PROCESSING OF DRAWBACK

SHIPPING BILL & DUTY

DRAWBACK CLAIMS PROCEDURE

By;Dr. Ram Singh

Associate ProfessorInternational Trade Operations and Logistics

Indian Institute of Foreign Trade,New Delhi

Email: ramsingh@iift.ac.in

Interaction with Managers / Officers ………………………… IIFT

DUTY DRAWBACK DEFINED

The term drawback is applied to a certain amount ofduties of Customs/central excise, some times the whole,some times only a part remitted or paid by Governmenton the exportation of the commodities on which theywere levied.

To entitle goods to drawback, they must be exported to aforeign port, the object of the relief afforded by theDrawback being to enable the goods to be disposed of inthe foreign market as if they had never been taxed at all.

For Customs purpose drawback means the refund ofduty of customs and duty of central Excise that arechargeable on imported and indigenous materials usedin the manufacture of Exported goods.

GOODS ELIGIBLE FOR

DRAWBACK

This scheme applies to:

export goods imported into India as such

export goods imported into India after having been taken

for use

export goods manufactured / produced out of imported

material

export goods manufactured / produced out of indigenous

material

Export goods manufactured /produced out of imported or

and indigenous materials.

TYPES OF DRAWBACK

Under Section 74 of Customs Act 1962

1. "Re- export of Imported Goods (Drawback of Customsduties) Rules, 1995.

Section 75 of Customs Act 1962

1. Customs and Central Excise Duties Drawback Rules 1995

2. All Industry Rates/ Brand Rates

3. Drawback sanctioned under section 75 has a two tier systeminvolving

(i) fixation of rates by the Directorate of Drawback inthe Central Board of Excise and Customs and

(ii) disbursement of drawback amount by the CustomsHouses and/ Central Excise Commissionerate

DUTIES REBATED UNDER

DRAWBACK SCHEME

Drawback Given:

1. Basic inputs like raw materials, Components, Intermediates and packing

materials used at various stages of production / manufacture.

Drawback Not Given:

1. Capital goods, fuels and consumables used in relation to the manufacture of the

export goods

2. no relief of Sales Tax or Octroi or any other indirect tax is given by way of

drawback.

3. The finished stage of excise duties on the export product is also not reimbursed

under this scheme ..

4. there are separate provisions for rebate of such finished stage duties under the

Central Excises and Salt Act 1944 and the Rules framed thereunder.

DRAWBACK UNDER SECTION 74-IMPORTED

GOODS RE-EXPORTED: SCOPE

In this category, two types of cases are coveredviz.,

1. Imported goods exported as such i.e. withoutputting into use – 98% of duty is refunded and

2. Imported goods exported after use – thepercentage of duty is refunded according to theperiod between the date of clearance for homeconsumption and the date when the goods areplaced under Customs control for exports. Thepercentage of duty drawback is notified underNotification. No 19 Cus, dated 6th Feb, 1965as amended from time to time

DRAWBACK ON RE-EXPORT OF USED GOODS

SECTION 74 OF CUSTOMS ACT 1962

Not more than three months-95%

More than three months but not more than six months-85%

More than six months but not more than nine months-75%

More than nine months but not more than twelve months-70%

More than twelve months but not more than fifteenmonths-65%

More than fifteen months but not more than eighteenmonths60%

More than eighteen months but not more than twenty--one months55%

DRAWBACK ON RE-EXPORT OF USED GOODS

SECTION 74 OF CUSTOMS ACT 1962

More than twenty--one months but not more than twenty-

-four months 50%

More than twenty--four months but not more than

twenty--seven months 45%

More than twenty--seven months but not more than thirty

months 40%

More than thirty months but not more than thirty--

three months 35%

More than thirty--three months but not more than three

months but not more than thirty --six months30%

More than thirty--six months NIL

ELEMENTS NECESSARY FOR DRAWBACK

UNDER SECTION 74

The elements necessary to claim drawback are;

1. The goods on which drawback is claimed must have beenpreviously imported;

2. Import duty must have been paid on these goods when they wereimported;

3. The goods should be entered for export within two years from thedate of payment of duty on their importation (whether provisional orfinal duty). The period can be further extended to three years by theCommissioner of Customs on sufficient cause being shown.

4. The goods are identified as the goods imported.

5. The goods must be capable of being identified as imported goods.

6. The goods must actually be re-exported to any place outside India.

7. The market price of such goods must not be less than the amountof drawback claimed.

8. The amount of drawback should not be less than Rs. 500/- as perSection 76-(1) (c) of the Customs Act.

PROCEDURE TO CLAIM DRAWBACK

UNDER SECTION 74

Drawback claims under Section 74 of the Customs Actare now being processed manually. To claim drawbackunder Section 74, the exporter should file the shippingbill under claim for drawback in the prescribed FORMand after assessment the goods are to be examined bythe Customs officers for purposes of physicalidentification. After shipment, the claim is filed in thedepartment, for sanction of drawback. The pre-receipted drawback payment order has to be forwardedto the drawback department upon which cheque isissued. If the information submitted by the exporter isinsufficient to process the claim, a deficiency memowill be issued to the exporter seeking furtherinformation or documents to process the claim. Oncompliance the claims will be processed in the usualmanner.

SUPPORTING DOCUMENTS REQUIRED FOR PROCESSING

DRAWBACK CLAIM UNDER SECTION 74

Triplicate copy of the Shipping Bill bearingexamination report recorded by the proper officer ofthe customs at the time of export.

Copy of the Bill of entry or any other prescribeddocuments against which goods were cleared forimportation.

Import invoice.

Evidence of payment of duty paid at the time ofimportation of goods.

Export invoice and packing list.

Copy of the Bill of Lading or Airway bill.

Any other documents as may be specified in thedeficiency Memo.

DRAWBACK UNDER SECTION 75 OF

THE CUSTOMS ACT 1962: SCOPE

This is an export

promotion incentive

payable for goods

manufacture in India

with duty paid inputs

whether indigenous

or imported.

ALL INDUSTRY RATES

The rates of drawback are announced by the Govt. ofIndia, Ministry of Finance for various categories of goods.

schedule appended to the Customs and Central ExciseDuties Drawback Rules, 1995.

The schedule of rates is normally announced on the 1st ofJune every year or 3 months after the budget. The ratesmentioned in the schedule are called all-industry rates ofdrawback.

The all industry rates of drawback are worked out on thebasis of broad averages of consumption of inputs, dutiessuffered, quantity of wastage, f.o.b. prices of the exportproducts etc.

NON APPLICABILITY OF ALL INDUSTRY RATES OF DRAWBACK

All – industry rates of drawback are not applicable where anexport product has been.

Exported in discharge of export obligation against an AdvanceLicence issued under Duty Exemption Scheme vide the relevantImport and Export Policy.

Manufactured partly or wholly in bond under Section 65 of theCustoms Act, 1962,

exported by a unit licensed under any 100% Export OrientedSchemes (100% EOU/EHTP/STP/Agriculture/aquaculture etc)

exported by a Unit situated in a Free trade zone/ Export processingZones

manufactured and exported in terms of Rule 12(1) (a) of the Centralof the Central Excise Rules 2002; and

manufactured and exported in terms of Rule 13(1) (a) of the CentralExcises Rules, 2002; and

manufactured and exported availing the facility under the Importand Export Pass Book schemes of he relevant Exim policy

BRAND RATES OF DUTY DRAWBACK

the exporter can approach the Directorate

of Drawback for fixation brand rates.

Brand rates are fixed under Rule 6 for

specific manufacturer exporter.

the manufacturer has to submit the

application to Directorate of Drawback

within 30 days of their first shipment.

PROCEDURE FOR CLAIMING DRAWBACK UNDER SECTION 75

OF THE CUSTOMS ACT UNDER THE MANUAL SYSTEM:

the exporter is required to file a drawback-shipping bill in

the prescribed Format as required under Rule 13 along

with the necessary declaration.

The goods after assessment are examined by the officers

posted in the Examination Shed as required for each

individual case. The examination report will indicate the

nature of goods in terms of drawback schedule for

classification and application of correct rate.

Samples may have to be drawn for testing by lab in

respect of chemicals, synthetic fabrics’ etc as specified

from time to time to confirm the declarations in the export

documents

SUPPORTING DOCUMENTS REQUIRED FOR

PROCESSING THE CLAIM.

1. Triplicate of the Shipping Bill

2. Copy of the Bank Certified Invoices.

3. Copy of the Bill Lading / Airway Bill

4. Sixtuplicate Copy of ARE 1/ ARE 2 wherever applicable

5. Freight and Insurance certificate wherever the contract is CIF / C&F

6. Copy of the Test report where the goods are required to be tested

7. Copy of the Brand rate letters where the drawback claim is against the Brand rate

8. Mate receipt

9. Copy of the Contract or Letter of credit as the case may be

10. Cenvat Declaration wherever applicable

11. Any declaration required as per foot note of the Drawback schedule

12. Work sheet showing the drawback amount claimed

13. DEEC Book and licence copy where applicable.

14. Transshipment certificate where applicable

15. Proof of foreign agency commission paid if any

16. Blank acknowledgement card in duplicate

17. Pre – receipt for drawback amount on the reverse of Shipping Bill duly signed on the Rs1/- revenue stamp

THE MECHANISM…..

The claims are settled and passed by the appraiser if the

amount sanctioned is below Rs 1, 00,000.

And by the Assistant Commissioner, if the amount of

drawback exceeds Rs1.00.000/- After pre-audit, the

cheques are issued to the designated banks for credit to the

exporters account or handed over to the authorized

representative of the exporter

PROCESSING OF DRAWBACK CLAIMS UNDER

SECTION 75 OF THE CUSTOMS ACT UNDER

THE EDI SYSTEM

Computerized processing of shipping bills is in vogue atover 24 ports in India. The shipping bills are processedunder the Indian Customs EDI systems (ICES). Under thesystem, there would be no processing of paper documentsexcept statutory declarations and endorsements until ‘letexport’ order stage.

Processing of drawback claims under the system will beapplicable for all exports except in respect of the claimsunder Section 74 of the Customs Act and those relating toEPZ/100% EOU.

For the excluded categories the export Shipping Bills willbe filed manually and processed by AC Drawback, ashitherto. Under the EDI system there is no need for filingseparate drawback claims. The shipping bill itself treatedas drawback claim.

THE PROCESSING IN EDI…

In the EDI system the exporters are required to open their accountswith the Bank nominated by the Custom Houses/ ACC. This has to bedone to enable direct credit of drawback amount to their accounts,obviating the need for issue of cheques.

For export of goods under claim for drawback, the exporters will fileS.D.F declaration in Annexure B in lieu of GR –1 FORM. Thedeclaration in Annexure C would also be filed when the export goodsare presented at the Export shed for examination and Let export.

All the claims sanctioned on a particular day will be enumerated in ascroll and transferred to the Nominated Bank through the system. TheBank will credit the drawback amount in their respective accounts ofthe exporters on the next day. Bank will send a fortnightly statement tothe exporters of such credits made in their accounts.

The steamer agents / Airlines will transfer the EGM electronically tothe system so that the physical Export of goods is confirmed. Thesystem will process the claims only on receipt of the EGM.

TIME LIMIT UNDER SECTION 75

3 Months

Can be extended by Commissioner on reasonable

cause.

INTEREST PAYMENT

@ of 15% by the government if it fails to make payments

within 3 months.

Exporter may have to pay @of 20% if he has received

excess claim and does not refund to directorate within

mentioned date.

SUPPLEMENTARY CLAIM

Can be made if exporter is not satisfied with in 30

days from the receiving of payments from

directorate.

RESTRICTION ON GRANT OF DRAWBACK

(a) The amount or the rate of drawback should work out 2% or more of the f.o.b. value of the product except in cases where the amount of drawback exceeds Rs5000/- per shipping Bill.

(b) The f.o.b. value of the product should not be less than the value of all imported materials used in the manufacture of that product. In other words the value addition in respect of the particular product should not be negative

…….RESTRICTION

(c) No drawback is admissible where the amount of

the drawback worked out is higher than the present

market value of the goods export (Section 76(1) of

the Customs Act)

(d) Drawback is not admissible where the total

amount of drawback is less than Rs 50/-(Section

76(1)(b) of the Customs Act,1962

(e) No drawback is admissible in case of goods

exported by land to any place in Burma, Tibet or

Bhutan as specified in the Ministry of finance

Notification 208 cus. dated 1/10/1977

RECOVERY OF ERRONEOUSLY PAID

DRAWBACK AMOUNT:

Rule 16 of the Drawback Rules empowers the

department to recover any erroneous payment of

drawback without any time limit and can initiate

recovery proceedings under Sec 142 of the

Customs Act 1962

FIXATION OF BRAND RATES UNDER

SIMPLIFIED SCHEME

Request for extension time limit for filing an application for brand rate

under Rules 6 & 7 of the Drawback Rules,

Application For Fixation Of Drawback Rates Under Rule 6(1)(A) (Brand

Rate) Or Rule 7(1) (Special Brand Rate) Of Customs And Central Excise

Drawback Rules,1995 (Under Normal Scheme)

LEGISLATIVE REFERENCES RELATING TO DRAWBACK

Section 74 Of The Customs Act 1962 (Drawback Allowable On Re-Export Of Duty Paid Goods)

Section 75 Of The Customs Act 1962 (Drawback On ImportedMaterials Used In The Manufacture Of Goods, Which AreExported)

Section 37 (Xvi) Of The Central Excises And Salt Act, 1944

Section 75 A Of The Customs Act (Interest On Drawback)

Section 76 Of The Customs Act 1962 (Prohibition And RegulationOn Drawback In Certain Cases)

Re-Export Of Imported Goods (Drawback Customs Duties) Rules1995.

Customs And Central Excise Duties Drawback Rules , 1995

QUESTIONS

谢谢DankeSchon

Thank you

धन्यवाद

Thank You