Duty Drawback

Section 74 of the Customs Act: Duty Drawback on Re-export of

Duty Paid Goods
Duty drawback under Section 74 of the Customs Act covers those goods that
have been imported into India and re-exported. As per the provisions, any
goods that are easily identifiable and imported into India on which any duty has
been paid and are-

● Entered for export where the proper officer makes an order permitting
loading and clearance of goods for exportation under section 51 or
● Are to be exported as baggage and for the purpose of exportation, the
owner makes a declaration of its contents to the proper officer under
section 77 and the such officer makes an order permitting clearance of
goods for the purpose of export or
● Are entered for export and the proper officer makes an order for
permitting the clearance of goods for export

The 98% of duty drawback shall be allowed as a drawback subject to the

following conditions:

● The goods have been identified as the goods that were imported to the
satisfaction of the Deputy Commissioner of Customs or Assistant
Commissioner of Customs
● The goods are entered for export within 2 years from the date of payment
of import duty. This period of 2 years may be extended by the board on
sufficient cause being shown

Further, the rate of duty drawback for goods that have been used after
importation shall be such as the Central Government notifies having regard to
the depreciation in value, duration of use, etc. These rates have been specified
in Notification No. 19/65 Cus dated 6-2-1965. As per the notification, the
following goods shall not be entitled to duty drawback if they have been used
after an importation:

● Tea chests
● Wearing Apparel
 ● Unexposed photographic films, X-ray films, paper, and plates.
● Exposed cinematographic films passed by the Board of Film Censors in
India

Further, the following rates have been fixed at which drawback for import duty
shall be allowed for goods that have been used after an importation:

Sr. The period between the date of clearance for home % of import duty
No consumption and the date when the goods are placed allowed as a
. under Customs Control for Export drawback

1 Not more than 3 months 95%

2 More than 3 months but not more than 6 months 85%

3 More than 6 months but not more than 9 months 75%

4 More than 9 months but not more than 12 months 70%

5 More than 12 months but not more than 15 months 65%

6 More than 15 months but not more than 18 months 60%

7 More than 18 months NIL

Even if the goods were not used but merely tested, still they shall be treated
as used after importation.

However, in the case of motor vehicles, different percentages of import duties

have been prescribed having regard to international practice.

Therefore, in the case of motor vehicles and goods imported by a person for
personal and private use, the following shall be the rate of duty drawback:

● If the car or specified goods are immediately re-exported: 98% of the

import duty paid shall be refunded.
 ● If the car or specified goods are used before being re-exported: The
drawback shall be calculated by reducing the import duty by the following
percentage:

Sr. Ye % to be reduced from the amount of duty

No. ar paid

1 1st 4% per quarter or part thereof

2 2nd 3% per quarter or part thereof

3 3rd 2.5% per quarter or part thereof

4 4th 2% per quarter or part thereof

Further, it has been specifically provided that the duty drawback for such cars
that are exported after a period of 2 years shall be provided only if the CBIC
extends the period of expiry beyond the period of 2 years upon sufficient cause
being shown.

Section 75: Drawback of Imported Materials Used in the

Manufacture of Goods That are Exported
Duty drawback under Section 75 of the Customs Act covers the cases where any
goods are being exported and any imported material has been used in the
manufacturing or processing of such goods or carrying out operations in such
goods. In such case, duty drawback shall be allowed for the duty paid on the
imported material used for the manufacture or processing of such goods.
However, if the duty drawback has been allowed and sale proceeds on export
have not been received in accordance with the provisions of FEMA 1999, then
such duty drawback shall be deemed to have never been allowed and the
procedure for recovery or adjustment of the drawback amount shall be
initiated.

Further, if it appears to the Central Government that the total quantity of

materials imported into India is more than the total quantity of materials used
in the exported goods, then it may declare so much of the materials as is
contained in the goods exported to be the imported materials. Further, the
Central Government has been provided the powers to specify the provisions
and methodology for the implementation of the above provisions.

Section 75A: Interest on Drawback

In case the drawback payable to a claimant under section 74 or 75 is not paid
within 1 month from the date of filing of the claim for such drawback, then the
claimant shall be paid interest at the rate not less than 5% and not exceeding
30% from the date immediately after the expiry of 1 month till the date of
payment of such drawback.

Further, if excess drawback has been paid to the claimant, then the claimant
shall pay the drawback within 2 months from the date of demand along with
interest at the rate not less than 10% and not exceeding 36%. The interest shall
be payable from the date of payment of such drawback to the claimant till the
date of recovery of the drawback.