CIRCULAR NO. 26/2005-Cus.
8th June, 2005

F.NO. 609/65/2005-DBK
Government of India
Ministry of Finance
Department of Revenue
Central Board of Excise & Customs

Sub:Applicability of drawback on exports  in CKD/SKD condition-regarding.   

The undersigned is directed to invite your attention to the above mentioned subject.  It  has been represented by the  trade and  industry that  All Industry Rates  of  Duty Drawback  as well as Brand Rates  of  duty drawback  should be allowed  on the  export  products  even when  they are exported in  completely  knocked-down (CKD) condition or  semi-knocked-down (SKD) condition or  unassembled  condition. It  has been  stated  that  in the current  trade  practice,  importers  of other countries, especially  developing  countries,  importing  goods from India  often insist  on  dispatch  of  export  goods, such  as, televisions, air-conditioners, washing  machines, refrigerator, etc. in CKD or  SKD condition.

2.   The  matter   has  been examined by the  Board. In the  Duty  Drawback  Schedule, 2005-06, notified under notification No.36/2005-Customs(N.T.)  dated  2nd May, 2005,  the tariff  items and  description of  goods  have  been aligned with  the  tariff   items   and   description   of  goods  appearing  in  the  First  Schedule  to  the   Customs  Tariff  Act, 1975

at  the  four  digit  level.  It  has been  clearly stated   in  General Note  2  of  the  above mentioned notification that  General  Rules  for the Interpretation of  the  First Schedule to the  Customs  Tariff Act, 1975 shall  mutatis  mutandis  apply  for  classifying  the  export  goods  listed  in the  Drawback Schedule. Rule  2(a)of  the  said rules provides that  any reference  in a  heading  to an article shall be taken  to include  a  reference  to that  article incomplete  or unfinished,   provided that,   as  presented,  the incomplete or  unfinished  article has the  essential  character  of the  complete or  finished  article.  It  shall also be  taken  to   include a reference  to  that article complete  or  finished (or falling  to be  classified  as  complete or  finished by virtue  of  this rule ),  presented  unassembled  or disassembled. In view  of this legal  position,  the  goods exported  in CKD/SKD/unassembled condition  shall be  entitled  to the All Industry Rate of  Drawback  if  the  same  is  available  on goods  when    exported  in  complete/ assembled form. In the same  way,  brand rate of  drawback would  also be  admissible  for  goods exported  in  CKD/SKD/unassembled  condition.

3.  However,  in order  to  safeguard  revenue, it may be  ensured   that All Industry Rate of  Drawback  and  Brand Rate of  Drawback  are   extended  to goods  exported  in  CKD/SKD/unassembled  condition only if  the  exporters  furnish  adequate  evidence to substantiate   that all the components /parts, etc.  being  exported constitute   the  complete export  product.

4. A suitable Public  Notice and Standing Order may be issued for the guidance of the  trade and staff.  Difficulties faced, if any, in implementation of the Circular may be brought to the notice of the Board at an early date.

Receipt  of  the  Circular  may  kindly be  acknowledged

                                                                        Dr.  M  Subramanyam
Deputy  Secretary to the  Govt. of India
Telefax  No.23360581

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