CUS CIR NO. 83/2003 DATE 18/09/2003

Fixation of brand rate of duty drawback by the Central Excise field formations under Rules 6 and 7 of the Customs and Central Excise Duties Drawback Rules, 1995 - Removal of difficulties-regarding.
Attention is invited to revised Customs and Central Excise Duties Drawback Rules, 1995, as amended by Notification No.20/2003-Cus(N.T.) dated 3.3.2003.

2. The fixation of duty drawback under Rule 6 (i.e. Brand Rate) in respect of those export products which do not figure in the All Industry Rate of Drawback Table or under Rule 7 (Special Brand Rate) where the exporters apply for such fixation on account of inadequate rebate of input stage duties through All Industry Rate, was earlier centralised in the Ministry. However, as a measure of decentralisation and trade facilitation, the powers for fixation of brand rate and special brand rate have been delegated to the jurisdictional Commissionerates of Central Excise through the amended Duty Drawback Rules. For the convenience of the field formations and for the guidance of the trade, a comprehensive Customs Circular No.14/2003 had been issued on 6th of March, 2003. As a result, brand rates/special brand rates for duty drawback are now being fixed by the Central Excise Commissionerates on the basis of the applications filed by the exporters. Though the new system has been in place for past five months, some confusion persists in the minds of field formations as well as trade in regard to certain areas.

3. The following issues raised by the field formations and the trade have been examined in detail in the Board:-

(a) Applicability of All Industry Rates of duty drawback in brand rates of duty drawback.

(i) It has been brought to the notice of the Board that in respect of leather articles including footwear, etc., the exporters have not been furnishing duty paying documents in respect of finished/lining leather. As a result the field formations are not factoring the duty drawback on account of finished leather/lining leather into the total brand rate.

It is clarified that both finished leather as well as lining leather are exempt from the Central Excise levy. However, it is to be borne in mind that various inputs in the nature of finishing chemicals, penetrating agents, wattle extracts and leather dyes & auxiliaries are used in the finishing of raw hides. Therefore, the duties on these inputs remain unrelieved as leather (finished/lining) is not subject to the Central Excise levy. Therefore, it has been the practice to factor the All Industry Rate of duty drawback available on finished/lining leather into the total duty drawback rate while calculating the drawback rate for export products manufactured from finished/lining leather. Field formations are, therefore, advised that while computing the brand rate of drawback for leather articles including footwear, the All Industry Rate available on finished/lining leather may be considered on the consumption of finished/lining leather in the export product.

Illustration:

Supposing, the leather product exported is ready-made garment. It involved predominant usage of indigenous finished leather, imported synthetic lining material, duty paid imported zippers and metallic buttons. In this case, in respect of the imported materials, the exporter would be required to produce duty paying bills of entry, evidencing the Customs duty incidence suffered on these inputs. Duty incidence on these inputs on the materials consumed ( after allowing normal wastage) shall be reckoned for the purposes of calculating duty drawback on these inputs. However, as regards finished leather, the exporter would be required to furnish an invoice indicating the local price of indigenous finished leather procured. Duty drawback element on this leather shall be calculated @ 6% of value, subject to a maximum of Rs.4.00 per sq. ft. as provided in SS No.41.02 of the Duty Drawback Table, 2003-2004. If the local invoices show procurement of finished leather @ Rs.60.00 per sq. ft. then the duty drawback element on this component shall be restricted to Rs.3.60 per sq. ft. However, if the drawback amount computed comes to more than Rs.4.00 per sq. ft., the same shall be restricted as per the drawback cap available.

(ii) Similarly, in the case of complete bicycle, manufactured by using various cycle parts and also certain other accessories/parts, not listed under SS No.87.44 of the Duty Drawback, the brand rate could be allowed in respect of such extra parts/accessories, provided that these parts/accessories are procured on payment of duty and not imported duty free under Advance Licence/DFRC/DEPB Schemes.

Illustration:

For example, an exporter exports a complete bicycle with certain accessories, i.e., indigenous seat cover, imported headlight, indigenous front basket, bicycle bell (SS No. 87.52), bicycle stand (SS No. 87.106), carrier(SS No. 87.63) and freewheel multi-speed (SS No. 87.112).

Brand rate of drawback in this case should be calculated by including following components:-


1. All Industry Rate of duty drawback appearing at SS No.87.44,
   
   
2. All Industry Rates of duty drawback for various accessories appearing in the Duty Drawback Table, in respect of which the exporter proves the usage of these accessories but does not furnish any duty paying documents, i.e., bicycle bell (SS No. 87.52), bicycle stand (SS No. 87.106), carrier(SS No. 87.63) and freewheel multi-speed (SS No. 87.112).
   
   
3. Central Excise duty paid invoices as regards indigenous seat cover and indigenous front basket.
   
   
4. Duty paid bill of entry in case of imported headlight.

(b) Calculation of brand rate of duty drawback for complete buses by the field formations.

It is clarified that since 1988, there has been the practice in the Ministry for factoring a component of 7% of the cost of bus body as duty drawback on bus body, into the total brand rate fixed for the complete buses. This percentage has been arrived at after averaging the data furnished by certain established bus body builders and the same has been approved by the officers of the Comptroller and Auditor General of India. Therefore, the field formations should continue the same practice while fixing brand rate of duty drawback for complete buses. This component purely has the Central Excise duty incidence and hence should be allocated accordingly.

Illustration:

An exporter exports a complete bus. The Chassis portion of the bus has been manufactured by using various parts, components, compressor for air-conditioner. The details as regards the duty incidence suffered on various inputs is provided in DBK-II and IIA supported by duty paying bills of entry. The exporter avails Cenvat on the countervailing duty suffered on all the imported inputs and claims only the Customs duty incidence on account of basic Customs duty and Special Additional Duty (SAD) on the same. For the sake of illustration, this duty incidence is shown as Rs.31,561.00.

As regards bus body, the same is got manufactured from the bus body builder and the exporter produces an invoice from the bus body builder indicating the cost of the bus body. Let us say, in this case, the cost of the body building is Rs.3,90,000.00. The duty drawback on account of body building shall be allowed @ 7%, i.e., Rs.27,300.00.

The exporter would be eligible for total drawback rate of Rs.58,861.00, i.e., 31,561.00 (Customs allocation) + Rs.27,300.00 (Central Excise allocation).

(c) Fixation and approval of brand rate of duty drawback as laid down in para 3(d)(i) of Circular No.14 /2003 vis-à-vis the provision of post-audit prescribed in para 3(d)(ix).

The function of the post-audit is to safeguard the revenue by pointing out errors whether in the nature of calculation mistake or wrong application of rules/regulations, etc. Based on the same, the Commissioner of Central Excise and the officers under his control have been invested with powers to rectify such mistakes through issuance of any amendment, addendum or corrigendum to the brand rate letters issued. However, as a matter of further decentralisation, for the convenience of the trade and for speedier issuance of the brand rate letters, it has been decided that proposals for fixation of brand rate involving duty drawback of more than Rs.5 lacs, shall be approved by the Additional/Joint Commissioner of Central Excise without any limit. In other words, no proposal for fixation of brand rate of drawback shall be submitted to the Commissioner of Central Excise for approval.

(d) Scope of rules 6(3) and 7(4) of the Customs and Central Excise Duties Drawback Rules, 1995.

It is clarified that the powers of Ministry expounded in rules 6(3) and 7(4) of the Customs and Central Excise Duties Drawback Rules, 1995 are envisaged to be exercised on rare occasions. Only in those cases, where the Ministry gets the information through some complaints or pursuant to an investigation that the drawback rate has been incorrectly determined or the rate letter has been improperly or irregularly issued, the Ministry, in such cases, shall suo moto proceed to revoke the rate letters in question and order recovery of duty drawback amount.

4. Suitable public notices for information of the trade and standing orders for guidance of the staff may kindly be issued accordingly.

5. The receipt of this Circular may kindly be acknowledged.

Yours faithfully,

Sd/-
(S.S. Renjhen)
Joint Secretary to the Government of India

F.No.603/32/2003-DBK

(Please refer CUS CIR NO. 108/2003 DATE 17/12/2003)

(Please refer CUS CIR NO. 97/2003 DATE 14/11/2003)

(Please refer CUS CIR NO. 89/2003 DATE 06/10/2003)

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