CUSTOMS AND CENTRAL EXCISE DRAWBACK – PART I

[Mr. M. GOVINDARAJAN]

Rules

The Central Government, in exercise of the powers conferred by section 75 of the Customs Act, 1962 and section 37 of the Central Excise Act, made the ‘Customs and Central Excise Duties Drawback Rules, 2017’(‘Rule’ for short)  which came into effect from 01.10.2017.    These Rules extend to whole of India.

Drawback

Rule 2(a) defines the term ‘drawback’ in relation to any goods manufactured in India and exported, as the rebate of duty excluding integrated tax and compensation cess leviable under Customs Tariff Act, 1975 chargeable on any imported material or excisable materials used in the manufacture of such goods.

Allowability of drawback

Rule 3(1) provides that drawback may be allowed on the export of goods at such amount or at such rates, as may be determined by the Central Government. Where any goods are produced or manufactured from imported materials or excisable materials, on some of which-

• only the duty chargeable thereon has been paid and not on the rest; or
• only a part of the duty chargeable has been paid; or
• the duty paid has been rebated or refunded in whole or in part or given as credit under any of the provisions of the-

• Customs Act, 1962 and the rules made there under; or
• Central Excise Act, 1944 and the rules made there under

the drawback admissible on the said goods shall be reduced taking into account the lesser duty paid or the rebate, refund or credit obtained.

Ineligibility for drawback

The second proviso to Rule 3(1) provides that no drawback shall be allowed-

• if the said goods, except tea chests used as packing material for export of blended tea, have been taken into use after manufacture;
• if the said goods are produced or manufactured, using imported materials or excisable materials in respect of which duties have not been paid;
• 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;
• if the said goods, being packing materials have been used in or in relation to the export of-

• jute yarn (including Bimlipatam jute or mesta fiber), twist, twine, thread and ropes in which jute yarn predominates in weight;
• jute facbrics (including Bimlipatam jute or mesta fibre) in which the jute predominates in weight;
• jute manufactures not elsewhere specified (including Bimlipatam jute or mesa fibre) in which jute predominates in weight.

Factors to be taken into account for determination of drawback

Rule 3(2) provides that in determining the amount or rate of drawback, the Central Government shall have regard to-

• the average quantity or value of each class or description of the materials from which a particular class of goods is ordinarily produced or manufactured in India;
• the average quantity or value of the imported materials or excisable materials used for production or manufacture in India of a particular class of goods;
• the average amount of duties paid on imported materials or excisable materials used in the manufacture of semis, components and intermediate products which are used in the manufacture of goods;
• the average amount of duties paid on materials wasted in the process of manufacture and catalytic agents;
• if any such waste or catalytic agent is re-used in any process of manufacture or is sold, the average amount of duties on the waste or catalytic agent re-used or sold shall be reduced;
• the average amount of duties paid on imported materials or excisable materials used for containing or, packing the export goods;
• any other information which the Central Government may consider relevant or useful for the purpose.

Revision of rates

The Central Government may revise amount or rates as determined by it.

Upper limit of drawback

The drawback amount or rate determined shall not exceed one third of the market price of the export product.

Effective period of drawback

The Central Government may specify the period up to which any amount or rate of drawback determined shall be in force.

If the amount or rate of drawback is allowed with retrospective effect, such amount or rate shall be allowed from such date as may be specified by the Central Government by notification in the Official Gazette which shall not be earlier than the date of changes in the rates of duty on inputs used in the export of goods.

Where drawback has not been determined

Rule 6 provides that where no amount or rate of drawback has been determined in respect of any goods, any exporter of such goods may, within 3 months from the date relevant for the applicability of the amount or rate of drawback, apply to the Principal Commissioner of Customs, having jurisdiction, for determination of the amount or rate of drawback.  All the relevant facts including the proportion in which the materials or components are used in the production or manufacture of goods and the duties paid on such materials or components.

If an exporter is exporting from more than one place of export, he shall apply to the Principal Commissioner or Commissioner having jurisdiction over any of the said places of export.

The prescribed period of 3 months for application may be extended by a period of three months by the Assistant/Deputy Commissioner.  The Principal Commissioner/Commissioner is having power to further extend the period by a period of six months.  This extension may be refused by the authorities after recording in writing the reasons for such refusal.

For the purpose of application requesting for extension of time with the Assistant/Deputy, an application fee equivalent to 1% of FOB value of exports or ₹ 1,000/- whichever is less, shall be payable.  If the extension is sought from Principal Commissioner/Commissioner then the application fee of 2% of the FOB value or ₹ 2,000/- whichever is less, shall be payable.

The Principal Commissioner/Commissioner shall making or causing to be made such inquiry as it deems fit, determine the amount or rate of drawback in respect of such goods.

Provisional payment

If the exporter wants drawback provisionally, he may make an application to the Principal Commissioner/Commissioner that a provisional amount may be granted to him towards drawback on the export of such goods pending determination of the amount or rate of drawback.  The Principal Commissioner after considering the application, may allow provisional payment of an amount not exceeding the amount claimed by the exporter.

The exporter, for the purpose of provisional payment, has to enter into a general bond of such amount and subject to such conditions as the Principal Commissioner may direct or enter into a bond for an amount not exceeding the full amount claimed by the exporter as drawback in respect of a particular consignment and binding himself-

• to refund the amount so allowed provisionally, if any for any reason, it is found that the duty drawback was not admissible; or
• to refund the excess, if any, paid to such exporter provisionally if it is found that a lower amount was payable as duty drawback;

The bond may be with such surety or security as the Principal Commissioner may direct.

If the Central Government considers it necessary so to do, it may-

• revoke the rate of drawback or amount of drawback, determined by the Principal Commissioner; or
• direct the Principal Commissioner to withdraw the rate of drawback or amount of drawback determined.

Final determination of drawback

When the amount or rate of drawback payable is finally determined, the amount provisionally paid to such exporter shall be adjusted against the drawback finally payable.  If the amount so adjusted is in excess or falls short of the drawback finally payable, such exporter shall repay to the Principal Commissioner the excess or be entitled to the deficiency.

Where drawback determined is low

Where the exporter finds that the amount or rate of drawback is less than 80% of the duties paid on the materials of components used in the production or manufacture of the said goods, he may make an application within three months from the date relevant for the applicability of drawback, to the Principal Commissioner having jurisdiction for determination of the amount or rate of drawback.  In the application he has to state all the relevant facts including the proportion in which the materials or components are used in the production or manufacture of the goods and the duties paid on such material or components.

If an exporter is exporting from more than one place of export, he shall apply to the Principal Commissioner or Commissioner having jurisdiction over any of the said places of export.

The prescribed period of 3 months for application may be extended by a period of three months by the Assistant/Deputy Commissioner.  The Principal Commissioner/Commissioner is having power to further extend the period by a period of six months.  This extension may be refused by the authorities after recording in writing the reasons for such refusal.

For the purpose of application requesting for extension of time with the Assistant/Deputy, an application fee equivalent to 1% of FOB value of exports or ₹ 1,000/- whichever is less, shall be payable.  If the extension is sought from Principal Commissioner/Commissioner then the application fee of 2% of the FOB value or ₹ 2,000/- whichever is less, shall be payable.

The Principal Commissioner/Commissioner shall making or causing to be made such inquiry as it deems fit, allow payment of drawback to such exporter  at such amount or at such rate as may be determined to be appropriate, if the amount or rate of drawback determined or revised is in fact less than 80% of such amount or rate determined.

Provisional drawback

If the exporter desires to get provisional drawback he may make an application to the Principal Commissioner of Customs and the same shall be paid by the proper officer. In the application the exporter is to indicate the provisional already paid and the grant of further provisional drawback.  The said payment is subject to the condition that bond required to be executed by the exporter and the bond shall be only for the difference between amounts or rate of drawback determined, revised and authorized provisional drawback.

If the Central Government considers it necessary so to do, it may-

• revoke the rate of drawback or amount of drawback, determined by the Principal Commissioner; or
• direct the Principal Commissioner to withdraw the rate of drawback or amount of drawback determined.

Value of export is less than import

No amount or rate of drawback shall be determined in respect of any goods or class of goods if the export value of each of such goods or class of goods in the bill of export or shipping bill is less than the value of the imported materials used in the manufacture of such goods  or is not more than such percentage of value of the imported materials used in the manufacture of such good, as the Central Government may, by notification, in the Official Gazette, specify in this behalf.

Power of the Officers

For the purpose of-

• determining the class or description of materials or components used in the production or manufacture of goods or for determining the amount of duty paid on such materials or components; or
• verifying the correctness or otherwise of any information furnished by any manufacturer or exporter or other persons in connection with the determination of the amount or rate of drawback; or
• verifying the correctness or otherwise of any claim for drawback; or
• obtaining any other information considered by the Principal Commissioner of Customs

to be relevant or useful, any officer of the Central Government specially authorized in this behalf by an Assistant Commissioner/Deputy Commissioner, may require any manufacturer or exporter of goods or any other person likely to be in possession of the same to furnish such information and to produce such books of account and other documents as are considered necessary by such office.

Access to manufactory

Whenever an Officer of the Central Government specially authorized by an Assistant/Deputy Commissioner of Customs, considers it necessary, the manufacturer shall give access at all reasonable times to the officer so authorized to every part of the premises in which the goods are manufactured, so as to enable the said officer to verify by inspection the process of, and the materials or components used for the manufacture of such goods, or otherwise the entitlement of the goods for drawback or for a particular amount or rate of drawback.