SME Chatroom: Duty drawback permitted on FOB value without bank charges

Q. For our exports we are paid through inward remittances, where foreign banks deduct their charges of euro 20-50 many times. We received notice from the Customs asking us to refund the drawback received by us in 2014-15 alleging non-realisation of export proceeds. When we submitted all bank realisation certificates to them, they prepared a list of 17 invoices where we have a shortfall in realisation of euro 35-50 due to foreign bank charges. Are we  liable to pay this pro-rata drawback back to the government with 18 per cent interest?

CBIC Circular no.33/2019-Cus dated September 19, 2019 clarifies that duty drawback may be permitted on FOB value without deducting foreign bank charges. It also says that since agency commission up to the limit of 12.5 per cent of the FOB value has been allowed, such deduction on account of foreign bank charges is allowed within this overall limit of 12.5 per cent of FOB value.

From the average rates of agency commission and foreign bank charges in respect of export shipments, it is seen that these deductions fall within the aforesaid overall limit of 12.5 per cent of FOB value allowed by the Board. Agency commission and foreign bank charges, separately or jointly, exceeding this limit should be deducted from the FOB value for granting duty drawback, the CBIC says.

Q. Eight years back, we imported certain equipment. We recently sent it back to the foreign supplier for repair and refurbishment under EDF waiver. However, the design and model have undergone changes due to technological advancement. Now we would like to bring in the latest version. A huge amount has to be paid through a new purchase order, which cannot be shown as repair cost. How can we comply with the EDF waiver condition?

The import of the latest version of the equipment must be treated as fresh imports and not as re-import against the EDF waiver condition. For closure of the EDF waiver, you may approach the Reserve Bank of India through your bankers, explaining why you cannot or do not want to re-import the equipment sent abroad for repairs.

Q. We are an EOU. The Tuticorin Customs are not allowing us to export our goods on payment of IGST under refund claim. We have written to them explaining that we import our inputs under the notification 52/2003-Cus dated March 31, 2003, and that we pay IGST and avail only the exemption from BCD and that the Customs at other ports are allowing our exports on payment of IGST under refund claim. However, the Tuticorin Customs are not responding to our letter despite reminders.  Please advise. 

I suggest you represent to the higher authorities at Tuticorin Customs and explain with evidence that all your imports of inputs are on payment of IGST and that on all your domestic procurement, refund of IGST has not been availed under notification 48/2017-CT dated October 18, 2017, and that this is not a case of export through a merchant-exporter.

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