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.
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-
The 98% of duty drawback shall be allowed as a drawback subject to the following conditions:
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 an importation:
Further, the following rates have been fixed at which drawback for import duty shall be allowed for goods that have been used after an 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 a 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:
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.
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.
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 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.
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 computerized, 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. A Triplicate copy of the shipping bill becomes the application only after the Export General Manifest is filed.
In order to file the application of Duty Drawback under Customs Act, 1962 the entity exporting the goods must be the legal owner of goods at the time of exportation & they must have paid customs duty on imported goods.
In case you require any assistance on duty drawback under section 75 or Section 74 of customs act, 1962, 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.
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