Clarification regarding Duty Drawback allowed in cases of short realization of export proceeds due to bank charges deducted by foreign banks, issued by the C.B.I.T.& C., New Delhi, vide Circular No. 33/2019 - Customs dated 19th September, 2019 - Customs - PUBLIC NOTICE NO. 15/2019

OFFICE OF THE COMMISSIONER OF CUSTOMS, G. S. T. BHAWAN, 41/A, SASSOON ROAD, PUNE-411001 F. No. VIII/Cus/Tech/PN/48-30/2018 Dated: 26.09.2019 PUBLIC NOTICE NO. 15/2019 Subject - Clarification regarding Duty Drawback allowed in cases of short realization of export proceeds due to bank charges deducted by foreign banks, issued by the C.B.I.T. C., New Delhi, vide Circular No. 33/2019 - Customs dated 19th September, 2019 - Attention is invited to the Circular No.33/2019 - Customs dated 19th September, 2019, issued by the Board vide F.No.609/19/2019-DBK. The matter pertains to the instances of show cause notices issued by the some Customs field formations for recovery of duty drawback on account of short realization of export sale proceeds due to bank charges deducted from export invoice by the banks. Exporters have contended that these short realizations are actually service charges deducted by intermediary banks while remitting payment from abroad and that said charges are documented by the banks. It has been requested that such short realized export sale proceeds may be considered as full realization and that duty drawback not be recovered for such short realization. 2 The matter has been examined by the Board. In this regard, the Reserve Bank of India has clarified that such deductions are enabled under Notification No. FEMA 23(R)2015-RB, dealing with Foreign Exchange Management (Export of Goods and Services) Regulations, 2015. In respect of various export promotion schemes, para 2.52 of the FTP 2015-20 also states that free foreign exchange remitted by buyer after deduction of bank service charges are taken as export realization under export promotion schemes of FTP. Earlier also, in respect of agency commission paid to agents abroad for securing export contracts, the Board vide Circular No.64/2003-Customs dated 21.07.2003, has allowed such commission upto the limit of 12.5 % of FOB value to be considered for payment of drawback without deducting it from FOB value in line with the RBI's Circular No. AD(MA Service)17 dated 19,5.1999 and DGFT's Policy Circular No.55 (RE-98) dated 10.02.1998. 3 In view of the above, the Board has clarified that duty drawback may be permitted on FOB value without deducting foreign bank charges. It is further clarified that since agency commission upto the limit of 12.5 % of the F.O.B. value has been allowed, such deduction on account of foreign bank charges is allowed within this overall limit of 12.5 % Of the F.O.B. value. From the average rates of agency commission and foreign bank charges in respect of export shipments, it is seen that these deductions fall within the overall limit of 12,5 % of F.O.B. value allowed by the Board. Agency commission and foreign bank charges, separately or jointly, exceeding this limit should be deducted from the F.O.B. value for granting duty drawback. 4 It is further clarified by the Board that the Field formations may consider exporter's request as regard to regularising such short realization on account of foreign bank charges based on documentary evidence such as export invoice, bank's confirmation regarding foreign bank charges, etc., to justify such deductions, on merit. It is also clarified that the show cause notices issued by the field formations for recovery of duty drawback be dealt with accordingly. 5 The concerned exporters, in case of any difficulty, are requested to approach the Deputy / Assistant Commissioner in charge of the Brand Rate Unit of the Commissionerate, located at E-Wing, IV Floor, GST Bhavan, Bund Garden Road, Pune - 411 001 (Phone No.020-26051846). (P. K. BEHERA) COMMISSIONER