What Is A Draw Back

Introduction

Duty Drawback has been one of the popular and principal methods of encouraging export. It is a relief by way of refund/ recoupment of custom and excise duties paid on inputs or raw materials and service taxation paid on the input services used in the manufacture of export goods.

Duty drawback provisions are given under section 74 and 75 of the Customs Human action, 1962. Section 74 allows duty drawback on re-export of duty paid goods. Whereas department 75 allows drawback on imported goods used in the manufacture of export appurtenances. In order to facilitate the drawback procedures, the Central Regime is empowered to brand rules. Pursuant to such power, the Central Government has issued two rules, i.e., Re-consign of Imported goods (Drawback of Custom Duties) Rules, 1995 and Customs and Central Excise Duties and Service Tax Drawback Rules, 1995.

Drawback on re-export of duty paid goods under Section-74

Section 74 of the Human action grants duty drawback upto 98% of the import duty paid on goods, if the appurtenances are re-exported past the importer. The importer is entitled to drawback bailiwick to the fulfilment of the following atmospheric condition:

a. Appurtenances are imported into India by making payment of community duty;

b. Appurtenances are identified to the satisfaction of the Assistant or Deputy Commissioner of Customs every bit the goods, which were originally imported;

c. Appurtenances take entered for export either on a shipping bill through sea or air, or on a bill of export through land, or as baggage, or through mail service and the proper officer should take permitted clearance of the goods for export;

d. Goods are entered for export within ii years from the date of payment important duty (period can exist extended on sufficient grounds being shown). Information technology is to exist noted that the fourth dimension limit of two years has to exist considered from the engagement of payment important duty. Hence, it does not hateful the date of importation.

The Key Government vide the powers conferred under section 74, has notified the Re-export of Imported goods (Drawback of Custom Duties) Rules, 1995. These rules prescribes the procedure for claiming drawback and procedure for claiming drawback on re-exports by Post and through other modes.

Rate of Drawback

As regards to the rate of drawback, the Key Regime is empowered to fix the rate having regard to the duration of apply, depreciation in value and other relevant circumstances prescribed by a notification. In this behalf, the Regime has issued notification no.xix/65 dated 6-02-1965 as amended. As per this notification, drawback is not permissible for certain specified goods, such as wearing apparel, tea chests, exposed cinematographic films passed by Pic Censor Board, unexposed photographic films, paper and plates and x-ray films. Too, in respect of motor vehicles imported for personal and private use the Drawback is calculated by reducing the import duty paid according to the laid down percent for use for each quarter or part thereof, but upto maximum of four years.

Following table enumerates the reduced charge per unit of duty drawback having regard to the duration of use:

Sl.No.	Length of period between the date of clearance for domicile consumption and the engagement when the goods are placed nether Community control for consign	Percentage of drawback
i	Non more than 3 months	95%
two	More than than iii months simply not more 6months	85%
3	6- ix months	75%
4	9-12 months	70%
five	12- 15 months	65%
6	15-18 months	60%
7	More than eighteen months	Cypher

Drawback on imported materials used in the manufacture of export goods under Section-75

Drawback under section 75 is dissimilar from drawback under department 74. As per section 75, Central Regime is empowered to permit duty drawback on export of goods, where the imported materials are used in the manufacture of such goods. Dissimilar drawback of a portion of the customs duty paid on imported goods, hither the main principle is that the Government fixes a rate per unit of last article to be exported out of the state as the amount of drawback payable on such goods. Shortly, these rates are of ii types, viz., ALL INDUSTRY RATE and Brand Rate. Further, the drawback amount depends upon the following factors:

a. Mode of manufacture,

b. Quantum of raw textile required,

c. Average content of duty paid manufactures in the terminal product,

d. Standardisation of last production conforming to these norms.

It is of import here to note that Drawback is besides eligible when imported materials and / or excisable materials are used in the manufacture of goods to exist exported. Such provisions are given under Community, Primal Excise Duties and Service Tax Drawback Rules, 1995 [Drawback Rules]. The Central Government have framed the Drawback Rules, pursuant to the powers given under Section 37 of the Key Excise Act, 1944. Co-ordinate to such rules, drawback is eligible for both customs duty as well every bit excise duty, discipline to the non availment of Cenvat credits. However, duty drawback of community component is eligible irrespective of whether exporter has availed of Cenvat or not.

Importance of shipping nib for claiming duty drawback

Shipping bill is an essential document for claiming duty drawback. In example of exports under e-Aircraft bill, the Shipping bill itself is regarded as merits for duty drawback. Whereas in case of manual export, the triplicate copy of the Shipping nib is treated as the drawback claim. Farther, at that place are sure other formalities and documents required apart from the Shipping bill.

Not applicability of Drawback scheme

Duty Drawback is non allowed in the following cases as per the Dominion 3 of the Drawback Rules:

a. if the said goods, except tea chests used every bit packing material for consign of blended tea, have been taken into use after industry;

b. if the said goods are produced or manufactured, using imported materials or excisable materials or taxable services in respect of which duties or taxes accept non been paid; or;

c. on jute batching oil used in the manufacture of export goods, namely, jute (including Bimlipatam jute or mesta fibre), yarn, twist, twine, thread, cords and ropes;

d. if the said goods, being packing materials accept been used in or in relation to the export of -

i. jute yarn (including Bimlipatam jute or mesta fibre), twist, twine, thread and ropes in which jute yarn predominates in weight;

ii. jute fabrics (including Bimlipatam jute or mesta fibre), in which jute predominates in weight;

three. jute manufactures non elsewhere specified (including Bimlipatam jute or mesta fibre) in which jute predominates in weight.

4. on any of the goods falling within heading 1006 or on wheat falling within heading 1001 of the Kickoff Schedule to the Community Tariff Act, 1975.

As well the in a higher place, duty drawback is non admissible in the following cases:

a. if the drawback entitlement is less than `.l/- [Sec-76(i)(c) of the Customs Human action, 1962]

b. if the market price of export appurtenances is less than the amount of drawback due thereon [Sec-76(1)(b) of the Customs Act, 1962]

c. if production is manufactured partly or wholly in bond under section 65 of the Customs Act, 1962 because the duty drawback is not admissible in case of goods manufactured from duty free inputs

d. if the product is manufactured and exported by a 100% EOU in terms of the relevant Import policy; However, as per para 6.eleven of FTP 2009-14, in case of deemed exports, if the DTA supplier does non merits export benefits, then the EOU/EHTP/STP/BTP Unit shall be eligible to claim such benefits

e. if the product is manufactured and/ or exported by any units in the FTZ/ EPZ or SEZ for the above reason

f. if the goods are manufactured and exported in terms of Dominion eighteen and 19(2)of the Central Excise Rules, 2002 as these rules provide for rebate of duty, and export in bond on appurtenances on which duty has not been paid

grand. if the appurtenances exported to Burma, Nepal, Kingdom of bhutan, Tibet or Sinkiang as specified in Notification No. 208/77-Cus., dtd 1-ten-1977

h. if the amount of drawback is less than 1% of Fob value (except where the corporeality of drawback is more than `.500/-) every bit laid down in Dominion 8 of Drawback Rules

i. the consign value of the goods in the Bill of Export or Shipping Bill is less than the value of imported materials used in the industry of such goods or is not more than such percentage of the value of such imported material equally the Central Government may notify in this behalf [Rule viii of the Drawback Rules]

j. where any drawback has been allowed on any goods nether section 75 and the auction gain in respect of such goods are not received by or on behalf of the exporter in India within the fourth dimension allowed under the FEMA, such drawback shallbe deemed never to have been allowed and the Central Regime may, by rules made under sub-section (2), specify the process for the recovery or adjustment of the corporeality of such drawback. [Proviso to Sec 75 of the Community Act]

Conclusion

Duty drawback is a beneficial provision given under the Customs Act, 1962 and the Drawback Rules, 1995. This fiscal benefit is in addition to the other benefits given under Foreign Trade Policy [FTP]. Yet, drawback is not immune when the assessee opts for Advance Authorisation scheme [i.e., purchase of inputs without payment of duty]. Therefore, it is advisable to analyse all the benign options earlier choosing whatever particular option.

-By CA. Monalisa Khuntia