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Circular No. 03/2021-Customs

F.No. DGEP/EOU/40/2017
Government of India
Ministry of Finance
Department of Revenue Central Board of Indirect Taxes & Customs
(Directorate General of Export Promotion)
******

New Delhi, dated 03
rd
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 Propriet orship/
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-
(Saroj Kumar Behera)
Additional Director