Drawback Rate Table
Duty Drawback is, available on items wherein such raw materials and components have been used on which duty either of customs or excise has been paid. Another essential condition being that such items have not been taken into use after their manufacturer (except tea chests). The items on which drawback is available have been put into 98 Chapters based on Customs Tariff (Harmonised System). The list containing rates of drawback are put into a tabular form which may be called “Drawback Table”
Residual Items
Chapter 98 of the Drawback Table covers “all other goods, not elsewhere specified”. General Note 5 to Drawback Table, states that export goods for which no rate has been specified, they will be entitled to drawback on account of the packing material used at the rates applicable for such materials under relevant serial/sub-serial number of the said Table.
Interpretation. Reliance on any advice given by an Export Promotion Council or the Explanatory Notes to BTN (Brussels Tariff Nomenclature) is not permissible for classification under the Drawback Schedule in preference to the more proximate and directly related tariff i.e. Central Excise Tariff.
Where No Drawback Exist
Where no amount or rate of drawback has been determined, any manufacturer or exporter may apply in writing to the Central Government for determination of the amount or rate of drawback on such goods within the prescribed time limit as detailed in Chapters 14, 15 and 16. But in such cases i.e. where no rate has been specified, such export goods will be entitled to drawback on account of the packing material used at the rates applicable for such materials under relevant sub-serial number of the drawback table.
Project Exports
Drawback is payable in respect of supplies of materials made from India for turnkey projects. Such projects may involve designing, civil construction, and commissioning of plant or supervision thereof along with supply of equipment. However, all these services need not have been taken compulsorily for the purpose of granting drawback.
Tailor-made Products
Products which are manufactured as per specification of foreign buyers are known as ‘tailor-made’ products. In respect of such products if the export of single item is spread over three or more shipments, their exporters have to get the brand rate fixed.
Parts and Accessories of Machinery
Parts and accessories of products falling under the specified product groups and are made of a single material or composite article for which a rate of drawback exists elsewhere in the Drawback Table, shall be entitled to drawback under the relevant Sub-Serial number. Therefore, exporters may make suitable claims at the time of export. However, duties paid on goods which are exported as spares or as an accessory of an equipment are not refunded under the Rules. For such items, if these are imported originally the duty relief on re-export can be claimed under Section 74 of the Customs Act, 1962. In case these are indigenously manufactured the provisions of export under bond or rebate of finished stage duty can be availed, as per procedure laid down under Central Excise Rules, 1944.
Packing Materials
The rates of drawback expressed against the various sub-serial numbers in the Drawback Table in specific terms or on as valorem basis unless otherwise provided under any sub-serial, are inclusive of drawback on packing materials used, if any. The General Notes provided that export goods for which no rate has been specified in the Table will only be entitled to drawback on account of the packing materials used at the rates applicable for such materials under the relevant serial/sub-serial number specified in the Table.
The rate for packing material for which drawback is claimed, had to be the appropriate rate against the relevant sub-serial number pertaining to the material for which such packing materials are made of. The material question, therefore, is as to what the material from which the packing materials is made of.
Packing materials like PVC bags where used for cotton madeups loose their identity as they become part and parcel of the items (madeups) exported. Even if identity of imported materials is established, drawback is not admissible on the same as the drawback rate on the export items is inclusive of drawback on packing material.
Paper inserts and adhesives (stickers) also go into manufacturing process for packing and they too are not eligible for drawback.
CKD/SKD Exports
In respect of the goods exported in CKD/SKD condition where an exporter establishes evidence and so long as it is possible to identify that a complete set of component required for assembling the export product has been shipped, either in one or more lots, through one or more ports/airports/land customs stations, then the drawback rate applicable to the completely assembled unit shall be applicable to such exports subject to such other conditions as are prescribed for the complete unit.
Notwithstanding drawback rates specified against the various serial/sub-serial numbers in the Drawback Table is specific terms or on ad valorem basis, are inclusive of drawback for packing materials used, as provided in General Notes to the said Table, the goods covered by specified sub-serial Nos. of the Table (See General Notes to the Drawback Table), when exported in CKD/SKD packs, by deletion of certain components/assembly, the drawback indicated in the relevant sub-serial shall be payable to such packs, subject to the condition that the f.o.b. value of such pack exported is not less than 80% of the f.o.b. value of the completely assembled unit. For this purpose, the exporter shall produce evidence, to the satisfaction of the Assistant Commissioner of Customs, the contemporary f.o.b. value of the relevant completely assembled pack.
TVs in CKD Form. TVs exported in unassembled component/CKD form will be entitled to A1 rate provided—
- the exporter appends a certificate on the Drawback SB, that the components exported will comprise specified number of complete TV sets in CKD condition.
- Appropriate evidence is produced to show that the consignment does contain all the components required for assembling the specified number of complete TV sets. A list of components which essentially contribute the major part of the incidence (of duty) compensated through A1 rate is the following :-
- picture tube
- deflection yoke
- flyback transformers/EHT
- electronic/mechanical tuner
- integrated circuits
- remote control mechanism for TVs with remote control facility.
For quick settlement of the Drawback claim, the exporters may approach, in advance, the Regional Testing Laboratory of the STQC Directorate under the DOE (Deptt. of Electronics) and get suitable certificated to the effect that the components exported in any particular consignment as specified in the Shipping Documents (invoice, packing list, etc.) would actually make a particular number of complete TVs on assembly.
Madeups/Fabrics/Garments
The word ‘madeup’ is not defined in the Drawback Schedule. In section Note 7 of Section 11 of the Customs Tariff the expression ‘madeup’ means, inter alia, textiles cut otherwise than into squares or rectangles’. If the goods are merely cut in squares or rectangles, they are excluded from this definition. Further, in terms of Sec. Note 7 (b), ‘madeup’ means produced in the finished shape, ready for use (or mere needing separation without sewing) and other working (for example, certain dusters, towels, table clothes, scarfs, squares and blankets).
In the September 1998 Drawback AI Rate Table, a single rate has been extended to all types of madeups so as to avoid periodic fixation of rate for new varieties of madeups during the year.
Laces. Under the Central Excise Tariff laces are covered under Chapter 58 (item No. 58.04). This Chapter though under Sec. XI itself does not have any item described as madeup articles, which are mentioned at a number of other places, such as in Chapter 61, 62 and 63 under the same Section. Hence, ‘laces’ are clearly not covered by the definition of ‘madeup articles’. Moreover, these are not made-up articles because these are not ready for specific end-use.
Labels Imported Duty Free and Affixed on Export Articles. The tables imported duty free under Notif. No. 150/80-Cus, although supplied free of charge by foreign supplier, if affixed on export articles will tentamount to manufacture of goods from duty exempt materials. Hence, export of such items will be eligible for
reduced rate of drawback in terms of first proviso to Drawback Rule 3(1).
Hangers Re-exported with Garments. Drawback is admissible on hangers imported on payment of customs duty when hangers are re-exported with readymade garments. For details, see Chapter 17.
Cotton Canvas and Duck fabrics, Cotton Tyre Cord Fabrics and Cotton Belting Fabrics. These items are classified under heading 52.05 of the Central Excise Tariff. Drawback claims will be settled accordingly.
Bed Spreads/Bed Covers. Bed spreads are used for covering beds. The expression bed covers under sub-serial No. 2702(2) will also cover ‘bed spreads’.
Woollen Garments. Other than woollen suits/trousers/blazers/jackets, are not covered by SS No. 62.01 of the permitted provided drawback of such duty is not claimed.
Fabrics, Tarpaulins and Madeups of Plastic. Drawback shall be admissible on these items at the rate specified under Sub-serial Nos. 63.01 and 63.02 irrespective of the fact whether these are classified under Chapter 39 or 63 of the Drawback Table.
Tea in Bulk. The AI rate of drawback is only for bulk tea and does not contain drawback on packing materials. The production of a certificate of non-availment of Modvat (CENVAT) facility is mandatory for allowing drawback on tea.
Sanitary/Industrial Castings. Unmachined sanitary castings and unmachined industrial castings are covered by the Drawback SS No. 73.03 of the Drawback Tabel.
Big vis a vis Box
A bag as per Webster’s third International Dictionary is defined as a container made of paper, cloth, mess, metal, foil plastic or other flexible material. Thus, absence of fixed shape is the essence of a bag. The same Dictionary defines “bag” as rigid, typical, rectangle respectacle, often covered in which something non-liquid is kept or carried. It also defines “box” as something is nearest to the definition of ‘box’ and is not a bag. The addition of straps also does not make it a bag. Such articles in the market are commonly known as box and not bags.
Utensils and Kitchen Appliance
A utensil by dictionary means an instrument, implement, especially one required for domestic use. Similarly, an appliance means a thing applied as means to an end and includes a utensil, device equipment, etc. In this view of the matter, it will be incorrect to hold that chakla and belan are not utensils. Hence, chakla and belan are utensils.
Dye Content
The term “dyed” in relation to textile materials would cover yarn dyed/piece dyed/predominantly printed/coloured in the body.
Absorbent Cotton Wool
Absorbent cotton wool is not a drug intermediary and, hence, not entitled to drawback.
Rayon Garments Embroidered with Plastic Sequin
Whatever is done by way of embellishment, may bring about a change in appearance marketability and even the value of the goods, but can not be taken as having substituted the main fabric. When the entire garment is of rayon fabrics, attachment of plastic sequins by way of embellishment therefore, could not make the rayon material as not “chiefly” used in the garment. Actually it is the base and has to be taken as the main material, where even criteria of predominant contention may not stand attracted.
Wrong Declaration for Composition
Where the goods were declared as hosiery goods made out of 100% woolen worsted yarn of the desired count, the same were found to be containing approximately 15% plyamide as per certificate from the Textile Committee. Thus, the declaration being found wrong, the conditions for sanction of drawback was not satisfied. Hence, revision application also rejected.
Predominance-What it Implies
The concept of pre-dominance of weight has been used in the Tariff for the purpose of clarification. But that does not imply that predominance of one type of fibre can mean complete absence of another. As a matter of fact, predominance in isolation to the complete exclusion of other things because then there will be nothing to dominate. Party’s plea that there can be a ratio of cent per cent : nil is also illogical as that would mean an infinite ratio which is an abstraction.
Ex-bond Articles
Drawback is also granted on the duty paid raw materials/components (imported and indigenous) used in the export goods being along with non-duty paid materials/components used in the goods manufactured under bond i.e. ‘manufacture-in-bond operations’ under Section 65 of the Customs Act, 1962. In such cases, besides superscribing the Shipping Bill as “Ex-Bond-cum-Drawback Shipping Bill”, declare on them that –
(i) a claim for drawback under the Drawback Rules is being made.
(ii) the duties of customs and central excise have been paid in respect of the containers, packing materials used in the manufacture of export goods on which drawback is being claimed, and that in respect of such containers or materials, no separate claim or for rebate of duty under the Central Excise Rules, 1944 has been or will be made to the Central Excise authorities,
(iii) there is no change in the manufacturing formulae and in the quantum per unit of the imported materials/components, if any, used in the manufacture of export-goods.
(iv) the materials/components which have been stated in the application made under Rule 6 or 7 of the Drawback Rules to have been imported continued and are not being obtained from indigenous sources.
(v) where any specified condition is incorporated in the Brand Rate letter, as a qualifying condition for obtaining the drawback, necessary declaration to this effect should be made on the Shipping Bill.
(vi) Where the claim is under the Brand Rate (for which rates have already been fixed), a description in the Shipping Bill will be in terms of the Brand Rate letter, quoting the number and date of the said letter in the “remarks” column of the shipping bill,
(vii) Indicate the description, quantity and such other particulars of the as are necessary for deciding whether the goods are entitled to drawback in the Shipping Bill/Bill of Export. For the purpose, quantity of raw material (both duty paid /non-duty paid) used in export goods should be clearly given,
(viii) Copy of shipment invoice or any other document giving particulars of the description, quantity and value of the goods to be exported should be submitted to the Customs Officer,
(ix) Where Brand Rate has not been fixed, clearly write on the Shipping Bill the words “Provisional Claim”.
Note : Observe the formalities under AR3/AR4 procedure.