For over three weeks, the grapevine has it that someone or the other has talked to a senior bureaucrat known personally to him and he has leaked the information that the final policy is being announced in 2-3 days. No wonder, people are keeping fingers crossed that it will be announced next Tuesday so they can at least commence business and take care of unfilled orders.

States were asked by the central government last July to levy 'special fees' on imported spirits and wines to offset the revenue loss arising from the withdrawal of ACD-additional customs duty, levied on imported wines and spirits. The government feels that it would stand the legal test if there ever were a case against it, by calling the excise duty by a different name- 'special fees'. But US is not buying this argument apparently and proceeding with the appeal.

Customs Woes

Excise is not the only hostile border faced by importers. Customs is also creating enough problems for them and today no material is going into or coming out of the privately owned public bonds. The customs department is insisting on the submission of bank guarantees to the extent of 25% of assessable duty that would be payable on the material stored.

' Would be payable' is the point of contention with many importers. Says Dharti Desai, CEO and Founder of Finewinesnmore , who has already invested over Rs.40 million ($1 million ) in the business, ' I can understand the government asking for the bank guarantee on wines on which duty is payable. But in cases like ours, where most  sales are to the duty free customers, where is the sense of insisting on the guarantees on these wines too.' 'and where are we going to get funds to block in the business in which we are finding difficult to break even,' she says in desperation.

Explains another smaller importer under conditions of anonymity, 'under the RBI rules, when the banks give a performance guarantee, it can be issued against margin money, But when the guarantee involves an obligation towards the revenue department of the government, banks insist on 100% margin. This implies investing 25% of the duties payable on the whole lot including the duty-free goods. This will work out as the average equivalent of total duty payable on wines.'

Mr. Koshi of Veritas in Mumbai, one of the finest privately owned public bonded warehouses, goes a step further. 'Why should the importer be asked to pay the bank guarantee at all?' he claims. 'The customs department does all kinds of verifications including the solvency details etc. The keys to the premises are with the officials. They should be on top of things and know when to step in with a heavy hand.'

The bone of contention arises also because the government owned bonds are exempt from giving these guarantees. In fact warehouses like CWC are in such a pathetic condition (service and storage is disgusting according to most importers I talked to in Delhi and Mumbai) that no importer wants to deal with them 'unless you are storing crappy wines, anyway'.

So committed is Koshi that he and Suntan of Mumbai filed a writ petition challenging the discrimination against the privately owned public bonded warehouses. These warehouses which are doing a yeoman's service to the consumer by storing the wines properly, have been asked by the customs department to submit bank guarantee applicable for the dutiable sensitive goods lying with them- in fact telling them to do the impossible and close the business.

Fortunately, as I have learnt from reliable sources in Mumbai the department has had the common sense of following what has been done in Delhi and decided to accept the bank guarantee from the individual importers directly. The suspended business can hopefully be allowed to start functioning for those who give the guarantee (with no guarantee that the excise department will allow to transfer the stuff out of the excise warehouse, though) and the wines cooking in various areas in the port would find a place of rest.

You may love Maharashtra or hate Maharashtra, but you have to proclaim, 'Mera Maharashtra Mahan!'

Subhash Arora
August 23, 2008

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