distinct from the company, there should
be no objection to allow the Directors of the EOU, which are Limited
Companies to stand as surety in their personal capacity for the said
companies. In addition, other corporate bodies including Limited Companies
may also stand as surety for the units.
4. Recently, it has come to notice
that the B-17 bond executed by the Proprietor of EOU was issued in violation
of the Circular no. 66/98-Customs dated 15.09.1998. The surety was given by
the Proprietor himself though the same was required to be given by some
independent legal entity other than the EOU firm. This resulted in improper
execution of B-17 Bond resulting in loss of Government revenue.
5. Matter
has been examined in the Board. “Surety” is a person/individual who
undertakes an obligation to pay a sum of money or to perform some duty or
promise for another in the event that person (obligor) fails to act. A sole
Proprietorship firm is not a legal entity distinct from its proprietor.
Hence, question of Proprietor himself standing as surety for his own
Proprietorship firm does not arise. Even the clarification vide
above
referred circular no. 66/98-Customs dated 15.09.1998 clarified this fact that
individuals (Directors) standing as surety in their personal capacity are
distinct legal entities from the limited companies (EOUs) thereby allowing
such Directors of EOU to stand as surety in their personal capacity for said
EOU companies. This clarification nowhere recognizes a Proprietor standing as
surety for his/her own Proprietorship EOU firm. Therefore, there seems to be
no ambiguity with regard to the requirement of surety to be given by some
independent legal entity other than EOU itself irrespective of the
constitution of the EOU firm. However, it is hereby clarified that in case of
B-17 bond executed by EOU/STP/EHTPs in capacity of Proprietorship or
partnership firm, surety cannot be given by Proprietor/ partner himself. Such
sureties must be given by an independent legal entity other than the
Proprietor/ Partner of the concerned Proprietorship/ Partnership EOU firm.
6. All B-17 bonds executed in your jurisdiction may be reviewed in view of
the above clarification.
7. Difficulties, if any, may be brought to the
notice of Board.
8. Hindi version will follow.
Yours faithfully,
-S/d-
F.No. DGEP/EOU/40/2017
(Saroj Kumar Behera)
Additional Director
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