What is Drawback

As defined in the Drawback Rules (see under ‘definition` later), drawback in relation to any goods manufactured, or processed or on which any operation has been carried out in India and exported, means the rebate of duty chargeable on any imported materials or excisable materials
used in the manufacture of such goods in India. Hence, drawback is-

(i) a refund of excise or import (customs) duty paid on indigenous or imported inputs (raw materials, components, parts, packing materials, etc) used in export products.
(ii) a refund of duty of customs or excise paid on production inputs and not refund of duty paid on finished products.

Anti-Dumping Duty Refund. The anti-dumping duty is rebatable under Sec. 75 of the Customs Act. Since this duty is not taken into consideration while fixing all industry rate of drawback, the drawback of such duty can be claimed by getting brand rate fixed under Rule 6 or 7 of Drawback Rules, 1995. This would necessarily mean that drawback shall be admissible only where the inputs which suffered anti-dumping duty were actually used in the goods exported as confirmed by the verification made for fixation of brand rate.

Distinction between Drawback and Excise Rebate. No Drawback is admissible on finished products on which either excise duty or export duty is paid. Because the finished excisable goods can be exported either under ‘bond’ or under ‘Claim of rebate’. Hence, the finished excisable goods need not suffer any duty as the same is either refunded or need not be paid under theSchemeof export under excise bond. For details of these schemes, refer to Paras Ram’s book ‘Simplified Excise Procedure for Export’. In case any export duty is paid, no drawback or refund thereof is admissible.

Duty need not be paid on each and every raw material used in export product.
Rule 3 of Drawback Rules does not say that on each and every raw material duty should have been paid. If duty is paid on some of the goods which went into the manufacture of a final product notified in the Drawback Schedule, it is for the Govt. while notifyingallIndustry Rates, to take into account the duty liabilities/exemptions in respect of raw materials. Therefore, drawback rates should extend as soon as an item is covered in the Drawback Schedule i.e. Drawback Table.

Categories of Drawback

Drawback is basically divided into two categories as per provisions of Section 74 and 75 of the Customs Act, 1962.
1. Section 74 of Customs Act allows drawback on re-export of duty paid imported goods, including passenger’s baggage, in the same position in which these were imported. Such goods must be identifiable as original imported goods. Details appear in Chapter 18.

2. Section 75 of customs Act allows drawback on physical exports (other than re-exports) of finished products wherein duty [excise/customs (import) on indigenous or imported] paid inputs have been used.

Besides, drawback is also admissible underDeemed Export Policy, as detailed in Chapter 21.

Hence, drawback is now admissible on:

- Physical Exports
- Re-exports
- Deemed Exports

Definition

According to the Customs and Central Excise Duties Drawback Rules, 1995 drawback and other terms used in its relation are defined as follows: -

(a) “drawback”, in relation to any goods manufactured in India and exported, means the rebate of duty chargeable on any imported materials or excisable materials used in the manufacture of such goods in India;

(b) “excisable material” means any material produced or manufactured in India subject to a duty of excise under the Central Excise Act, 1944 (1 of 1944);

(c) “export”, with its grammatical variations and cognate expressions means taking out of India and includes loading of provisions or store or equipment for use on board a vessel or aircraft proceeding to a foreign port;

(d) (i) “imported material” means any material imported into India and on which duty is chargeable under the Customs Act, 1962 (52 of 1962).

(ii) “Deemed imported materials” are the specified materials notified under Section 75 (1A) of the Customs Act, 1962 for granting drawback under Section 75 (1) of the same. Accordingly, the Central Govt. has vide its Notif. No. 44-Cus (NT) dt. 30-5-1991 (as amended) issued a list of such materials (Annexure 37). The whole quantity of these materials as is contained in the goods manufactured in India and exported will be deemed to be imported materials. See Chapter 19.

(e) “manufacture” includes processing of or any other operation carried out on goods, and the term “manufacturer” shall be construed accordingly.

Drawback Year. It is from 1st June to 31st May (of the following year) as against the financial year (April-March) and calendar year (January-December).