TMI BlogBONDS AND LETTERS OF UNDERTAKINGX X X X Extracts X X X X X X X X Extracts X X X X ..... s surety to guarantee the performance on the part of obligor. The surety should be for the full value of the bond and the person standing as surety should be solvent to the extent of the bond amount. Under the Contracts Act, the liability of the surety is co-extensive with that of the principal debtor and hence the department is at liberty to enforce the recovery of the dues either from the obligor or from the surety. 2.2 The following are the types of bonds, which are presently in vogue: (a) B1 - General Bond with surety/ security for removal for export of excisable goods without payment of duty for export. The bond is to be filed by the exporters for export of goods without payment of duty. The bond amount should be sufficient to cover the duty liability. The person standing as surety should be solvent to the full amount covered. The security should normally be limited to the 25% of bond amount. Fixation of amount of surety! security is as per Board's Circular No. 284/118/96-CX., dated 31-12-96 However, certain categories of exporters, namely, recognized export houses, holders of RCMC memberships are not required to furnish any bank guarantee/ cash security while exe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... be signed by the obligor or by the authorised agent. The surety should be for the full amount and the person standing as surety should be solvent to the extent of the amount covered. The security should normally be limited to 25% of the bond amount. 3.2 In case of exporters, certain specific categories i.e. Super Star Trading House, Star Trading House, Exporters registered with Export Promotion Council Registered Exporters need not furnish any bank guarantee/cash security while executing export bonds. They may furnish sureties only. This is a modification over the previous instruction contained in Board's Circular No. 284/118/96-CX., dated 31-12-96. Presently, specified categories of merchant exporters namely status holders (Super Star Trading House, Star Trading House, Trading House, Export House) exporters registered with any recognized Export Promotion Councils would be exempt from furnishing security and/or surety with the bond executed by them for export of goods without payment of duty unless they have come to the adverse notice of the Department. 3.3 In the case of E.O.Us obtaining indigenous goods without payment of duty under a notification issued under sect ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nd in Form B-2 should be sufficient to cover the difference between the duty payable on provisional assessment and the probable duty payable if the highest rate / value applicable for such goods is applied. (ii) The amount of the general bond in Form B-2(Surety)/(Security) should be equal to the difference between the duty payable on provisional assessment and the probable duty payable applying the highest rate/value applicable to such goods for a period of 3 months. If the provisional assessment cannot be completed within the 3 months and longer time is required, say a period of one year, in appropriate cases, differential duty likely to arise during such period shall be the basis/ determination of the bond amount. When the security bond is executed, the amount of security will be generally fixed at 25% of the bond amount. However, in appropriate cases, for special reasons to be recorded, the proper officer under rule 7 of the said Rules may order for a higher security amount. In the event of death or insolvency or insufficiency of the surety / security, the proper officer may demand fresh bond. If the security furnished is found to be inadequate, he may demand additional secur ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... furnished in respect of the bonds will be, as follows: (i) The security furnished should either be cash, Government promissory notes, post office savings, bank deposits, National Savings Certificates, National Defence Bonds or similar realizable Government papers. Promissory Notes and stock Certificates of the Central Government or a State Government shall be accepted subject to the conditions laid down in clause (ii) of Rule 274 of GFR. (ii) Deposit receipt of bank can also be pledged as security for Central Excise - Bonds subject to certain specific conditions under Rule 274(vi) of G.F.R. The conditions inter alia are: (a) The deposit receipt shall be made out in the name of the pledgee or if it is made out in the name of the pledger, the bank shall certify on it that the deposit can be withdrawn only on demand or with the sanction of the pledgee. (b) The depositors shall agree in writing to undertake any risk involved in the investment and make good the depreciation, if any. (c) The depositors shall receive the interest when due, direct from the bank on a letter from the pledgee authorising the bank to pay it to him. (d) The responsibility of the pledgee in con ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... during which obligations arising during the period of validity can enforced. The time limit for enforcement of obligation should be at least two years. (ii) Where there is a need for extension of the period of validity of guarantee furnished by the bank on behalf of a party in pursuant an order of an original or appellate authority or any other reas4 should be done by means of supplementary deed of bank guar on a stamp paper. 10. Preservation of bond and retention of securities 10.1 Proper preservation of bonds is to be ensured in the interest o revenue. (i) Bonds must be preserved as long as they are valid and should be returned only after all the obligations under the bond had been discharged. (ii) All officers who fill Central Excise bonds must be careful not to w the word cancelled on the bonds even after the apparent fulfilment of obligation; otherwise it is likely to be argued that persons liable under the bond have been there by discharged from the liabilities imposed by the bond. The obligations under the bond are not 1eg extinguished so long as the bond is not returned to the obligor or is not cancelled on execution of a deed of cancellation. 11. Ver ..... X X X X Extracts X X X X X X X X Extracts X X X X
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