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PREFACE
The revised duty drawback rates (All Industry Rates, 2014-15) have been announced by the Government
vide Notification No. 110/2014-Cus. (NT), dated 17-11-2014, w.e.f. 22-11-2014. These rates have been
announced in the background of the new Government having promised whiff of fresh air in policy formulation
and expeditious decision making and giving a renewed thrust to the industry and export sector and creating
a congenial atmosphere for its growth.
The inflation rates had till recently maintained a disturbing steadiness at a higher level but in the past
two months there has been a decline. Although diesel prices have been de-regulated, there has been a
downward revision in the diesel prices, simultaneously the prices of petrol have also been reduced. This will
have significant impact on input costs much to the relief of the industry. Food prices have also been showing
a declining trend in recent months. It is in this background that the industry had expected much from the
Government as far as duty drawback rates are concerned. It is for the industry to appreciate and evaluate
as to how far the expectations of different segments/sectors have been met with by the Government.
As usual while presenting this book containing the revised drawback schedule care has been taken to
revise the contents also. Government has issued several circulars covering various aspects. A System of Risk
Management (RMS) has been introduced; it will also cover the duty drawback claims/declarations. Audit
stream has also been strengthened pursuant to the audit reports which have invited the attention of the
Government to different issues which came to light during the audit. Commissioners have been advised to
ensure that proper check is exercised while sanctioning the drawback claim, reducing the dwell time as an
export facilitation measure, need for recording speaking orders in cases of drawback on re-exports in respect
of supplementary drawback claims filed etc. This apart a number of decided cases have been added in Chapter
10 dealing with the disputes/litigations/judicial rulings in drawback matters.
This revised version of the book we hope will be very useful to every reader and we sincerely trust
that the reference value of this book would meet to the readers expectations.
We are thankful to Mr. R. Sampath, Mr. Kannan and Mr. Yogesh Bisht of our office for their valuable
help and assistance. We are extremely grateful to Mr. Sandeep Garg of Commercial Law Publishers (India)
(P) Ltd. once again for his zeal in bringing this book with great dispatch.
Place : Delhi
Date : 18-11-2014
R. KRISHNAN
Advocate, New Delhi
rkriadvo@gmail.com
R.PARTHASARATHY
Consultant, Excise, Customs and
Service tax
Sarathyassociates @yahoo.com
CONTENTS
2.
2.1
2.2
2.3
2.4
2.5
2.6
2.7
2.8
2.9
2.9.1
Background .......................................................................................................................................................... 4
Extent of drawback allowed on re-export of duty paid goods ..................................................................... 4
Identity of goods to be same to claim benefit of Section 74 .......................................................................... 4
Export need not take place from the same port .............................................................................................. 6
Drawback restricted to 98 percent of the duty ................................................................................................ 6
Drawback in the case of goods which have been used after importation .................................................. 6
Drawback under Section 74 is not available to goods used in manufacture .............................................. 7
Use of goods before re-export ........................................................................................................................... 7
Case laws on section 74 ...................................................................................................................................... 7
Order on appellants request for re-export for earlier consignment pendingre-export
of present consignment not allowed by an interim order ............................................................................. 7
2.9.2
Delay in granting let export order not to come in the way of re-export .............................................. 7
2.9.3
Refusal of importer to take delivery of goods due to financial problemsExporters request
for re-export to be allowed ................................................................................................................................. 7
2.9.4
Re-export of imported goods, when goods imported not tallying with details in the bill
of entry Re-export permissibleRefund also to be allowed ........................................................................ 8
2.9.5
Claim for duty drawback can be made at appellate stageIf exports had admittedly
taken place, procedures are secondary ............................................................................................................ 8
2.9.6
Drawback claim in re-exportsto be filed within 3 months from the date of receipt of
Commissioner Appeals order .......................................................................................................................... 9
2.9.7
Re-exportAfter reprocessing goods must be identified as the same which were imported ................ 9
2.9.8
Re-exportExamination Report not signed by A.C.Claim not rejectable when report was
signed upto Superintendent level ..................................................................................................................... 9
2.9.9
Re-exportIdentification of goods under exportis a substantial condition u/s 74 .............................. 9
2.9.10 Drawback on re-exportWaiver of pre-deposit granted when goods were found confiscated .......... 10
2.9.11 Part of the goods cannot be allowed to be re-exported under section 74 ................................................. 10
vi
2.9.12
2.9.13
2.9.14
2.9.15
2.9.16
2.9.17
2.9.18
2.9.19
2.10
2.11
2.11.1
2.11.2
CONTENTS
APPENDIX 2.1
DRAWBACK RATES IN RESPECT OF GOODS TAKEN INTO USE AFTER IMPORTATION .......... 18
APPENDIX 2.2
RE-EXPORT OF IMPORTED GOODS (DRAWBACK OF CUSTOMS DUTIES) RULES, 1995 ............. 19
APPENDIX 2.3
CUSTOMS SERIES FORM NO. 109 ................................................................................................................ 22
APPENDIX 2.4
SHIPPING BILL FOR EXPORT OF GOODS UNDER CLAIM FOR DUTY DRAWBACK .................... 23
APPENDIX 2.5
TEXT OF SECTION 74 OF THE CUSTOMS ACT, 1962 .............................................................................. 25
APPENDIX 2.6
WRIT JURISDICTIONDUTY DRAWBACKRE-EXPORTIDENTITY OF GOODS
UNDER SECTION 74 OF CUSTOMS ACT, 1962 ......................................................................................... 25
3.
Drawback under the Customs, Central Excise Duties and Service Tax
Drawback Rules, 1995
3.1
3.2
3.3
3.4
3.5
3.6
3.7
3.8
Background ........................................................................................................................................................ 28
No drawback of excise duty on raw material for manufacturers availing Cenvat credit ...................... 28
Meaning of Drawback under Drawback Rules, 1995 .................................................................................. 28
Meaning of export of goods ........................................................................................................................... 28
Meaning of Manufacture ............................................................................................................................... 29
Scheme of Duty Drawback Rules ................................................................................................................... 29
Certain materials to be treated as imported materials ................................................................................ 30
No Drawback on certain items in view of galloping inflation and the need to increase supply in
domestic market ................................................................................................................................................ 30
Failure to realise export proceeds Drawback to be recovered by Department ................................... 30
Drawback on supplies made to SEZ Units by DTA Units and Appropriate Authority for
sanction of drawback ........................................................................................................................................ 30
3.9
3.10
APPENDIX 3.1
TEXT OF THE CUSTOMS, CENTRAL EXCISE DUTIES AND SERVICE
TAX DRAWBACK RULES, 1995 .................................................................................................................... 33
CONTENTS
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APPENDIX 3.2
MATERIALS DEEMED AS IMPORTED MATERIAL FOR PURPOSES OF DRAWBACK ................... 47
APPENDIX 3.3
RECOVERY OF DRAWBACK AMOUNT ON THE PORTION OF THE FOB VALUE OF
EXPORT NOT REALIZED BY THE EXPORTER BUT COMPENSATED BY ECGC - REG. ................. 50
APPENDIX 3.4
PROGRESS IN THE IMPLEMENTATION OF THE BANK REALIZATION
CERTIFICATE (BRC) MODULE ..................................................................................................................... 51
APPENDIX 5.5
SYSTEMS ALERT FOR MONITORING REALIZATION OF EXPORT PROCEEDS IN EDI - REG. .... 97
APPENDIX 5.6
AUDIT REPORT NO. 15/2011-2012, SECTION 2, DUTY DRAWBACK SCHEME ............................... 99
APPENDIX 5.7
POST EXPORT EPCG DUTY CREDIT SCRIP(S) SCHEME AND CERTAIN OTHER
CHANGES RELATED TO FOREIGN TRADE POLICY 2009-14REGARDING ................................ 103
4.
4.1
4.2
4.3
4.4
Background ........................................................................................................................................................ 54
All Industry Rates of Drawback ...................................................................................................................... 54
Different All Industry Rates (AIRs) based upon Cenvat credit availment ............................................... 54
All Industry rates (AIRs) applicable even where goods were procured from
duty-exempted sector ....................................................................................................................................... 55
No drawback on All Industry Rates (AIRs) in certain circumstances ....................................................... 55
Factors taken into account by the Central Government in determining All Industry
Rates (AIRs) ........................................................................................................................................................ 55
Dates from which rates are effective .............................................................................................................. 56
Salient Features of All Industry Rates of drawback announced w.e.f. 22-11-2014 vide
Noti. No. 110/2014-Cus. (NT), dt. 17-11-2014 .............................................................................................. 56
Option where All Industry Rates are not acceptable to an exporter (Brand Rates) ................................ 59
Provisional drawback at All Industry Rates till disposal of application by the Commissioner ............ 59
Duty Drawback to Merchant Exporters purchasing Goods from open market ...................................... 60
Procedure for obtaining the drawback on export at All Industry Rates ................................................... 60
Introduction of Risk Management Systems (RMS) in exportspost clearance credit
to look into Duty Drawback claims ................................................................................................................ 60
Post-export EPCG Duty Credit Scrips Scheme and Duty Drawback ........................................................ 60
4.5
4.6
4.7
4.8
4.9
4.10
4.11
4.12
4.13
4.14
APPENDIX 4.1
GRANT OF ALL INDUSTRY RATE OF DUTY DRAWBACK TO MERCHANT
EXPORTERSPERMISSIBLE ......................................................................................................................... 60
APPENDIX 4.2
INTRODUCTION OF RISK MANAGEMENT SYSTEMS (RMS) IN EXPORTSREGARDING ......... 62
5.
5.1
5.2
5.3
5.4
5.5
5.6
viii
CONTENTS
APPENDIX 5.1
COMPUTERISED PROCESSING OF EXPORT DOCUMENTS AT NEW DELHI CUSTOMS ............. 71
APPENDIX 5.2
I. EXPORT PROCEDURE TOUGHENED, STENCIL MARKING OF EXPORTER
NAME AND INVOICE ON EACH PACKAGE A MUST ................................................................... 72
II. PROCESSING OF SHIPPING BILLS UNDER EDI SYSTEM IN ICD TUGHLAKABAD ............... 74
III. PROCESSING OF ALL CATEGORIES OF BILLS
UNDER EDI SYSTEM IN CHENNAI ..................................................................................................... 82
APPENDIX 5.3
CUSTOMS SERIES FORM NO. 93 .................................................................................................................. 93
APPENDIX 5.4
FILING OF CENVAT CREDIT DECLARATIONRELAXATION OF IN THE
CASE OF MERCHANT EXPORTERS ............................................................................................................ 95
6.
6.1
6.2
6.3
6.4
6.4.1
6.4.2
6.4.3
6.4.4
6.4.5
6.4.6
APPENDIX 6.1
FORM NO. 115 ................................................................................................................................................ 116
APPENDIX 6.2 ............................................................................................................................................................... 117
FORM NO. 116
APPENDIX 6.3
FORM NO. 117 ................................................................................................................................................ 118
APPENDIX 6.4
FORM NO. 118 ................................................................................................................................................ 119
APPENDIX 6.5
FORM NO. 119 ................................................................................................................................................ 120
APPENDIX 6.6
AMENDMENT OF THE CUSTOMS, CENTRAL EXCISE & SERVICE TAX DRAWBACK
RULES, 1995 AND THE RE-EXPORT OF IMPORTED GOODS (DRAWBACK OF
CUSTOMS DUTIES) RULES, 1995 IN JUNE 2010REG. ........................................................................ 121
7.
7.1
7.2
7.3
7.4
7.4.1
7.4.2
CONTENTS
ix
APPENDIX 7.1
BAN ON DRAWBACK ON STORES TAKEN ON SHIPS OF LESS THAN 200 TONNES ................. 125
APPENDIX 7.2
DRAWBACK ON GOODS EXPORTED IN VESSELS OF LESS THAN 1000 TONNES ...................... 125
APPENDIX 7.3
BAN ON DRAWBACK OF DUTY ON GOODS EXPORTED TO MYANMAR,
NEPAL, BHUTAN ETC. ................................................................................................................................ 126
8.
8.1
8.2
8.3
8.4
8.5
8.6
8.7
APPENDIX 8.1
NOTIFIED PROJECTS FOR DEEMED EXPORT BENEFIT ...................................................................... 130
APPENDIX 8.2
APPLICATION FOR FIXATION OR REVISION OF DEPB RATES/FIXATION OF
BRAND RATE OF DEPB FOR SAD COMPONENT ................................................................................. 131
APPENDIX 8.3
BANK CERTIFICATE OF PAYMENTS FOR DOMESTIC SUPPLIES .................................................... 134
APPENDIX 8.4
FORMAT OF CERTIFICATE OF PAYMENTS ISSUED BY THE PROJECT AUTHORITY ................. 135
9.
9.1
9.2
9.3
9.4
Reimbursement of excise duty paid on fuels procured from domestic oil companies by EOUs ........ 139
Rates of drawback notified by DGFT ........................................................................................................... 139
Changes in procedure in September 2004 ................................................................................................... 139
Procedure for claiming drawback of duties paid on oil procurement from oil companies ................. 140
10.
10.1
10.2
10.3
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Brand Rate fixation available even in cases where AIR have been notified .......................................... 150
Sanction of drawback against brand rate letter issued under Rule 6(1)(a) of the Duty
Drawback Rules, 1995 Sustainability as All Industry Rates of drawback have been notified ........ 150
Brand RateCondonation of delay in filing applicationHigh Court directions to be
complied with ................................................................................................................................................. 151
Brand RateAssessee eligible if cenvat credit not taken .......................................................................... 151
Condonation delayPeriod spent in pursuing the appeal before Tribunal wrongly, condonable ... 151
Drawback Rules ............................................................................................................................................... 151
Classification of goodsBTN classification not to be preferred (old tariff) ........................................... 152
Classification of GoodsDescription as per documents submitted along with the shipping
bill will be a relevant criteria unless otherwise disputed on the basis of any technical
information or otherwiseBlended Knitwear of cotton fibre containing various percentage
of Wool, Poly Acrylic, Polyester Fiber etc.Classifiable under Sl. No. 60.07 and not under
Sl. No. 61.01 of Drawback Schedule 2002-2003On giving excess drawback claim by the
exporter, interest is to be paid automatically without issue of show cause notice ............................... 152
Tribunals directions to be complied with in the absence of stay by the Court ..................................... 152
Recovery of drawbackSettlement Commission has jurisdiction .......................................................... 152
Recovery of drawback paid must be within a reasonable timeAny recovery proceedings
after 3 years would have the effect of disturbing the settled right .......................................................... 153
Market price and drawback claim ................................................................................................................ 153
Basic Customs duty paid through debit of DEPB will be not eligible for drawback ............................ 153
Higher Officer can adjudicate and exercise power of lower officer ........................................................ 153
Commissioners order adjudicating DrawbackAppeal lies to the Tribunal ....................................... 154
Restoration of appeal regarding refund of interest on delayed refundPermissible for
Tribunal to do so ............................................................................................................................................. 154
Suspension of drawback facilityWrit petition not to be entertained when appellate
remedy available ............................................................................................................................................. 154
Rebate on export not available when duty drawback already claimed .................................................. 154
Deemed Export DrawbackIt has to be shown that imported goods had suffered duty .................. 154
When Drawback was of customs duty cash refund of accumulated CENVAT Credit
held permissible .............................................................................................................................................. 155
Delay in filing brand rate application due to delay in getting EP Copy of shipping
billjustified .................................................................................................................................................... 155
Condonation of delay wrongly by Asst. CommissionerDrawback given cannot be
demanded back as CBE & C has powers to condone delay ..................................................................... 155
Rejection of condonation of delay in filing drawback on re-exportwhere the order is
unreasoned/cryptic it is unsustainable ....................................................................................................... 155
Condonation of delay in filing the drawback claim required to be dealt with by competent
authority ........................................................................................................................................................... 156
Delay in filing shipping Bill ........................................................................................................................... 156
Rejection of supplementary claims for filing drawback as drawback fixed earlier was not
appealed againstHeld proper .................................................................................................................... 156
Appeal ............................................................................................................................................................... 156
Penalty and other actions ............................................................................................................................... 156
Principles of natural justice ............................................................................................................................ 157
High Courts directions seeking clarifications ............................................................................................ 157
Application for brand rate of drawback after rejection of application for Advance Licence .............. 157
General points about drawback .................................................................................................................... 157
Section 74 and Section 75 - Comparison ...................................................................................................... 157
Drawback on re-export of goods imported ................................................................................................. 158
Draw back under Section 74 of Customs ActLimitation ....................................................................... 158
CONTENTS
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APPENDIX 10.1
FORM NO. EA-1 ............................................................................................................................................. 190
APPENDIX 10.2
FORM NO. CA-1 ............................................................................................................................................. 191
APPENDIX 10.3
FORM EA-3 ...................................................................................................................................................... 192
APPENDIX 10.4
FORM NO. CA-3 ............................................................................................................................................. 193
APPENDIX 10.5
RETURN UNDER SECTION 70 OF THE FINANCE ACT, 1994 ............................................................. 197
APPENDIX 10.6
FORM ST-5 ....................................................................................................................................................... 217
APPENDIX 10.7
SHIPPING BILLSCONVERSION OF FREE SHIPPING BILLS TO ADVANCE AUTHORISATION/
DEPB/DRAWBACK SHIPPING BILLS AND FROM ONE EXPORT PROMOTION SCHEME
TO ANOTHERCLARIFICATIONS .......................................................................................................... 218
11.
11.1
11.2
11.3
11.4
11.4.1
11.4.2
11.4.3
xiv
12.
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Reimbursement Of Duty (ROD) in lieu of drawback for supply of goods to SEZ developers ........... 248
Facility of Reimbursement Of Duty (ROD) instead of drawback ............................................................ 248
Procedure to be followed ............................................................................................................................... 248
Claims for ROD in lieu of drawback to be made by Zonal Development Commissioner ................... 249
APPENDIX 12.1
FORMAT FOR DRAWBACK CLAIM UNDER RULE 30(8) OF SEZ RULES, 2006 .............................. 249
APPENDIX 12.2
FORM 2BANK CERTIFICATE OF PAYMENTS TO DOMESTIC SUPPLIERS TO BE ISSUED
BY THE RESPECTIVE BANK ........................................................................................................................ 250
CONTENTS
xv
3.
4.
5.
6.
7.
8.
9.
10.
11.
12.
13.
14.
15.
16.
17.
18.
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CONTENTS
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CONTENTS
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PART - I
Drawback Commentary