Project Research Report of Jindal Steel on Long Product

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As expected, the Indian Steel giants have now started moving outside India, acquiring big
steel plants, iron ore mines, coal mines. Tata Steel, JSW Steel, SAIL, Essar, etc. have all gone
outside the shores of India. We are watching the steel industry grew since early 1940 and
now the stage has come when Indian entrepreneurs are expanding – a phenomena – that
European countries or USA were doing earlier. As expected Indian will emerge the second
largest steel producer as well as having interest in the steel industry outside India in next
four years.

Coming to the domestic steel industry at present, the demand is almost matching the
production. No-doubt some controversy is going on between the Integrated Steel Plants
producing hot rolled steel and cold rolled steel manufacturers. This is unnecessary. As
understood, the integrated steel plants have sufficient capacity to produce hot rolled flats.
Therefore, CORSMA need not have any apprehension in this regard.

Steel prices of all products have now somewhat stabilized after the increase in the prices by
the major steel producers. It appears that the Government is very keen that all those steel
plants - national or international – who signed MoU should bring their installation work at the
earliest. There is international demand of steel and any excess production in India can be
absorbed by them.


1.    Summit on unleashing India’s Potential in Metals & Mining
      ASSOCHAM organized the summit on 4th July 2007 at Hotel Shangri-La, New Delhi.
AIIFA was invited to attend the one day summit Mr. L N Goswami, General Manager, AIIFA,
attended the programme.

Dr. T. Subbarami Reddy, Hon‟ble Minister of state for Mines, Govt. of India inaugurated the
summit. In his inaugural address, Dr. Reddy pointed out that India has abundant mineral
resources. India is 4th in the world in coal reserve and VI in iron ore and Bauxite out of
huge mineral resources, a very little area is being explored. Investment in mining and mine
exploration is abysmally low comparative to other developed countries. He emphasized the
imperative need for technology up-gradation in mining exploration. The Hon‟ble Minister
mentioned that new mineral policy is going to be finalized. Shortly which will address the
various issues concerning economics, social responsibilities of mining industry etc.
Indirectly touching upon the contentious issue of leasing of iron ore mines for captive use
to the steel plant situated in the state, where iron ore mines is located. Dr. Reddy remarked
that India is one and steel plant in other states should not be deprived in getting captive
mines. He added that iron ore is not the only criteria for selecting the location for setting up
steel plants, power, water, labour force and other infrastructure facilities are also to be
considered. He mentioned that Indian Economy is very much dependent in efficient mining.
He welcomed private entrepreneurs in public private partnership in mining for efficient
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operation by deploying modern mining technology.

Prior to the Minister‟s inaugural address, Ms. Meena Gupta, Secretary, Ministry of
Environment and Forests, Govt. of India, in her special address emphasized the need for
adopting modern mining technology to maintain a balance between economic development
and preserving ecology.

After inaugural session, in 3 technical sessions quite interesting deliberation took place
broadly covering following areas:-

        Developments and opportunities in metals and mining
        Metals and mining growth opportunities
        Financing of growth

2.     Meeting of PHDCCI Committee of Association Members
       AIIFA is a member of PHD Chamber of Commerce and Industry (PHDCCI). The
Committee of Association members of PHDCCI is a Forum for interactions on issues
relating to Industry and Commerce in the region and for strengthening cooperation between
PHDCCI and its Association members. A meeting of the above Committee was organized
on 27.07.2007 at PHD House, New Delhi. Representatives of AIIFA attended the meeting
which was chaired by Mr. Sanjay Bhatia, President of PHDCCI.

In the meeting various Associations put forth their suggestions. We also placed in the
meeting various issues concerning to our Association and also suggested how PHDCCI and
AIIFA can further strengthen the cooperation for mutual benefits. On our suggestion that
PHDCCI should set up a Steel Committee for taking up the issues concerning the
Secondary Steel sector, the President of PHDCCI has indicated that it would look into the
possibility of forming a Steel Task Force (STF) at PHDCCI.


International growth for steel slow-down
Global steel production expanded at its slowest pace in 17 months in June, indicating that Chinese
mills may be responding to government pressure to restrain output, Credit Suisse stated. Steel out rose
5.7% to 110.6 million metric tonne last month, from a year earlier, the International Iron & Steel
Institute (IISI) statement. It is also reported that Chinese demand for steel is expanding at about 18%,
so production is now seriously under-shooting.

JSPL to get Iron Ore from Bolivia
Jindal Steel & Power Limited (JSPL) has inked the contract for development of El Mutun Iron ore mine
in Bolivia, believed to be one of the world‟s biggest. As a part of the deal Naveen Jindal led JSPL would
be investing $2.1 billion over a period of eight years to set-up an integrated steel plant. Given the size of
the investment, the deal took one full year to materialize from the time JSPL won the international bid
for the mining contract in May 2006. JSPL has crated a subsidiary in Bolivia, Jindal Steel Bolivia SA for
the project which is to be financed through a debt to equity ratio of 60:40. The contract was signed by

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JSPL vice-chairman and CEO, Vikrant Hujral at Santa Cruz, Bolivia on July 18, 2007

Speed up Steel Projects – PM wants expeditious action
Prime Minister Manmohan Singh has constituted an inter-ministerial group (IMG) to suggest measures
to ensure early completion of major investments in the steel sector. The IMG will recommend measures
to ensure proper availability of iron ore and coal for the sector. IMG will monitor and co-ordinate isues
concerning major steel investments. IMG comes at a time when Posco and Arcelor-Mittal are facing
hurdles in their path of proposed investment. The IMG will be headed by the Steel Secretary and
comprises of secretaries of DIPP, Railways, Shipping, Road Transport and Highways, Mines,
Environment & Forests, besides Chief Secretaries of concerned states. Joint Secretary in the Ministry of
Steel will function as the Convenor of IMG.

Any other ministry or state government may be requested to participate as and when considered
necessary. The terms of reference of the IMG would be to review and coordinate measures for
early completion of the major steel capacities and to address various problems concerning:

1. Infrastructure constraints related to ports, rail, road network
2. Availability of iron ore and coal.
3. Speedy environmental clearance for project site as well as for iron ore and coal mining
4. Availability of land, water resources and issues concerning rehabilitation.
5. Any other item concerned with the major steel investments in the country.

SAIL to Pick-up 40% in Chattisgarh Steel Plant
Steel Authority of India Limited (SAIL) is set to pick up a 40% stake in the proposed 4-million tonne
steel plant in Chhattisgarh through a joint venture with the National Mineral Development Corporation
(NMDC) and Rashtriya Ispat Nigam Limited (RINL). At 40%, SAIL‟s exposure is likely to be Rs. 6,400
crore. Though a three-way Memorandum of Understanding (MoU) was signed between SAIL Chairman
SK Roongta, RINL Chairman Siva Sagar Rao and NMDC head B Ramesh Kumar on April 26 to set up
the unit, the share of the investment by each of them was not agreed upon. NMDC‟s efforts to develop
new mines could face a severe jolt because of the Maoist violence. Its mining operations can get severely
affected if the issue is not tackled head-on. NMDC has increased patrolling by CISF personnel, but the
„ground‟ situation is getting very serious as the Maoists are launching attacks at their will.

Mittal’s Steel Project in Jharkhand & Orissa
Government of India has assured Mr. L.N. Mittal that his 10 million tonne projects – one each in Orissa
and other in Jharkhand will get Iron ore to fullest extent. He has also been assured by Government
about allocation of coal mines. Mr. Mittal stated that “everyone in the steel business likes to have the
Chiria mines. We are not alone” . He added that iron ore mines of 600-mt each were required for the
two planned steel projects. This is the first time after the Vizag Steel Plant that such a large investment
has been announced. Government was not geared up for such large investments and the concessions

15% Rise in Stainless Steel output
Global production of stainless steel grew 15.1% YoY to 7.57 mt in March 2007 quarter, according to
data recently released by the International Stainless Steel Forum (ISSF). Asian production (including

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India) of Stainless Steel amounted to 4.191 mt, a growth of 25.2 per cent YoY, according to the data.
Demand for stainless steel has come mainly from user industries such as construction and industrial
applications, point out analysts. Amongst Indian players, Jindal Stainless is one of the largest players
and it is leveraging strong demand in the domestic market as well as neighbouring countries, by
ramping up the manufacturing capacity from 0.6 mt to 0.9 mt by the Financial year 2009. However,
stainless steel companies have been grappling with the rising cost of key inputs such as nickel over the
last few quarters. To offset this situation, players such as Jindal Stainless have tilted its sales mix in
favour of low-nickel (200 series) stainless steel products, in a bid to keep operating costs under check.

NTPC NCDEX power trading platform invites PFC and others
It is reported that the power exchange proposed to be set up by National Thermal Power
Corporation led consortium has offered corporate entities such as Power Finance Corporation
and others to join hands with it. National Thermal Power Corporation and National Commodity &
Derivatives Exchange Limited are the other consortium members. Central Electricity Regulatory
Commission‟s decision on the National Thermal Power Corporation led power exchange is
expected to come by November 2007. The proposed power exchange would be a spot exchange
model for developing pricing benchmark for power called a day ahead model. This is so as the
estimate of supply surplus or deficit is determined a week in advance, as power suppliers and
users work out the definite supply surplus and deficit figures a day before that of actual use.
Thus, the surplus of one zone can be traded on the proposed spot power exchange.

The trades on the exchange can only be settled by deliveries as mandated by Central Electricity
Regulatory Commission. Thus only genuine users and generators of power can use the power
exchange platform. Although the bid sell and ask buy trades are matched on the spot exchange,
the Power Grid Corporation transmits power to the purchaser. Mr PH Ravikumar MD of National
Commodity & Derivatives Exchange Limited said that Central Electricity Regulatory Commission
has clarified that some power transmission capacity has to be reserved for the power exchanges.
He added that in the long term there is a supply deficit but in the short term there are surpluses
that can be traded through the spot exchange. Power Trading Corporation is the leading provider
of power trading solutions in India and is a government of India public private initiative. Power
trading through PTC is done over the phone, which results in lack of transparency in the price.
Multi Commodity Exchange of India has also proposed to set up a power exchange.

Global wagon builders eyeing Indian market
It is reported that the ambitious INR 30,000 crore dedicated freight corridors and metro projects
of various states have attracted global rail transport giants to invest in India and several majors
including Toshiba, Bombardier and GE are looking at manufacturing wagons and coaches in
India. As per reports, a high level delegation from Toshiba is in talks with Indian Railways for
manufacturing coaches and locomotives, Canadian Bombardier Transportation will soon set up a
multi million dollar rail car manufacturing facility in India and GE has picked up a 15% stake in
private wagon maker Titagarh Wagons. Mitsubishi Corporation is also exploring options to set
up a locomotive manufacturing and maintenance facility like other global giants such as
Siemens, Alstom and Itochu. A senior railway ministry official said the government had talks
with several companies including Toshiba and Bombardier for setting up locomotives and
coaches to supplement the upcoming metros and the dedicated freight corridor. Indian Railways
will require INR 60,000 crore for completing its projects, including strengthening, modernizing

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and creating new infrastructure and the ministry is adopting private public partnership to source
the funds.

China to create four steel clusters
Mr Luo Bingsheng deputy director of China Iron & Steel Association told Shanghai Securiteis
News that China aims to breed up four steel clusters through cross regional merger & acquisition
in coming years.

1. Anshan-Benxi in northeast China
2. Shougang and Tanggang in North China
3. Baosteel and Maanshan Steel in East China
4. Wuhan Steel and Panzhihua Steel in middle and southwest China.

Mr Luo said “China's steel making capacity, while it far exceeds that of other countries, continues
to exhibit a very low industrial concentration rate in comparison with most other producing
nations. There are over 760 steel makers in China, whose combined steel output exceeds 400
million tonnes in 2006. However, only 21 steel producers boast capacity of over 5 million tonnes
per year. Therefore, it's necessary to create several steel conglomerates with capacity close to
some 100 million tonnes per year in a bid to beef up the competitiveness of the country's steel
making sector.” Mr Luo added that the average energy consumption of steel making has shown
sign of improvement in the first five months. CISA statistics reveal that domestic comprehensive
energy consumption of per ton steel dips 4.4% YoY in January to May 2007, comparable energy
consumption of per ton steel slips 4.97% YoY, and water consumption of per ton steel also
declines 8.7% YoY from the same comparison period of last year. Mr Luo emphasized that
creating regional steel clusters does not mean that each mill should expand their scale blindly
and the authority won't put all the mills in the same province or region together without any

Indian steel minister assures level playing filed to ArcelorMittal
Indian steel minister, while citing India‟s target to become number 2 in the world in steel sector
by developing 200 million tonne capacity, outlined that need for participation by both public
sector as well as private sector steel makers and assured a level playing filed. Mr Ram Vilas
Paswan union minister of steel, fertilizers & chemicals during a meeting with Mr LN Mittal
president & CEO of ArcelorMittal said that “India should be the second largest producer of steel
in the world by 2015–16 and the government has fixed a target of 200 million tonnes capacity by
2020. That is why we would like both private and public sector players to set up additional

On the question of allotment of iron ore mines, he said, the Group of Ministers has approved the
mining policy and now it will go to the cabinet and then to parliament. Mr Paswan suggested that
the ArcelorMittal should put in its applications as first as possible. Mr Paswan while talking to
reporters later said that “It is his belief that the Jharkhand government can provide six hundred
million tonnes of iron ore from Chiria mines outside the disputed part which SAIL has been
asking for.” Mr LN Mittal during the meeting sought the support of Indian government for
implementation of their mega steel projects in Jharkhand and Orissa. Mr LN Mittal said that he

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would discuss with the Jharkhand Government issues like allotment of coal, iron ore mines and
land. Mr Mittal said they would need the 600 million tonnes of iron ore in Jharkhand over 30
years and a similar amount in Orissa.

Steel imports from China rise
The exodus of cheap Chinese Steel exports sweeping the international markets is impacting
the global steel trade. As Chinese steel producers raced to beat government measures like
reduction in export rebates, imposition or increase in export taxes on some product
categories and licensing of exports to make export more expensive, exports of steel from
China soared 132 per cent to 21.3 mt in January-April. And about three mt. of Chinese
steel landed in India in January-April 2007. With imports from China touching 7.5 per
cent of total Indian production of about 40 mt, the industry is keeping close tabs on
shipments of steel into the country. The Chinese government had been forced to
implement measures to check steel exports in face of brewing trade war with US, where
imported Chinse steel surged to 45 mt in 2006, double that of in the previous calendar.
This has prompted six US steel produced to seek higher import duties on Chinese steel.
However, officials of some of top steel companies played down impact of imports from China
on grounds that much of steel landing on domestic shores were of low grade, while most
Indian Steel producers had moved up the value chain to meet the demand from domestic
customers. Recently London-based metals analyst had said that Chinese steel makers will
increase world supplies of cheap exports, hurtling profits for US and European producers,
because of an “unsustainable trajectory” of output gains that is exceeding domestic use.

Government tax increases on exports of unprocessed steel have had only limited success in
slowing shipments because Chinese producers have switched to semi-fabricated products
like steel pipe. Though, there is a rapid domestic consumption in China, production is
growing even faster, he said and added that the surplus is coming onto the global market.
U.S. “imports from China have soared from nothing”, he said in a report. “Moreover,
China‟s steel industry is still increasing production rapidly and exports are expected to rise

Dr Irani calls for exporting only low grade iron ore
Mr JJ Irani director of TATA Sons while delivering a lecture on “The present position of the steel
industry and its future in the country” last week at the Vishakhapatnam Steel Plant said that it
is not desirable to export high grade iron ore from India and only low grade ore should be
reserved for the purpose. He said that “I have no doubt that the future of the steel industry lies in
India, in view of our vast iron ore reserves, but we should be prudent with them. We should not
export the high grades. In my view, the whole debate on the issue is unnecessary. It should be
obvious.” Mr Irani opined that the existing steel plants in India, including Vishakhapatnam Steel
Plant, should enjoy assured supply of iron ore for the next 20 to 25 years, taking into account
their expansion plans. However, he said that he was not against foreign companies setting up
steel plants in the country and making use of the ore. He added that “POSCO is welcome. We
need the competition. But let them make steel here. They can be permitted to make steel, but
they should not be allowed to export ore.” He said that “China is far ahead of India in steel
making, infrastructure development and many other matters. But we have a great advantage
now. China, because of its population policy of one or none, is now saddled with aged and ageing

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population. We have the edge, as we are a young nation.” Mr Irani also urged the steel
companies, both in the public sector and the private sector, to spend more on research and
development. He said “As we have become intellectually lazy, though we have the brain power
and technologies relevant to Indian conditions should be developed.”

Steel stocks firm up on demand optimism
Despite the predicted slump in steel consumption during monsoon and the price cut
announced by both the public and private steel makers in the country, shares of steel
companies have witnessed a significant rise during the last one-month. Experts feel that
the growth in construction sector is providing the fillip to the sector. Recently the steel
companies considering the weak steel prices globally, had announced price cuts on hot
rolled coils and flat steel between Rs. 500-1200 per tonne. Experts stated that metals are
generally sensitive to price cuts but this time it did not reflect in the scrip as the growth in
construction sector has taken care of the steel sector as well. An analyst said there could
be marginal drops in prices on the assumption of decreased demand during the monsoon.
Slump is a seasonal phenomenon but there was no slump actually this time and
profitability of most of the companies is showing on the stock exchange. Additionally, a
research report by Credit Suisse Equity Research reckons projects of above $1 in Indian
infrastructure will keep the demand growth strong and this will absorb supplies from
additional capacities coming on stream.

Indian Q1 finished steel production up by 12.6% YoY
As per provisional figures released by Indian Government, India‟s production of finished carbon
steel has reached 12.088 million tonnes during April to June 2007 quarter recording an increase
of 12.6% YoY as compared to 10.734 million tonnes in April to June 2006.

The provisional data released for finished carbon steel is as under
                                A-J'06 A-J'07 Change
               Production       10.734 12.088 12.6%
               Exports          1.215 1.31         7.8%
               Imports          0.675 0.8          18.5%

                                              In million tonnes

Indian steel industry urged to reduce energy consumption
According to a consultant for clean development mechanism, Indian steel industry must reduce
the energy consumption, which is one of the highest in the world. Mr VK Duggal said that the
Indian steel industry requires huge improvement in power and energy consumption, which can
be achieved by opting for the clean development mechanism. He said that Indian steel companies
could earn INR 15,000 crore through carbon credit sale by 2012.

Indian Railways unlikely to match steel makers requirements
It is reported that while the railways have planned for adding freight capacity of around 338
million tonnes during the 11th Plan which commenced from April 1st 2007, the steel industry
said that it alone would require space for moving 400 million tonnes of raw materials and
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finished steel on the railways during the period. Mr Vijay K Raina GM of South Eastern Railway
while responding to a presentation made by Mr SK Lahiri, Confederation of Indian Industry
Jharkhand chapter‟s infrastructure core committee member, described the situation as the crux
of the problem. He added that “If the steel sector alone is demanding 400 million tonnes
capacity, that‟s both a challenge and an opportunity for us. Unless the political system and
economic planners decide to invest this sort of money in the railways as a brand, it would not be
possible.” Mr Raina admitted that railway officials were themselves quite pessimistic about
achieving an annual freight capacity addition of around 70 million tonnes, which would lead to
addition of 338 million tonnes freight capacity. He said „It did not matter whether it was the
Indian Railways or the industry or any particular house like the TATAs invested the money.”

Electrosteel achieves financial closure for steel unit at Bokaro
It is reported that Electrosteel Integrated, an associate company of Electrosteel Castings, has
achieved financial closure for its INR 4,956 crore integrated steel project at Bokaro in Jharkhand.
IL&FS were the financial advisors and sole arrangers for project financing and debt financing has
been arranged by a consortium of banks and financial institutions. Elecrosteel Integrated is
setting up a plant with a capacity of 1.3 million tonnes per annum, which will manufacture long
steel products and ductile iron pipes. Electrosteel Castings had also obtained mining blocks of
iron ore and coking coal in Jharkhand

Global crude steel production in June up by 8.5% YoY
International Iron and Steel Institute reported that the total crude steel production in June 2007
for the 67 countries was 110.6 million tonnes up by 5.7% YoY as compared to June 2006. The
global crude steel production in January to June 2007 was 651.036 million tonne up by 8.5%
YoY. The growth in crude steel production during April 2007 among regions was again led by
Asia as discussed

                          Jun'06             Jun'07     Change      A-J'06   A-J'07    Change
            Total         104636             110643     5.7%        600144   651036    8.5%
            Asia          55769              61277      9.9%        312984   355755    13.7%
            North America 11414              11157      -2.3%       67337    64098     -4.8%
            CIS (6)       10013              10381      3.7%        58579    62747     7.1%
            South America 3583               3887       8.5%        21711    23562     8.5%
            Africa        1564               1529       -2.2%       8910     9251      3.8%
            Middle East   1211               1295       6.9%        7423     7550      1.7%
            Oceania       749                726        -3.1%       4269     4334      1.5%
                                                                                       In „000 tonnes
                                                                                       Source IISI
                                                     EU is not mentioned although included in the total

China opposes US anti dumping probes on tubes
It is reported that China has strongly opposed anti dumping and anti subsidy investigations by
the US into imported Chinese steel tubes saying that such measures threatened bilateral trade
ties. Mr Wang Xinpei spokesman with China‟s ministry of commerce said "The US government

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continues the mistake of imposing anti dumping and anti subsidy measures from time to time.
These investigations have aroused strong dissatisfaction in Chinese business circles.”

He said that as the US did not treat China as a market economy, the use of anti dumping and
anti subsidy measures also infringed US rules and its tradition of not adopting anti subsidy
measures against non market economies, which had been practiced for more than two decades.

Mr Wang said the move threatened Sino-US economic and trade ties and China would assert its
rights as a WTO member if the United States continued the measures. The US Department of
Commerce announced this week that it would officially launch investigations into imports of light
walled rectangular pipes and tubes. In June, the US Department of Commerce started anti
dumping and anti subsidy investigations into Chinese carbon steel tubes.

                                            P A R T - II
NO. 82/2007-CUSTOMS DATED 03.07.2007 (F.NO. 356/25/2004-TRU (Vol.II)

“In exercise of the powers conferred by sub-section (1) of section 25 of the Customs Act,
1962 (52 of 1962) read with sub-section (8) of section 3 of the Customs Tariff Act, 1975 (51
of 1975) and in supersession of the notification of the Government of India in the Ministry
of Finance (Department of Revenue) No. 178/2003-Customs, dated 12.12.2003, the Central
Government, on being satisfied that it is necessary in the public interest so to do, hereby
exempts all the goods from the whole of the additional duty leviable under the notification
of the Government of India in the Ministry of Finance (Department of Revenue), No.
32/2003-Customs, dated the 1st March, 2003, published in Gazette of India, vide G.S.R.
167(E), dated the 1st March, 2003.
                                                                  (G.G. Pai)
                                                      Under Secretary to the Govt. India
NO. 24/2007-CUS. DATED 02.07.2007 (F.NO. 401/229/2006-Cus.III)

All Chief Commissioners of Customs
All Chief Commissioners of Central Excise
Principal Chief Controller of Accounts, CBEC
Chief Departmental Representative, CESTAT
All Commissioners of Customs
All Commissioners of Central Excise

                         Delay in payment of Customs duty refunds – reg.

I am directed to state that various representations from importers, exporters, trade and
industry associations have been received in the Board regarding delay in payment of
Customs duty refunds and the hardships faced in obtaining refunds from Customs field

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formations. Further, in a number of cases it has also come to the notice that the Courts
and higher judicial authorities have taken adverse note of the delay caused in refund of

Refund of customs duty involves acknowledgment and processing of refund application for
sanction or rejection of refund in terms of section 27 of the Customs Act, 1962 and the
Customs Refund Application (Form) Regulations, 1985. Further, Board have also issued
instructions from time to time clarifying the doubts raised by field formations in dealing
with the refund claims. (Board‟s circular No. 59/95-Cus, dated 05.06.1995). Needless to
say that if these procedures are followed properly, normally refund applications should be
disposed off within the interest free time limit of three months.

However, it is noticed that the aspect of timely refund of Customs duty has not been given
due importance by the field formations. Therefore, Board desires that in order to ensure
expeditious disposal of Customs duty refund applications and to enhance transparency in
refund disbursement as well as bring alertness among the officers, the following procedures
should be followed:

System for receipt and acknowledgement of all Customs duty refund applications
All refund applications made by any person under section 27 of the Customs Act, whether
by post or courier or personal delivery, shall be received by the department and a simple
receipt, for having received the application that is said to have been filed as „refund
application‟ shall be issued immediately. At this stage, the receipt should make it clear
that the application has not been scrutinized for its completeness. These application are
required to be scrutinized for their completeness within ten working days of their receipt,
for giving acknowledgement by the proper officer as per the Customs Refund Application
(Form) Regulations, 1995. Hence, if any deficiency is found in the application or any
document is required by the department, the same shall be informed at this stage of initial
scrutiny itself within ten working days of the initial receipt. This will avoid any chance for
raising repeated queries to the applicant, in a piece-meal manner and bring certainty in
dealing with refund applications.

Processing of refund applications and their disposal
Application of refund found to be complete in all respects by Customs, after scrutiny as
above, shall be processed on „first-come-first served‟ basis so as to decide whether the
whole or any part of the duty and interest paid by the applicant is refundable. If refund is
due in such case, an order for refund is required to be passed in terms of sub-section (2) to
section 27 or where the claim for refund is found liable to be rejected, as the case may be,
speaking order shall be passed giving complete reasons for the order. Further, in respect of
the provisions of unjust enrichment, the order should indicate that this aspect has been
examined based on the guidelines, if any, applicable; the order should also contain the
findings of adjudicating authority on the documents produced in support of the claim and
the basis for determining the amount as either refundable to the claimant or payable to the
Consumer Welfare Fund or the claim not being admissible.

Issue of Cheque

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Where the refund application has been admitted, whether in part or in full, and claimant is
eligible for refund, the Deputy/Assistant Commissioner of Customs may ensure that
payment is made to the party within 3 days of the order passed after due audit, if any. In
all such cases refund of amount shall be paid to the applicant by a cheque on the
authorized bank with which the sanctioning authority maintains account. After the cheque
has been signed, it shall either be delivered to the claimant or his authorized representative
personally when the next calls for it or sent to him by registered post „Acknowledgement
Due‟ at Government cost, on the basis of pre-receipt already obtained from the claimant.

Audit system
Existing instructions on audit scrutiny of refunds shall continue.            Accordingly, all
applications involving a refund of duty and/or interest of Rs. 5 lakhs or more shall be
subjected to pre-audit as per the existing practice. The application refund of the amount
below Rs. 50,000/- may be post audited on the basis of the random selection by
Deputy/Assistant Commissioner (Audit). The selection can be made in such a way that
25% of the refund applications are post-audited. The application of refund for amount
between Rs. 50,000/- and Rs. 5 lakhs should be compulsorily post audited. This audit
system has been prescribed with a view to check improper sanction and payment of
refunds. However, this does not dispense with the verification of the refund vouchers and
the re-conciliation of refunds, which shall continue to be done by the Chief Account
Officers. However, it may be ensured that where pre-audit is involved the action is
completed at the earliest so that the disposal of refund applications is not unduly delayed.

CVC’s instructions
Your attention is also invited to the instructions issued by the Central Vigilance
Commission (CVC) under section 8(1)(h) of the CVC Act, 2003 to bring about greater
transparency and accountability in the discharge of regulatory, enforcement and other
public dealings of the Government organizations vide their Circular No. 40/11/06 dated
22.11.2006.     (Refer CVC website under „Improving Vigilance
administration by leveraging technology). These instructions, interalia require that status
of individual applications/matters should be made available on the organization‟s website
and should be updated from time to time so that the applicants remain duly informed
about the status of their applications. It is further stated that the manual records
maintained presently for various purposes may continue.

System of maintaining online database on Customs duty refunds
In pursuance of the instructions of CVC, all Commissioners of Customs shall establish a
mechanism for maintenance of a comprehensive database in their respective website,
indicating the receipt, acknowledgement, action taken for disposal (either payment or
rejection) of refund applications and those pending at the end of the month. This shall be
implemented with in a period of three months time and a report of the same may be sent to
the Board and DG (Inspection).

The details of refund application such as name of the claimant, file number, data of
application, amount of refund claimed, date of its acknowledgement shall be indicated in
chronological order by the date of its receipt. The applications may be serially numbered

ISSUE NO. 11 VOL. V INDUCTION FURNACE NEWSLETTER 01-08-2007 to 15-08-2007             13
for each year and shall be shown in a single list indicating their respective status distinctly.
The illustrative status that could be mentioned for easy understanding of any applicant
may include the following: (i) refund application received but pending for scrutiny and
acknowledgement (ii)(a) refund application acknowledged for its completeness (ii)(b) refund
application found incomplete and returned for rectification of deficiency (iii)(a) refund
application rejected by passing a speaking order (iii)(b) refund application sanctioned,
pending verification by audit (iv) cheques issued for refunds sanctioned and paid to
applicant/credited to consumer welfare fund. This is not exhaustive and if any other stage
of processing of refund application is involved the same may be indicated. An abstract at
the end of the month about the total number of refund applications received,
acknowledged, disposed and pending may also be indicated.

This online data base would enable any person who had applied for refund with Customs,
to check the status of his refund application by reference to the date of his refund
application having been received by Customs. This data will be accessible to the trade and
public as well as by all Customs officers to enhance transparency. Further, the status of
individual applications for refund of customs duty shall be updated from time to time, at
least daily, so that the applicants remain duly informed about the status of their
applications. The data may be allowed for display in the website for three months period
from the date of its final disposal and there after it can be moved to the history data base.

Monitoring Mechanism
Chief Commissioners/Directorate General of Inspection (DGI) is requested to review the
position of refunds in their respective zones/select zones, to check on the timely sanction of
refund applications. If any refund application is pending for long period, the reasons for
the same may be identified by the concerned Commissionerate. DGI may also access the
data base of such refund applications and maintain the data in respect of those refund
applications pending for long period and action taken thereon, for reporting to the Board.

The above instructions are being issued so that an administrative arrangement is made on
a permanent basis to deal with refund of customs duty, an important aspect of tax
administration which needs to be given due importance in view of the prompt disposal as
per legal provisions and their revenue implications. Accordingly, the Commissioners of
Customs and Chief Commissioners of Customs concerned may ensure for proper
implementations of these instructions of the Board.

A suitable Public Notice and Standing Order may be issued for the guidance of the trade
and staff. Difficulties faced, if any, in implementation of the Circular may be brought to the
notice of the Board at an early date.
                                                                       (Aseem Kumar)
                                                                  Under Secretary (Customs)

NO. 29/2007-CENTRAL EXCISE DATED 06.07.2007 (F.NO. DGEP/FTP/69/2007-EOU)

ISSUE NO. 11 VOL. V INDUCTION FURNACE NEWSLETTER 01-08-2007 to 15-08-2007               14
In exercise of the powers conferred by sub-section (1)( of section 5A of the Central Act, 1944
(1 of 1944), read with sub-section (3) of section 3 of the Additional Duties of Excise (Goods
of Special Importance) Act, 1957 (58 of 1957) and sub-section (3) of section 3 of Additional
Duties of Excise (Textile and Textile Articles) Act, 1978 (40 of 1978), the Central
Government, on being satisfied that it is necessary in the public interest so to do, hereby
directs that each of the notifications of the Government of India, Ministry of Finance
(Department of Revenue), specified in column () of the Table hereto annexed shall be
amended or further amended, as the case may be, in the manner specified in the
corresponding entry in column (3) of the said Table, namely:-

Sl.No.     Notification No                                      Amendments
               & Date

ISSUE NO. 11 VOL. V INDUCTION FURNACE NEWSLETTER 01-08-2007 to 15-08-2007             15
        22/2003-Central        In the said notification,-
1. NO. 11 VOL. V INDUCTION FURNACE NEWSLETTER 01-08-2007 to 15-08-2007
ISSUE                                                                                           16
         Excise dated
         31.03.2003, GSR         (i) in the condition (4) of opening paragraph, in clause (a) for sub-
         265(E) dated            clause (ii), the following sub-clause shall be substituted, namely:-
                                 “(ii) in the case of goods other than capital goods, such goods as
2.        23/2003-Central         In the said notification, for the Explanation II, occurring after
          Excise dated            pargraph 3, the following Explanation shall be substituted, namely:
          31.03.2003, GSR
          266 (E) dated           Explanation II. For the purpose of this notification, following
          31.03.2003              supplies shall be treated as imported goods.

                                  (i) goods received from any export oriented undertaking or Software
                                  Technology Park unit or Electronic Hardware Technology Park
                                  unit, as the case may be;

                                  (ii) goods received from Domestic Tariff Area under benefits if
                                  deemed exports under Paragraph 8.3 (a) and (b) of the Foreign
                                  Trade Policy”.

                                                                          (Aseem Kumar)
                                                                 Under Secretary to the Govt. of India

Issue No. 11       Vol. V     “Fortnightly”          Date: 01-08-2007 to 15-08-2007            Rs. 10/-

ISSUE NO. 11 VOL. V INDUCTION FURNACE NEWSLETTER 01-08-2007 to 15-08-2007                        17

Description: Project Research Report of Jindal Steel on Long Product document sample