Rate of Drawback Determination of Date from which the Amount or Rate of Drawback is Effective

Drawback Rules lay down that the Central Govt. may specify the period upto which any amount or rate of drawback determined or revised, as the case may be, shall be in force.

The amount or rate of drawback applicable to any goods exported under these Rules shall be determined in terms of provisions of Sec. 16, or Sub-sec. (2) of Sec. 83, of the Customs Act, 1962.

Retrospective Effect. Where 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 Govt. which shall not be earlier than the date of changes in the rates of duty on inputs used in the export goods.

All Industry Rates-The Drawback Table The rates of drawback which have already been fixed and are applicable to all exporters, are known as ‘All Industry Rates’. The A.I. rates as such are given in col. 4 of the Drawback Table. These rates may, however, be got revised on application to the Govt. in a prescribed manner as detailed in Chapters 13 to 15.

The titles of Chapters of the Drawback Table are identical with the titles of the corresponding Chapters of the First Schedule to the Customs Tariff Act. Further, the serial/sub-serial numbers of the export products in the said Table also correspond with the Heading /Sub-heading Nos. of the Customs Tariff Schedule under which the goods of the description similar/identical with the export products are classifiable.

In terms of General Notes to the Drawback Table, unless the context otherwise requires, the scope of the specified export products against a Sub-serial No. in the Drawback Table is the same as such specified goods would have under the First Schedule to the Customs Tariff Act, 1975.

Cap/Maximum Limit – A cap/maximum limit has been/may be imposed on products having drawback rate above 10%.

The drawback rates are determined either in specific terms or in terms of percentage of f.o.b. value of the export product. Unless otherwise specifically provided, these rates are inclusive of drawback for packing materials used, if any. Moreover, these are shown in column 5 of the Drawback Table separately for customs and excise. The rate of drawback would be applicable as is prevailing on the date of entry out i.e. the passing of the Shipping Bill by the Customs authorities. Where, however, the Shipping Bill has been presented before the date of entry outwards of the vessel by which the goods are to be exported, the Shipping Bill shall be deemed to have been presented on the date of such entry outwards. Passing of the SB is also known as giving “Allow Order” or “Let Export” order on the SB.

Brass Articles-Limitation on Drawback. In case of specified articles of brass in the Drawback Table, which contains non-brass portion, the drawback rate specified under the particular sub-serial No. shall be limited to the brass content only. The drawback on other articles of brass, of the Drawback Table shall be applicable to any composite articles/or any other articles containing brass irrespective of percentage of the brass content.

Paper/Board and Articles thereof. In case the export product covered under specified sub-serial Nos. of the Drawback Table, are made of more than one type of paper/board, rate applicable shall be in proportion to the material content of paper/board used.

Foreign Agent’s Commission. Drawback claims will be passed on the total f.o.b. value inclusive of foreign agents commission. Thus, for determination of the drawback, the foreign agent’s commission paid by the exporter will be included in the f.o.b. value declared in the shipping bills.

Market Price. The market price of the goods in India should not be less than the amount of drawback due. Also see under ‘Regulation of Drawback’ in Chapter 1.

Drawback is of Average Amount of Duty Paid. The Drawback Rules (Rule 3 in particular) provides only for a refund of the “average amount of duty paid on materials” of any particular class or description of goods used for the manufacture of export goods of that class or description by manufacturers generally, except to the prescribed under 7. The Rules do not envisage a refund of an amount arithmetically equal to the customs duty or central excise duty, which may have been actually paid by an individual importer cum-manufacturer. If that had been statutory intendment, it would have been simple to provide that in all cases where imported raw materials are fully used in the manufacture of goods which are exported, the assesses i.e. exporter would be entitled to a drawback of customs or excise duties paid by him for the import or on the manufacture.

Rate Conditional on Use of Imported Inputs. Wherever a rate has been provided subject to the condition of use of imported inputs, such rate shall be payable only when such imported inputs are duty paid.

Additional Drawback

Electric Fan Export with Regulator. In case electric fan is exported along with regulator, the additional drawback shall be payable, at the rate specified under sub-serial No. of regulator.

Bicycle/Cycle Rickshaw Export with Accessories. If bicycle/cycle rickshaw, assembled or unassembled is exported along with extra ‘Accessories’ as specified under specified serial/sub-serial Nos. of the Drawback Table, then additional drawback shall be payable at the rate specified against the sub-serial number relating to such accessories.

No Reduction in Drawback

Under Rule 3 of Drawback Rules, 1995, the drawback is to be allowed at such rates as may be determined by the Central Govt. These rates has are notified. The Commissioner or “proper officer” cannot vary such rate as the Govt. has not delegated the power of varying the average amount of drawback to the officer(s) who sanction the amount of drawback. Even the duty not paid on goods imported under duty free licenses can not be deducted from the drawback amount to which the exporter is eligible.

Procedural Requirements

The rates of drawback shall be applicable only if the procedural requirements for claiming drawback as specified under rule 11, 12 and 13 of the Customs and Central Excise Duties Drawback Rules, 1995 in this regard, unless otherwise relaxed by the competent authority, are satisfied.

The rates of drawback specified in the Drawback Table shall not be applicable to export of any of the commodities/products if such commodity/product falls within the items on which ‘no’ drawback is admissible or drawback is regulated.

Also see ‘No Drawback’ and ‘Regulation of Drawback’ in Chapter 1.

Drawback on Exports to Nepal, Bhutan and Myanmar

Drawback may/may not be payable on goods that are exported under claim for drawback to any place in Nepal/Bhutan/Myanmar (Burma). Details are in Chapter 9.

Drawback on Goods Exported in Vessels of Less than 1000 tonnes

Drawback of import duty in respect of goods exported in such vessels shall be allowed only if-

(i) the agent of the vessel executes a bond of a sum equal to amount of drawback and in such form and manner as the proper officer of customs deems fit; or

(ii) the exporter produces to the officer a certificate issued by the Customs authorities at the port of destination that the goods have been landed at the port or a certificate from the Authorized Dealer in Foreign Exchange through whom the export documents have been negotiated, that the sale proceeds have been realized in foreign exchange or a certificate from the said dealer showing that the consignee has taken delivery of the goods in the country of destination and that the sale proceeds thereof will be realized in the prescribed manner.

Term of Bond. The terms of the bond shall be that if the agent of the vessel produces to the proper officer within three months or within such extended period as may be allowed, a certificate from the Customs authorities at the port of destination that the goods have been landed at the port, the bond shall stand discharged; but otherwise a sum equal to the amount of drawback allowed on the goods in respect of which the said certificate is not produced shall stand forfeited.

Goods not covered by this Provision. The goods on which the export duty leviable is more than the drawback of duty admissible and the drawback of duty is adjusted against the export duty leviable, shall be beyond the purview of the above mentioned conditions i.e. drawback will be admissible on such goods.

Drawback on Stores exported in Vessels less than 200 toones gross

Drawback shall not be allowed on following goods when such are taken on board as stores on any vessel of less than 200 tons gross.

(i) Alcoholic liquors

(ii) Cigarettes

(iii) Cigars

(iv) Pipe tobacco

Brand Rates and Special Brand Rates

According to the tables of rates of drawback, a brand rate can be got determined in respect of any goods included in a ‘group’ of items in the said Table, provided an All Industry Rate does not exist, or when the rate of drawback is less than four-fifth of duty paid on raw material, etc. used in the production or manufacture of the specific goods by a particular manufacturer.

Where the rate of drawback does not exist at all, it can be got determined under Rule 6(1) (a), and where the existing rate is less than 80% of the actual duty paid on raw materials, etc. it is done under Rule 7(1). While the rate under Rule 6(1) (a) is known as Brand Rate, the rate got determined under Rule 7(1) is called Special Brand Rate. Further details are in Chapters 14 to 16.

Brand Rate under Duty Exemption Scheme. Brand/Special Brand Rate, is also granted against such export products wherein duty paid raw materials are used along with raw materials imported under Duty ExemptionSchemeof Advance Licensing. This Brand Rate is granted against such export products in respect of duties paid on other inputs i.e. other than duty free inputs used in production, based on AI rates for such Inputs and conversion stage duties of Central Excise levied on such intermediate stage products.

Since the brand rates are to be fixed on an application from individual manufacturer/exporters, they vary from one exporter to another. As such, these are also applicable to the products of those manufactures-exporters only who have got them determined. In case such goods where person, drawback is paid to such person only on production of a ‘no objection’ certificate from the concerned manufacturer. It may be noted that brand rate can be got determined by the manufacturer (and not exporter) of a product only. Details are in Chapter 13.