India Entry & Business Startup Consultings

Duty Drawback Under Customs Act, 1962- Section 74 and 75

Duty Drawback Under Customs Act, 1962- Section 74 and 75

In order to understand the concept of Duty Drawback it is necessary to know that whenever imports take place, the goods imported are chargeable to customs duty. However, in certain situations, the customs duty paid on the import of goods is refunded to the importers in the form of duty drawbacks under customs.

Section 74 and 75 of the Customs Act 1962 lays down the explicit provisions for duty drawbacks which are discussed in detail below.

Section 74: Duty Drawback on Re-export of Duty Paid Goods

Duty drawback under Section 74 of the Customs Act covers those goods that have been imported into India and re-exported. As per the provisions, any goods that are easily identifiable and imported into India on which any duty has been paid and are-

  • Entered for export where the proper officer makes an order permitting loading and clearance of goods for exportation under section 51 or
  • Are to be exported as baggage and for the purpose of exportation, the owner makes a declaration of its contents to the proper officer under section 77 and such officer makes an order permitting clearance of goods for the purpose of export or
  • Are entered for export and the proper officer makes an order for permitting clearance of goods for export

The 98% of duty drawback shall be allowed as a drawback subject to the following conditions:

  • The goods have been identified as the goods that were imported to the satisfaction of the Deputy Commissioner of Customs or Assistant Commissioner of Customs
  • The goods are entered for export within 2 years from the date of payment of import duty. This period of 2 years may be extended by the board on sufficient cause being shown

Further, the rate of duty drawback for goods that have been used after importation shall be such as the Central Government notifies having regard to the depreciation in value, duration of use etc. These rates have been specified in Notification No. 19/65 Cus dated 6-2-1965. As per the notification, the following goods shall not be entitled to duty drawback if they have been used after importation:

  • Tea chests
  • Wearing Apparel
  • Unexposed photographic films, X-ray films, paper and plates.
  • Exposed cinematographic films passed by the Board of Film Censors in India

Further, the following rates have been fixed at which drawback for import duty shall be allowed for goods that have been used after importation:

Sr. No.

The period between the date of clearance for home consumption and the date when the goods are placed under Customs Control for Export

% of import duty allowed as drawback

1

Not more than 3 months

95%

2

More than 3 months but not more than 6 months

85%

3

More than 6 months but not more than 9 months

75%

4

More than 9 months but not more than 12 months

70%

5

More than 12 months but not more than 15 months

65%

6

More than 15 months but not more than 18 months

60%

7

More than 18 months

NIL

 

Even if the goods were not used but merely tested, still they shall be treated as used after importation.

However, in the case of motor vehicles, different percentages of import duties have been prescribed having regard to international practice.

Therefore, in the case of motor vehicles and goods imported by a person for personal and private use, the following shall be the rate of duty drawback:

  • If the car or specified goods are immediately re-exported: 98% of the import duty paid shall be refunded.
  • If the car or specified goods are used before being re-exported: The drawback shall be calculated by reducing the import duty by the following percentage:

Sr. No.

Year

% to be reduced from the amount of duty paid

1

1st

4% per quarter or part thereof

2

2nd

3% per quarter or part thereof

3

3rd

2.5% per quarter or part thereof

4

4th

2% per quarter or part thereof

 

Further, it has been specifically provided that the duty drawback for such cars that are exported after a period of 2 years shall be provided only if the CBIC extends the period of expiry beyond the period of 2 years upon sufficient cause being shown.

Section 75: Drawback of Imported Materials Used in the Manufacture of Goods That are Exported

Duty drawback under Section 75 of the Customs Act covers the cases where any goods are being exported and any imported material has been used in the manufacturing or processing of such goods or carrying out operations in such goods. In such case, duty drawback shall be allowed for the duty paid on the imported material used for the manufacture or processing of such goods. However, if the duty drawback has been allowed and sale proceeds on export have not been received in accordance with the provisions of FEMA 1999, then such duty drawback shall be deemed to have never been allowed and the procedure for recovery or adjustment of the drawback amount shall be initiated.

Further, if it appears to the Central Government that the total quantity of materials imported into India is more than the total quantity of materials used in the exported goods, then it may declare so much of the materials as is contained in the goods exported to be the imported materials. Further, the Central Government has been provided the powers to specify the provisions and methodology for the implementation of the above provisions.

Section 75A: Interest on Drawback

In case the drawback payable to a claimant under section 74 or 75 is not paid within 1 month from the date of filing of the claim for such drawback, then the claimant shall be paid interest at the rate not less than 5% and not exceeding 30% from the date immediately after the expiry of 1 month till the date of payment of such drawback.

Further, if excess drawback has been paid to the claimant, then the claimant shall pay the drawback within 2 months from the date of demand along with an interest at the rate not less than 10% and not exceeding 36%. The interest shall be payable from the date of payment of such drawback to the claimant till the date of recovery of the drawback.

Procedure for claiming Duty Drawback Under Customs Act, 1962

The procedure for claiming duty drawback on export goods (whether AIR or Brand Rate) to be claimed at the time of export and requisite particulars filled in the prescribed format of Shipping Bill/Bill of Export under Drawback. If the processing of documents has been computerised, then the exporter is not required to file any separate application for claiming duty drawback. In the case of manual export, a separate application is to be submitted for claiming duty drawback. The claim is to be accompanied by certain documents as laid down in the Drawback Rules 1995. Triplicate copy of the shipping bill becomes the application only after the Export General Manifest is filed.

Eligibility Criteria:

In order to file the application of Duty Drawback under Customs Act, 1962 the entity exporting the goods must be legal owner of goods at the time of exportation & they must have paid custom duty on imported goods.

 In case you require any assistance on Duty Drawback Under Customs Act, 1962- Section 74 and 75, please feel free to contact the ASC Group.

*Note: Following were the explicit provisions governing duty drawbacks under section 74 and 75 of the Customs.Act.

 

Leave a Reply

Your email address will not be published. Required fields are marked *

 

SUBSCRIBE OUR NEWS LETTER