ADVANCE LICENCE Vs DUTY DRAWBACK

Quite often, one is faced with a dilemma as to which Scheme to choose. Should I go for Advance Licence (DEEC) Scheme or opt for Duty Drawback is the question that is to be answered. To be honest, many do not even contemplate going in for Duty Drawback, as there is notional loss of interest, because Drawback is obtained after export. On the other hand, Advance Licence Scheme looks attractive, as Raw Materials, Components and Intermediates required for export can be obtained on Pre-export basis at Nett of Duty Prices. Therefore, there is apparently logic in favour of opting for Advance Licence Scheme. But, a prudent practitioner of exim matters should not be weighing the notional loss of interest alone in the choice of scheme. He would have several factors as below before deciding the scheme : 1) Is material sought to be imported and exported figure in SION (Standard InputOutput Norms) List ? 2) Is the Unit eligible for Bank Guarantee exemption in terms of PN 112/2003 ? 3) Is there any proper system and procedure for monitoring Export Obligation ? If the answer to the question no. 1 is negative and application for Advance Licence is to be made on No Norms basis, no doubt Licence is issued by the Regional Licensing Authorities but with a rider that the decision of Advance Licensing Committee (ALC), New Delhi is final as far as InputOutput ration is concerned. Let us say in a hypothetical situation, the ALC is not convinced of the numericals provided by the Unit and decides to reject the case, where do the Unit stand ? In such case, it is better to prefer Duty Drawback. Even if the export item is not figuring in the Duty Drawback schedule, one can always choose Brand Rate fixation of Duty Drawback. Additional advantage in Brand Rate fixation is that, unlike in the past, the whole mechanism of fixing the Rate is decentralized and delegated to the jurisdictional excise authorities. So, before choosing the Scheme, exercise caution and due diligence.