Duty drawback on export of manufactured goods - CBEC's Customs Manual 2023 - Customs

2. Duty drawback on export of manufactured goods: 2.1 Duty Drawback rebates Customs and Central Excise duties chargeable on any imported materials or excisable materials used in the manufacture of goods exported. The composite rates of Duty Drawback comprising incidence of Customs and Central Excise duties and Service Tax have been discontinued w.e.f. 1.10.2017. Drawback is now limited to incidence of duties of Customs on inputs used and remnant Central Excise Duty on specified petroleum products used for generation of captive power for manufacture or processing of export goods. Duty Drawback is of two types: (i) All Industry Rate and (ii) Brand Rate. The legal framework is provided by Sections75, 75A and 76 of the Customs Act, 1962.Customs and Central Excise Duties Drawback Rules, 2017 (Drawback Rules, 2017)(earlier The Customs, Central Excise duties and Service Tax Drawback Rules, 1995) have been issued under the Customs Act, 1962 and the Central Excise Act, 1944. 2.2 The All Industry Rates (AIR) are notified, generally every year, by the Government in the form of a Drawback Schedule based on the average quantity and value of inputs and duties (both Customs Central Excise) borne by export products. The AIRs are essentially average rates based on assessment of average incidence. These AIRs are recommended by a Drawback Committee which is set up by the Government. 2.3 AIR are fixed after extensive discussions with stakeholders like Export Promotion Councils, Trade Associations, individual exporters so as to obtain relevant data, which includes procurement prices of inputs, indigenous as well as imported, applicable duty rates, consumption ratios and FOB values of export products. Data is also sought from Customs and Central Excise field formations and Ministries which is taken into account. 2.4 The AIR may be fixed as a percentage of FOB price of export product or as specific rates. Drawback Caps are imposed in cases to obviate the possibility of misuse. All claims of duty drawback are filed with reference to the tariff items and description of goods given in the Schedule. The rates of drawback specified in the Schedule are not applicable to export of commodity or product manufactured or exported, among others, in discharge of export obligation under Advance Authorisation or Duty free Import Authorisation issued under Duty Exemption Scheme of relevant Foreign Trade Policy; by a licensed hundred per cent Export Oriented Unit; by units situated in Free Trade Zone, Export Processing Zone or Special Economic Zone, etc. However in case of exports in discharge of export obligation under Special Advance Authorization scheme of DGFT, rates of drawback specified in the Schedule shall apply subject to certain restrictions and modifications. [Refer Notification No.89/2017-Cus (N.T.), dated 21.09.2017] 2.5 The tariff items and description of goods in the Schedule are aligned with the tariff items and description of goods in the First Schedule of Customs Tariff Act, 1975 at four digit level only. The description of goods given at six or eight digits in the Schedule are in several case may not be aligned with the description of goods given in the First Schedule to Customs tariff Act, 1975. The general rules for interpretation of First Schedule to Customs Tariff Act, 1975 apply, mutatis mutandis, for classifying the export goods listed in the Schedule. [Refer Notification No.89/2017-Cus (N.T.), dated 21.09.2017] 2.6 The scrutiny, sanction and payment of Duty Drawback claims at EDI locations is carried out through the EDI system which also facilitates payment directly to the exporter s bank account, if other conditions are fulfilled. 2.7 The Brand Rate of Duty Drawback may be fixed in terms of Rules 6 and 7 of the Drawback Rules, 2017in cases where the export product does not have the AIR of Duty Drawback or the AIR neutralizes less than eighty per cent. of the duties paid on the materials or components used in the production or manufacture of the export goods. Brand rate is fixed by the Principal Commissioner of Customs or Commissioner of Customs, as the case may be, having jurisdiction over the place of export. 2.8 An exporter intending to claim Brand rate of Drawback, has to file an application for fixation of the brand rate within 3 months from the date of Let Export Order which can be extended up to 12 months from LEO subject to conditions and payment of fee as provided in the Drawback Rules, 2017. This application has to be made before the Principal Commissioner of Customs or Commissioner of Customs, as the case may be, having jurisdiction over the place of export. [Refer Drawback Rules, 2017 and Circular No. 38/2017-Cus dated 22.09.2017] 2.9 The application for fixation of Brand rate is to include, inter alia, 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. 2.10 In Brand rate of drawback, the exporter is compensated the incidence of Customs and Central Excise duties actually incurred in the export product based on verification of documents and proof of usage of actual quantity of materials or components utilized in the manufacture of export product and duties/tax paid thereon. 2.11 Exporters who file application for fixation of Brand Rate under Rule 6 of the Drawback Rules, 2017 may also apply to the Principal Commissioner of Customs or Commissioner of Customs for provisional drawback to be granted to him pending determination of amount or rate of drawback. Similarly, exporters claiming Brand rate of duty drawback under rule 7 of the Drawback Rules, 2017 shall be paid a provisional drawback amount, as may be specified by the Central Government, by the proper officer of Customs. He may also apply to the Principal Commissioner of Customs or Commissioner of Customs for further provisional drawback. [Refer Rules 6 and 7 of drawback Rules,2017] 2.12 A time limit of 15 days is prescribed for Customs Commissionerates to issue such provisional Brand rate letters in case of revised simplified procedure and 25 days for final Brand rate letters in the case of normal procedure. The work related to fixation of brand rates should be regularly monitored by the Commissioner of Customs, and by Chief Commissioners, for ensuring concerted and sustained action for disposing Brand rate work. The Brand rate fixation letter issued by Customs Commissionerates has to indicate full and comprehensive description/details of the exported goods and other details. [Refer Circular No. 14/2003-Cus dated 06.03.2003, D.O. letter No. 609/110/2005-DBK dated 26.08.2005 and Instructions No. 603/01/2011- DBK dated 31-7-2013 and dated 11.10.2013]