3. Non-Admissibility/Restriction

Drawback is either not admissible or restricted in following cases.

(i) Export Manifest/Export Report. It is not admissible if the export goods which are required under Customs Regulation to be included in the export manifest/export report at the port of shipment, are not so included.

(ii) Market Price. If market price of export goods in the course of trade in India is less than the amount of drawback due, drawback will not be admissible. The exporter is required to declare the Present Market Value (PMV) in the Drawback Shipping Bill. The PMV or current market price should constitute the price approved under Sec. 4 of Central Excise Act, 1944, the excise duty paid thereon and other charges like, transport, octroi, etc. This price is to be compared to the f.o.b. value declared by the exporter.

(iii) In cases where the amount of drawback is less than Rs.500/- it should not be less than 1% of f.o.b. value of exports. This condition of minimum 1% of f.o.b. value will not be applicable in case exportes are made by post and exports are made in discharge of exports obligation against advance licences issued under Duty Exemption Scheme. Thus, in case of exports made by post and exports under Duty Exemption Scheme, drawback shall be payable in all cases wherever the amount of drawback is more than Rs.50/- the minimum limit specified statutority in section 76 of the Customs Act.

Wherever specific rate have been provided against any sub-serial no. in the Drawback Table, the drawback shall be payable only if the amount is 1% or more of free on board value, except where amount of drawback per shipment exceeds rupees five hundred.

(iv) Export Destinations. Drawback is not admissible on any goods exported by land to any place in Tibet or Sinkiang. It is also not granted on exports to Bhutan, Nepal and Myanmar (Burma) not made against irrevocable Letters of Credit in freely convertible currency. However, there are certain exceptions for which see Chapter 9.

(v) Export Goods taken in Use. If the export goods are taken in use after manufacture, drawback will not be admissible. However, it is permissible on tea chests used as packing material for export of blended tea.

(vi) Vessels of less than 1000/200 Tonnes. Drawback of duty in respect of goods exported in such vessels is admissible subject to specified conditions explained later.

(vii) Duty Exemption Scheme. In the case of Advance licence the drawback shall be available in respect of any of the duty paid materials, whether imported or indigenous, used in the goods exported, as per the all industry/brand rate fixed by Ministry of Finance (Directorate Drawback). The drawback shall, however, be restricted to the duty paid materials as indicated in the application for the licence and endorsed as such on the DEEC. See Chapter 15.

Drawback shall not be admissible if the goods manufactured and/or exported in discharge of export obligation against an Advance Licence issued under the Duty ExemptionSchemeof Export and import Policy in force :

Provided that, in case of exports made against value based advance licences, issued on or after 1st April, 1995 in discharge of export obligation in terms of Notification No. 79/95-Cus. Dated 31st March, 1995 or against quantity based advance licences issued on or after 1st April, 1995 in discharge of obligation in terms of notification No. 80/95-Cus. Dated 31st March, 1995, drawback at the rate equivalent to Central Excise allocation of rate of drawback specified in said Table shall be admissible subject to the conditions specified therein.

Provided further that wherein in terms of the notes given under various Sub-serial Numbers of the Drawback Table where reduced rates of drawback applicable to the export made against quantity based advance licences have been specified, the said rates shall also be applicable for the export made against quantity based advance licences issued on or before 31st March, 1995.

(viii)Pass Book Scheme. The drawback is not admissible if goods are manufactured and/or exported availing of the facility under the erstwhile Pass Book Scheme.

Provided that nothing contained under clause 2 of the General Notes reproduced in Part 5 shall prohibit payment of drawback at a particular rate/amount if it has been specifically authorized under these General Notes or under any Sub-Serial number in the said Table.

(ix) Duty Entitlement Passbook Scheme. The exports made under the DEPB Scheme shall not be entitled for drawback. The additional customs duty i.e. countervailing duty (CVD), paid in cash on inputs under DEPB shall be adjusted as Modvat credit or Duty Drawback.

However, where exporters file DEPB-cum-Drawback Shipping Bills and make a declaration that they would be claiming drawback against such exports in the main body of that SB, the brand rate of drawback shall be available. Such cases will be processed under normal Scheme of brand rate of fixation, after receipt of verification report from field formations.

(x) Engg. Products Export Scheme. If the goods are exported claming benefit under “Engineering Products Export (Replenishment of Iron and Steel Intermediated Scheme” as contained in Appendix XVII-D of Handbook of Procedure, Volume I, 1992-97 the same shall not be entitled to drawback.

(xi) Drawback on Goods on which Other Credit Schemes are Availed. In terms of first proviso to Rule 3 of drawback Rules, drawback is admissible even in cases where Modvat Credit or other credit has been availed. But the drawback admissible on such goods shall be reduced taking into account the lesser duty paid or the rebate, refund or credit obtained.

(xii) (a) Drawback on goods Exported through Merchant Exporters. Manufacturers of goods exporting through merchant exporters, export house, etc. can claim drawback if the latter gives a disclaimer in favour of the former.

(b) In the case of goods procured from open market and exported by merchant exporters, the All Industry rate of drawback shall be restricted to the Customs allocation only, if any, given in column (5) of the Drawback Table.

(xiii) Export under Rule 12(1)(b) and 13(1)(b) of Central Excise Rules. Drawback shall not be admissible on goods manufactured and exported in terms of :

(i) clause (b) of sub-rule (1) of rule 12 of CE Rules, and

(ii) clause (b) of sub-rule (1) of rule 13 of the CE Rules.

(xiv) EOUs/EPZ Units. No drawback is allowable on products manufactured in and exported from an approved EOU (Export-Oriented Unit) and units in Export Processing Zones or Free Trade Zones, Electronic Hardware or Software Technology Parks. But the exports by unapproved units exporting cent per of their production are entitled to drawback. Drawback shall also be admissible against exports of readymade garments manufactured by EPZ units subject to certain conditions. See Chapter 61 in the Drawback Tabel.

(xv) Negative Value Addition. No drawback will be determined in cases where the value addition is negative i.e. the total foreign exchange spent on production inputs in the goods exported is more than the f.o.b. value of exports, vide Rule 7A(2) of the Drawback Rules. This is, however, applicable to the cases of brand rate fixation only.

(xvi) Time Limit. Where the sale proceeds of the exported goods are not realized within the time i.e. 180 days from the date of export, unless extended by RBI, no drawback will be allowed.

(xvii) In-Bond Manufacture. Drawback is admissible on goods manufactured partly or wholly in-bond under Section 65 of the Customs Act, 1962; however, see ‘Ex-bond Articles’ in next pages.

(xviii) Where any goods are produced or manufactured from imported materials or excisable materials, on some of which only, duty chargeable thereon has been paid and not on rest, or only a part of the duty chargeable has been paid, or the duty has been rebated or refunded in whole or in part or given as credit, under any of the provisions of the Customs Act, 1962 (52 of 1962), and the rules made thereunder, or of the Central Excises, 1944 (1 of 1962), and the rules made thereunder, the drawback admissible on the said goods shall be reduced taking into account the lesser duty paid or the rebate, refund or credit obtained.

Note : Nothing will prohibit payment of drawback at a particular rate/amount if it has been specifically authorized under any sub-serial number in the Drawback Table subject to the terms and conditions as may be specified thereunder.