Some leeway on duty drawback

The finance ministry has notified revised All Industry Rates (AIR) of Duty Drawback and enabled quicker disbursement of the customs portion of this at notified rates in cases where the exporter opts to claim it on the basis of actual duty incidence through the special brand rate route. The Central Board of Excise and Customs (CBEC) has followed by prescribing a new procedure for export under claim of drawback through the special brand rate under Rule 7 of the Duty Drawback Rules, 1995.

In the new AIR schedule, as usual the composite rates have been increased in some cases and reduced in some, separate entries provided for some items and some descriptions have been reworded. Certain products earlier having only customs rates have been provided with composite ones, and rates have been aligned for some items. Drawback caps, where possible, have been provided normally in entries with rates higher than 1.9 per cent (the highest residuary one).

Exporters opt for drawback through the special brand rate route when the notified AIR reimburses less than 80 per cent of the actual duty incidence. In 2003, based on the Kelkar committee recommendations, CBEC directed that in all those cases, whenever exporters opt for a special brand rate of drawback, this may be permitted at AIR as admissible immediately. And, the differential amount be paid later, on the basis of the special brand rate fixed on the basis of application and evidence of actual duty incidence presented by the exporter. Last year, the law was amended to deny drawback at the special brand rate where a claim is made at AIR. So, exporters had to wait for getting drawback even for the notified portion. To some extent, the recent changes address this issue.

The revised procedure requires exporters opting for drawback at special brand rates to declare the figure 9807 (instead of 9801) as an identifier in the shipping bill if filed on or after November 23. After the said identifier, the tariff item number of goods as shown in the AIR schedule must be declared, followed by the character 'B'. For example, if tractors (other than tractors of heading 8709) are exported under claim for special brand rate, the related Drawback Tariff Item number for such tractors in the AIR Schedule is 8701; the declaration on the shipping bill should be 98078701B.

Such shipping bills have to be processed by Customs for payment of the provisional drawback amount, equivalent to the Customs component for the said declared Drawback Tariff Item of the AIR schedule. This processing is subject to the same conditions as applicable to AIR drawback, wherein there is claim for only the Customs component.

After the goods are exported, the exporter may apply to the relevant central excise office for fixation of special rate. After due scrutiny, the special brand rate letter may be issued for the difference between the actual duty incidence and the amount already disbursed, based on which the Customs can disburse the differential amount.

The new procedure is useful to the extent that the exporter can get disbursement of some part of the actual duty incidence immediately after export. Even if his claim for a differential amount is rejected, the exporter will be assured of the customs portion of the notified AIR. The field formations should now ensure that the revised procedures work without hitches.
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