Drawback Duty In Custom Law India

Procedure & general definitions

The term drawback is applied to a certain amount of duties of Customs/central excise, some times the whole, some times only a part remitted or paid by Government on the exportation of the commodities on which they were levied.

• To entitle goods to drawback, they must be exported to a foreign port, the object of the relief afforded by the Drawback being to enable the goods to be disposed of in the foreign market as if they had never been taxed at all. For Customs purpose drawback means the refund of duty of customs and duty of central Excise that are chargeable on imported and indigenous materials used in the manufacture of Exported goods.
• Drawback rates for standard and common type of products are pre-notified (All Industry Drawback Rate Schedule) and updated every year after the Budget.
• For products not figuring in the All Industry Schedule or where the All the Industry rate is below 80% of the exporter’s claimed rate, the exporter has to get a brand rate fixed by furnishing the prescribed data.
• Anti-dumping duty is rebatable only by way of special brand rate of drawback provided the input used has actually borne this duty. Drawback for inputs is permissible not only in case of manufacture but also for processing or other operations for export of goods.
• For imported products re-exported as such, 98% refund of customs duty paid, including anti-dumping duty, is available as Drawback. Drawback is payable only if the amount of drawback exceeds Rs. 500/- or it is 1% or more of the export FOB value. In case of export by post or export is discharged of export delegation, the minimum limits Rs. 50/-.
• Regarding payment of excise component of All Industry Rates of Drawback, a certificate of non-availment of Modvat facility may become necessary. Excise component will not be paid in the case of goods procured for export from open market by merchant exporters, such goods being treated as having availed the Modvat facility. Where goods are unconditionally exempt from excise duty, Customs officers may not insist on such certificate for paying the drawback.

No separate application or claim for payment of drawback need be filed. The drawback shipping bill (green coloured) is automatically treated as a claim. It should be accompanied, inter-alia, by the following documents :-

• Copy of export contract or letter of credit as the case may be
• Copy of packing list
• AR4 form, wherever necessary
• Copy of brand rate sanction order, where applicable

In respect of claims filed on or after 8/1/1999, Customs should pay the drawback within two months of export of pay interest thereon for the period of delay.

• Draw back option is open to merchant exporters as well.
• Imports for repair, jobbing etc. free of duties subject to bond for their re-export with 10% value addition. No. CCP is required now.

Interest on delayed payment of duty or on delayed refund/drawback of duty :

Section 27A, 28AA and 75A of Customs Act, 1962 introduced in1995 Budget provide for changing of interest on delayed payment of customs duty and payment of interest on delayed refunds/drawback of duty.

Types Of Drawback

There are two types of drawback.

• One is called drawback under Section 74 of the Customs Act, 62 which allows drawback of duty paid on goods originally imported on payment of duty and subsequently re-exported. The manner and time limit for filing the claims are governed by "Re- export of Imported Goods (Drawback of Customs duties) Rules, 1995.

  In this category, two types of cases are covered viz.,

  1. Imported goods exported as such i.e. without putting into use – 98% of duty is refunded and
  2. Imported goods exported after use – the percentage of duty is refunded according to the period between the date of clearance for home consumption and the date when the goods are placed under Customs control for exports. The percentage of duty drawback is notified under Notification. No 19 Cus, dated 6th Feb, 1965 as amended from time to time.
• The other scheme is payment of drawback under Section 75 and Rules made thereunder at specified rates on export of goods manufactured in India. The manner and time limit for filing the claims are prescribed under the Customs and Central Excise Duties Drawback Rules 1995 as amended from time to time.

The Central government notifies the Drawback rates for various products either on a general basis (all industry rates) or for individual exporters( brand rates) as the case may be.

Drawback sanctioned under section 75 has a two tier system involving

1. Fixation of rates by the Directorate of Drawback in the Central Board of Excise and Customs and
2. Disbursement of drawback amount by the Customs Houses and/ Central Excise Commissionerate.