Section 74
Section 74 of the Customs Acc 1962 as amended vide Customs (Amendment) Act; 1985
allows Drawback on re-export of duty paid goods. It reads as under:
74 (1). When any goods capable of being easily identified which have been
Imported Into India and upon which any duty has been paid on importation,
(i) are entered for export and the proper officer makes an order permitting
clearance and loading of the goods for exportation under section 51: or
(ii) are to be exported as baggage and the owner of such baggage for the purpose
of clearing it makes a declaration of its contents to the proper officer under
section 77 (which declaration shall be deemed to be an entry for export for the
purposes of this section) and such officer makes an order permitting clearance
of the goods for exportation or
(iii) are entered for export by post under section 82 and the proper officer
makes an order permitting clearance of the goods for exportation.
ninety-eight per cent of such duty shall except otherwise here in after
provided be repaid as drawback, if-
(a) the goods are identified to the satisfaction of the Assistant Commissioner
of Customs as the goods which Imported and
(b) the goods ace entered for export within two years from the date of payment
of duty on the importation thereof:
Provided that in any particular case the aforesaid period be extended by the
Board by such further period as it may deem fit.
(2) Notwithstanding anything contained in sub-section (1). the rate of drawback
in the case of goods which have been used after the importation thereof shall be
such as the Central Government, having regard to the duration of use,
depreciation in value and other relevant circumstances may, by notification in
the Official Gazette, fix.
(3) The Board may make regulations for the purpose of carrying out the
provisions of this section and, in particular, such regulations may -
(a) provide for the manner in which the identity of goods imported in different
consignments which are ordinarily stored together in bulk, may be established ;
(b) specify the goods which shall be deemed to be not capable of being easily
identified.
(4) For the purposes of this section-
(a) goods shall be deemed to have been entered for export on the date with
reference to which the rate of duty is calculated under section 16;
(b) in the case of goods assessed to duty provisionally under section 18, the
date of payment of the provisional duty shall be deemed to be date of payment of
duty.
Distinction Between Sec. 74 and 75 of Customs Act, 1962
There is a distinction between Sec. 74 and Sec. 75 of the CA 1962. Sec. 74 of
Customs Act comes into operation when articles are imported and thereafter
re-exported, such articles being easily identifiable; and Sec. 75 comes into
operation when "imported materials are used in the manufacture of goods
which are re-exported."
1995 Rules
The Drawback Rules for Re-export of Imported goods are reproduced in Part 2 of
this book.
Drawback Defined. In terms of rule 2 (a), "drawback" in relation to
any goods exported out of India, means the refund of duty paid on importation of
such goods in terms of Sec. 74 of the Customs Act. (See above).
Conditions
Accordingly, for claiming drawback on re-export of duty paid goods, the
following conditions need to be fulfilled:
(1) the goods are identified to the satisfaction of the customs as the goods
which were imported, as per Sec. 74 (1)
(2) the goods are entered for export within two years from the date of payment
of duty on the importation thereof, unless the said period is extended by the
Central Board of Excise & Customs, as per Sec. 74(1)
(3) The claim for drawback should not exceed the prevailing market price or
value (PMV) of the goods exported as per Sec. 76. Hence, the market value should
not be less than the drawback claim or, i.e., drawback is not admissible if its
claim amount is higher than the market value of the goods exported.
Identity of Goods
As per condition (1) above, the identity of the goods exported is to be
established to the satisfaction of the Asstt. Commissioner of Customs as the
goods, which were imported. For this purpose, special shipping bill, i.e.,
Drawback Shipping Bill is presented that enjoins upon the proper officer to make
detailed examination to establish the above identification. Hence, if the
exporter files any other SB like Dutiable SB or Free SB than Drawback SB, no
drawback is admissible.
Coverage or Scope. Expor1 includes loading of provisions or store or equipment
for use on board a vessel or aircraft proceeding to a foreign por1 or airpor1.
Hence, Ship Stores supplied to foreign going vessels/aircrafts are eligible for
drawback.
The position would be clear when goods as such are re-expor1ed, say where these
were received as defective goods or wrong shipments were made by suppliers
abroad or after use within the country these are being sent back. However, if
the goods are expor1ed as a necessary concomitant to other articles which are
manufactured in the country and for which drawback may or may not be admissible,
it will be permissible to hold that the test of "those very goods being expor1ed
is satisfied. This is despite the fact that broadly the impor1ed goods (OTS cans
in 1his case) may at times be re-exported without any substantial change except
merely as packing material.
The only issue to allow drawback on re-expor1 of goods under Section 74 of the
Customs Act, is whether identity of the goods is established with reference to
the expor1er"s claim under Section 74 or not. The identity of the goods need not
be established with reference to import document only. Other evidence of
collateral in nature, if produced, could also be considered. It would include
inspection of the goods/packages comparing the examination report or other
connected documents relating to import formalities with examination of goods as
reflected in the Shipping Bill against which drawback is claimed.
Where detailed examination/test report at the time of import could not be done,
reliance may be placed on other parameters/documents such as letters exchanged
between exporters and their agents and also the suppliers to reach a subjective
satisfaction that the goods which were being re-exported were the same
originally imported.
The basic requirement of Section 74 is that "with respect to such
(impor1ed) goods a party is entitled to drawback if those very goods, are
re-exported. The position is clear when goods are such re-exported, say where
these were received as defective goods or wrong shipment were made by suppliers
abroad or after use within the country, these were being sent back. However, if
the goods are exported as a necessary concomitant to other articles which are
manufactured in the country and for which drawback is being claimed separately,
it will be impermissible to hold that "test of those very goods" being
exported is satisfied. This is despite the fact that broadly the impor1ed goods
(plastic package in this case) made at times be re-exported without any
substantial change but merely as packing material. Once packing material is used
for making the main article marketable the identity of the packing gets
assimilated into the overall description of the goods marketed/exported. This
applies a Fortiori when the exporter puts labels on the packing materials. It
is, thus, clear that the ingredients of the Section 74 of the Customs Act are
not satisfied.
Packing Material
Once packing material is used for making the main ar1icles marketable the
identity of packing gets assimilated into the overall description of goods
marketed/exported. It is clear, thus, the ingredient of Sec. 74 of the Customs
Act, 1962 are not satisfied.
Breakup of Export Goods into two Parts -Claim both under Sec. 74 and Section 75
of the Customs Act
It is not admissible to breakup the goods exported into two parts, to carve out
one description to which Sec. 74 of the Customs Act, 1962 will apply. What is
exported is a composite commodity and whatever description is accepted for
purposes of Customs shall govern the drawback claim. Now, the basic requirement
of Sec. 74 is that "with respect to such (imported) goods a par1yis
entitled to drawback if those very goods are re-exported, as decided in H.S.
Mehra v. Union of India -AIR 1968 Delhi 142.
But it is possible to export two commodities together one as the main item and
the other as a spare. Whereas drawback either AI rate or brand rate (as got
fixed) can be claimed on the main item under Sec. 75 of the Customs Act and also
under Sec. 74 for re-export of spares (earlier imported but which did not go
under any manufacturing process).
Hangers Re-export with Garments. There should not be any objection in permitting
drawback under Sec. 74 of the Customs Act on hangers imported on payment of
customs "duty when such hangers are re-exported with readymade garments
provided:
(i) hangers have not been used in India and
(ii) the same have not undergone any change.
Such drawback under Sec. 74 can be allowed simultaneously with All Industry (AI)
rate of drawback on readymade garments provided value of hangers is not included
in the value of garments. In such cases it would suffice if hangers and
readymade garment are declared as two distinct commodities on the Shipping Bill
with separate value for claim of drawback under Sec. 74 and Sec.75 of Customs
Act, even if for the sake of convenience hangers have been packed along with
readymade garments.
OTS cans used in Packing Cashew Kernels
Drawback is not admissible when OTS cans are used in an activity connected with
manufacture. Besides, the drawback scheme is clear that a package gets subserved
in the class of products being re-exported.
Hydra-jack
It is a specialised lifting and erection equipment imported and re-exported as
such. Being easily identifiable within the meaning of Sec. 74, drawback is
admissible at the rate of 98% of duty paid on its importation.
Manufacturing Process
Where description of the goods in bill of entry and Shipping Bill is different,
is is not open3 to the Customs to go behind the manufacturing process and
identify individual components in exercise of powers qua Sec. 74 of the Customs
Act, 1962, benefit under sec. 74 is not available on such components. More over,
concept of manufacture is not relevant for Sec. 74 of the Customs Act, 1962.
Market Value
Still another important criteria for allowing drawback on re-export of imported
goods is that the claim for drawback should not exceed prevailing market price
of the goods exported. Hence, the value of exported goods should be relatable to
the market value of the goods exported. The market value needs to be ascertained
before drawback is considered.
Defective but Irreparable Goods
Defective machinery sent to the overseas suppliers for repair, if not
re-imported being found irreparable, is not eligible for drawback under Section
74 of the Customs Act. Moreover, to claim drawback on such machinery, a special
Shipping Bill, i.e., Drawback Shipping Bill needs to be filed for re-export
thereof. The filing of such a Shipping Bill will enable the proper officer of
Customs to make detailed examination to establish the identity of the goods.
Besides, the market value of such goods should not be less than the amount of
the drawback claim. Since goods exported were irreparable, their value is
nothing, and, hence, less than the drawback claim. Therefore, such items are not
entitled to drawback.
Value given in Documents other than SB
The value given in the documents seeking permission from RBI is for the purpose
of foreign exchange regulation and export of goods (sought to be replaced under
warranty). This value is not at all relatable to the market value of the
defective goods exported under the warranty Clause.
The entire exercise is aimed at establishing that neither foreign exchange will
be earned by export (of defective goods) and no foreign exchange will be
involved in subsequent import (of new piece being provided free of cost by the
supplier abroad). This value is absolutely immaterial in so far as Section 76 of
the Customs Act, 1962 is concerned. It does not need much discussion to say that
if a defective piece is being sent out, its value as indicated can only be,
notional based on carlier documents invices, etc.
"It may sometimes happen that goods have been cleared out of customs charge,
these are found to be defective at importers premises. The market value (often
referred as salvage value) in such cases, in terms of Sec. 76, needs to be
ascertained before drawback claim is considered." For this purpose, drawback
claim has to be made on Drawback Shipping Bill on which market value of export
item is declared.
Value of Replacement Parts for Levy of Import Duty to constitute the value for
Drawback
It is true that the goods that were being despatched to the USA, were not goods
of any real value that these did not represent export in the real sense of the
term. But then again, the importation of the replacement parts made by the writ
petitioner, were also not, in the real sense of term, any fresh imports calling
for payment of any further, fresh or additional duty.
The Commissioner of Customs was not dissatisfied with the procedure adopted by
the writ petitioner, that in not treating both the despatch of defective
machinery to USA as a real export, and the importation of the replacement
machinery as fresh import. The value of the goods upon which the writ petitioner
paid import duty in obtaining replacement would also be the value of the goods
to be taken for the purpose of calculating the export drawback payable to the
writ petitioner
Amount of Drawback
98% of the duty will be re-paid as drawback, on the fulfillment of the necessary
conditions.
Reduced Rate.1 The rate of drawback will be allowed at a reduced rate, depending
upon the period for which the goods have been out of Customs control. The
percentage of import duty which will be allowed as drawback is shown in the
table.
TABLE
Length of period between the date of clearance for
home Percentage of import duty to
consumption and the date when the goods are place
under be paid a drawback
Customs control for export
(1)
(2)
Not more than 6
months...
85
More than 6 months but not more than 12
months
...
70
More than 12 months but not more than 18
months
...
60
More than 18 months but not more than 24
months
...
50
More than 24 months but not more than 30
months
...
40
More than 30 months but not more than 36
months
...
30
More than 36 months Nil ...
...
Nil
|
No Drawback.
When any of the goods specified below have been used after their importation
into India, drawback of duty paid thereon shall not be allowed, when they
are exported out of India.
(i) Wearing apparel
(ii) Tea chests
(iii) Exposed cinematograph films passed by the Board of Film Censors in
India
(iv) Unexposed photographic films, paper and plates, and X-ray films
Personal Goods.
In respect of a motor car or goods (other than those above) imported by a
person for his personal use, drawback shall be calculated by reducing the
import duty paid in respect of such motor car or goods by 4%, 3%, 2t% and 2%
for use for each quarter or part thereof during the period of first year,
second year, third year and fourth year respectively. Moreover, if the
period exceeds more than 2 years, drawback shall be allowed only if the said
period is got extended. Besides, the motorcar or goods should not have been
used for more than four years.
Exhibits
Goods imported on payment of duty for the purpose of exhibition and
demonstration can be regarded as "used" depending upon whether
these are worked upon/operated or not in the course of exhibition. Each case
will be decided on merits for grant of drawback on their re-export under
Sec. 74 of the Customs Act.
Drawback Claim Procedure on Re-export of Imported Goods
1. Postal Exports
Drawback Parcels
The outer packing carrying the address of the consignee shall also carry in
bold letters the words: "DRAWBACK EXPORT".
Claim Form & Documents
Along with the parcel/packet, file a claim in the prescribed form at
Annexure 17, to the post office. The form is to be filled in quadruplicate
and submit along with:
(i) copy of Bill of Entry or any other document against which goods were
cleared on importation.
(ii) evidence of having paid import duty
(iii) calculation sheet showing the amount of drawback claimed.
Date of Receipt
An intimation showing date of receipt of claim application shall be given by
the proper officer of Customs to the exporter.
Deficiency Memo
In case the drawback claim is not complete in all respect, the exporter
shall be intimated through a deficiency memo in the form prescribed, within
15 days of its receipt from postal authorities.. The exporter is required to
comply with the requirements specified in the defi9iency memo, within 30
days of its receipt. In that case the date of issue of an acknowledgment of
reply to deficiency memo shall be considered as date of receipts of drawback
claim for the purpose of payments of interest on delayed settlement/payment
of drawback under Sec. 75A of the Customs Act.
2. Non-Postal Export
2.1 Shipment
Shipping Bill/Bill of Export
The procedure for export (rather re-export) of imported goods by sea, air or
land (surface) but other than post is same as for normal exports explained
partly in Chapters 2 and 4. Accordingly, the exporter is to file Drawback
Shipping Bill/Bill of Export in triplicate.
Declarations/Statements
Give the following declarations/statements on SB/Bill of Export.
(i) State the description, quantity and such other particulars as are
necessary for deciding whether the goods arc entitled to drawback on their
re-export.
(ii) Make a Declaration that -
(a) the export is being made under a claim for drawback under section 74 of
the Customs Act;
(b) that the duties of customs were paid on the goods imported;
(c) that the goods imported were not taken into use after importation;
OR
(c) that the goods were taken in use;
Documents
Enclose the following documents along with the SB/Bill of Export.
(i) Bill of Entry or Any other prescribed document against which goods were
cleared on importation.
(ii) Import invoice
(iii) Documentary evidence of having paid the import duty
(iv) Export invoice
(v) Packing List
(vi) RBI"s permission to Re-export the goods, where necessary.
2.2. Post-shipment Stage
Claim of Drawback
Rule 5 of the Drawback Rule on Re-export of Imported Goods. 1995 lays down
the procedure to claim drawback.
Claim Form
The claim should be made in prescribed form at Annexure 8 to the concerned
Customs House Drawback Cell/Deptt.) within 3 months from the date of
"Let Export Order" given by the customs on the SB/Bill of Export.
It can be filed within a further period of 3 months on sufficient cause for
lat~ filing, being shown and accepted by the Asstt. Commissioner of Customs.
Documents
The claim application should be sent with the following documents
(i) Triplicate copy of the Shipping Bill bearing examination report recorded
by the proper officer of the customs at the time of export
(ii) Copy of Bill of Entry or any other prescribed document against which
goods were cleared on importation.
(iii) Import invoice.
(iv) Evidence of payment of duty paid at the time of importation of the
goods.
(v) Permission from Reserve Bank of India for re-exports of goods, wherever
necessary.
(vi) Export invoice and packing list.
(vii) Copy of Bill of lading or AirWay bill.
(viii) Any other documents as may be specified in the deficiency memo.
Acknowledgment
An acknowledgment shall be issued by the Drawback Deptt. for having received
the Drawback claim.
Deficiency Memo
For the claim found incomplete in any material particulars or without the
documents specified above, shall be returned with a Deficiency Memo within
15 days. Such claims will be deemed not to have been filed. The exporter is
required to comply with the requirement of the Deficiency Memo within 30
days from the date of receipt of the same.
Payment
The drawback and interest, if any, shall be paid to the exporter or his
agent specially authorised by him to receive the said amount of drawback and
interest.
Interest
15% interest per annum will be payable on delayed payment of drawback i.e.
if it is not paid within three months from the date of filing of the claim
or receipt of the compliance of the deficiency memo issued, if any.
Repayment
Where an amount of drawback and interest, if any, has been paid erroneously
or the amount so paid is in excess of what the exporter is entitled to the
claimant shall be liable to repay/refund the said excess amount within three
months from the date of demand.
Interest. If the exporter fails to repay the amount within three
months, he shall be liable to pay interest at the rate of 20% per annum on
the amount recoverable.
Application Filed before Commencement of 1995 Rules
In terms Rule 8(2) of 1995 Rules for Drawback against Re-export of Imported
Goods. "Where any goods have been exported under claim for drawback
under Section 74" (of Customs Act. 1962)," "before the date of commencement
of these" (1995) "Rules but no claim for payment of drawback has been filed,
the exporter may file his claim within a period of three months from the
date of commencement of these rules in the manner prescribed.
Relaxation
Where an exporter or his authorised agent has, for reasons beyond his
control, failed to comply with any of the provisions of "Re-export of
Imported Goods (Drawback of Customs Duties) Rules, 1995, and has thus been
entitled to drawback, the Central Govt. may entertain a representation by
the exporter and exempt him from the provisions of such rule and allow
drawback in respect-of such goods.