Circular No. 57/95-Cus.
F.No. 602/4/95 – DBK
Government of India
Ministry of Finance
Department of Revenue, New Delhi
Subject :- Changes in the provisions relating to Drawback in the Customs Act, 1962 by Finance Act, 1995 – Re-export of Imported Goods, (Drawback of Customs Duties) Rules, 1995 and the Customs and Central Excise Duties Drawback Rules, 1995
Section 74 and Section 75 of the Customs Act, 1962 have been amended by Finance Act, 1995 and a new section 75A has been introduced. Some of the significant changes are as under :-
Enlargement of Scope
(1) Drawback under section 75 will now be admissible even for goods processed or on which any operation has been carried out in India, in view of the definition of manufacture.
Provision for interest on delayed payment
(2) Exporter shall be entitled to interest at the rates specified on the drawback amount where drawback is not paid to him within three months from the date of filing of his claim.
Interest on erroneous excess drawback recoverable
(3) Similarly where an exporter has been paid erroneous or excess drawback and fails to repay the same within three months from the date for demand, he shall be liable to pay interest on the amount recoverable.
Retrospective all industry rates
(4) Central Government shall be empowered to announce All Industry Rates of Drawback even with retrospective effect from a date not prior to the date of change in rates of duties on the inputs used in the export product.
Rule making power u/s 74
(5) Section 74 has been amended to empower Central Government to make rules for the purpose of the said section.
New Rules Notified
2. In order to give effect to the changes effected in the Act and also to streamline the existing rules, it was considered necessary to revise the Customs and Excise Duties Drawback Rules, 1971. Accordingly Customs and Central Excise Duties Drawback Rules, 1995 have been issued issued vide Notification No. 37/ 95-Customs & Central Excise (NT) dated the 26th May,1995, in supersession of 1971 rules. Re-export of Imported Goods (Drawback of Customs Duties) Rules, 1995 have also been issued under section 74 of the Customs Act vide Notifications No. 36/95-Customs dated the 26th May, 1995. Copies of these notifications are enclosed for ready reference.
3. Significant aspects/ changes of these rules are as under :-
(I) Customs & Central Excise Duties Drawback Rules, 1995
(i) Changes consequent to amendment of Customs Act :-
Under Definition of “Manufacture”
(a) The term “manufacture” has been defined in the rules and manufacture includes processin or any other operation carried out of goods and the term manufacturer has to be construed accordingly.
Retrospective effect to all Industry rates by Notification
(b) In terms of rule 5(2) of the new rules, the amount or rate of drawback determined by the Central Government under rule 3 or revised under rule 4 can now be allowed with retrospective effect from a date to be specified by the Central Government by notification in the official gazette, which date should not be earlier than the date of changes in the rates of duty on inputs used in the export product. Thus whereas normal announcement of rate or amount of drawback under rule 3 or rule 4 shall continue to be made by a Public Notice as hitherto, any retrospective effect to a rate would have to be necessarily by a notification.
Filing of claims
(c) A specific procedure has been provided for claiming drawback on goods exported by post as well as on goods exported other than by post. Such a procedure has become necessary in view of section 75A of the Customs Act which provides for payment of interest on the drawback amount in case drawback is not paid within three months from the date of filing of a claim by the exporter.
Claim of Drawback on exports by Post
(i) For claiming drawback on goods exported by post, exporter will be required to file his claim at the time of booking the parcel with the postal authorities in the form prescribed in the rules. The new form is on the lines of ‘D’ Form which was being presented with the parcel hitherto. The date of receipt of this Form from the postal authorities by the Customs authorities shall be treated as date of filing of claim by the exporter for the purpose of section 75A of the Customs Act. Thus drawback should be paid to the exporter within three months from the date of receipt of claim form from the postal authorities. On receipt of claim form, an intimation is also required to be given to the exporter. Where claim form is incomplete a deficiency memo must be issued within fifteen days of its receipt from the postal authorities. The exporter can resubmit his form after compliance with deficiencies within a period of 30 days. If such a claim is found to be in order, the same should be acknowledged and the period of three months for payment of drawback in terms of section 75A in such cases shall commence from the date of such acknowledgment.
Filing of Claim for Drawback on goods exported other than by post
(ii) The procedure for filing a claim for drawback in case of goods exported other than by post has been specified in rule 13. The claim is required to be filed in triplicate in the form prescribed in the rules within three month from date relevant for applicability of amount or rate drawback in terms of sub-rule (3) or rule 5. i.e. within three months from the date of “Let Export” Order. The claim has to be accompanied by documents specified in sub-rule (2) of
Rule 13. The claims which are complete in all respects are required to be affixed
with Dated Receipt Stamp and an acknowledgment should be issued to the exporter
within fifteen days from the date of filing of claim. The time limit of three months for
payment of drawback shall commence from the date of such acknowledgment.
Any claim which is incomplete should be returned to the exporter with a deficiency memo within fifteen days of its receipt. Where the exporter complies with the requirements specified in the deficiency memo within thirty days, the same is to be treated as a claim filed afresh. Acknowledgments should be given across the counter or sent by RPAD. Commissioner should make suitable rearrangement of the R & I work for this purpose.
Exclusion of time taken for testing of sample.
(iii) Wherever a sample has been drawn for test from a consignment, the exporter is required to file his claim along with a copy of the test report. Custom Houses should therefore make arrangements for supply of a copy of test report to the exporter at the earliest. Time taken in testing or the sample, in excess of one months, is required to be excluded for computing the period of three months specified for filing of a claim by the exporter. Thus where testing of sample takes one month and twenty days, exporter will be eligible to file his claim within three months and twenty days from the date of ‘Let Export’ Order. It should therefore be ensured that testing of samples is expedited and normally test results should be made available to the exporter within a period of one month from the date of drawl of samples.
Extension of limit for filing of claim
(iv) Under rule 13, a provision the been made for extension of aforesaid period of three months for filing a claim by the exporter by another three months where Assistant Commissioner is satisfied that exporter was prevented by sufficient cause. from filing has claim within the prescribed period of three months. The reasons for granting such extension should be clearly recorded in the claim file. For the time being such requests should be put up to Dy./ Addl. Commissioner for their concurrence.
Order passed by Commissioner (Appeals), Central Government or Courts.
(v) In case where an order for payment of drawback is made by Commissioner (Appeals), Central Government or any Court against the order of the proper officer of Customs, the manufacturer or exporter will be required to file a claim in the manner prescribed within three months from the date of receipt of order so passed.
Date of payment for the purpose of Section 75A.
(d) Since the interest is required to be paid for the period commencing from three months after the date of filing of claim by the exporter till date of payment, it has been specified in rule 14 that in case of payment by cheque to the exporter or his agent, the date of cheque shall be the date of payment whereas in case of credit in the exporter’s account maintained in the Custom House, the date of such credit shall be deemed to be the date of payment Commissioners should ensure that issue of cheque should be done as immediately as possible after sanction/ pre audit. For this purpose the issue of cheques should be on weekly basis without fail.
Procedure for filing of Supplementary claims
(e) Supplementary claim will require to be filed within three months from the date of Public Notice / Notification of revision of All Industry Rates, or from the date of communication of Brand Rate, and in other cases from the date of payment or settlement of original drawback claims. The procedure for issue of acknowledgement or deficiency memo as prescribed in case of fresh claims also applied to supplementary claims. Any differential claims for drawback arising out of appellate/ Revision/ Court order would be dealt with as a fresh claim as in Sub-Rule (5) or Rule 13 (See as Sub Para (v) of (c) above).
Recovery of excess or erroneous Drawback and Interest
(f) Demand for excess or erroneous drawback and interest is required to be issued in terms of rule 16 and is case of exporter’s failure to pay the amount within a period or three months, he shall also be liable to pay interest at the rates specified in terms of section 75A of the Customs Act.
(ii) Changes other than consequent to amendment of Customs Act.
Increase in time limit for filing applications for Brand Rate
(a) The time limit of thirty days prescribed under rule 6 and rule 7 of the erstwhile 1971 rules for filing of an application for Brand Rate or a special Brand Rate has been revised to sixty days. However the period of 60 days shall now count from the date relevant for applicability of rate or amount of drawback in terms of sub-rale (3) of rule 5 i.e. in case of exports by post it shall be from the date on which the exporters delivers goods to the postal authorities for exportation [section 83(2) of the customs Act.] and in case of goods exported other than by post from the date of ‘Let Export’ order by the proper officer of Customs under section 51 of the Customs Act (section 16 of the Customs Act).
Provisional Payment of Drawback
(b) The earlier rules provides for provisional payment of drawback only under rule 6. However, the simplified Brand Rate Scheme was being extended to special Brand Rate case under Rule 7 also. In the new rules provisional payment of drawback has been provided both under rule 6 and rule 7. Where the Central Government allows a provisional rate of drawback under rule 6, the exporter will be required to execute a bond with the Commissioner of Customs for an amount not exceeding the full amount claimed as drawback and with such surety or security as the Commissioner of Customs may direct. However, under rule 7 the bond shall be only for the difference between the All Industry Rate of drawback and the provisional rate of drawback authorised by the Central Government under the said rules.
Claims filed before commencement of these rules
(c) In terms of proviso to section 75A (1), drawback in respect of any claim filed under section 74 or section 75 of the Customs Act, before the enactment of Finance Act, 1995, if not paid within three months from the date of enactment will require to be paid with interest at the prescribed rates. Provision has therefore been made in the rules for disposal of all such pending claims in accordance with the provisions of new rules. Thus where as such claims need not be filed by the exporter again in the form prescribed under rule 11 or rule 13, such claims could be treated to have been so filed. In case the claims are complete in all respects, the amount of drawback should be paid within three months from the date of commencement of new rules (i.e. 26.5.1995). In case the claims are not complete, a deficiency memo must be issued within fifteen days from the date of commencement(26.5.1995) of these rules. However, these claims should be settled within 3 months from the date (i.e. 26.5.95) of commencement of Finance Act, 1995, failing which interest would be payable. Commissioners should therefore ensure special efforts for disposal of the pending claims of Drawback including putting staff on overtime. Provision has also been made permitting the exporters to file claims in respect of export made before the commencement of these rules within three months from the date of commencement of new rules.
II. Re – export of Imported Goofs (Drawback of Customs Duties) Rules, 1995.
(a) The aforesaid rules have been issued specifying the procedure for filing a claim in respect of goods exported under a claim for drawback under section 74. It has become necessary to prescribed a procedure for filing of a claim in view of section 75A of the Customs Act which now requires the Government to pay interest at the specified rates in case drawback is not paid to the exporter within three months from the filing of his claim.
Drawback on goods exported by post
(i) Rule 3 provides for procedure to be followed in case of goods exported by post under claim for drawback under section 74. The claim in the prescribed from is required to be furnished by the exporter to the postal authorities along with the parcel. The date of receipt of the claims so filed by the proper officer of the Customs from the postal authorities, shall be deemed to be the date of filing of a claim by the exporter for the purpose of section 75A. An intimation of receipt of claim from postal authorities is required to be thirty days are to be treated as fresh claims. Such claims if found in order should be acknowledged and period of three months for payment of drawback shall commence from the date of such acknowledgement.
Drawback of goods exported other than by post
(ii) Rule 4 provides for statement/ declarations to be made on the Shipping Bill/ Bill of Export in case of goods exported under section 74. Rule 5 provides for the time and manner for claiming drawback on such goods. The claim is required to be filed in the prescribed from within three months from the date of ‘Let Export Order’ under section 51 by the proper officer of Customs. The claim in sub-rule (2) of rule 5. Procedure regarding affixing Dated Receipt Stamp and issue of acknowledgment or deficiency memo as in the case of claims under section 75 has been prescribed for claims under section 74 of the Customs Act in these rules also.
Extension of time limit by Assistant Commissioner
(iii) Rule 5 provides that where the Assistant Commissioner is satisfied that the exporter was prevented by sufficient cause to file his claim within the prescribed period of three months, he may permit claim to be filed within a further period of three months. As instructed in sub-para (iv) of para (c) relating to Section 75 claims, the file should be put up to the Deputy Commissioner/ Addl. Commissioner for concurrence.
Orders passed in Appeal / Revision etc.
(b) Where an order for payment is made by Commissioner (appeals), the Central Government or any Court against an order of a proper officer of Customs, the exporter may file a claim within three months from the date of receipt of orders so passed.
Date of payment of drawback
(c) Since the interest is required to be paid from the date of expiry of three months from the date of filing of a claim upto the date of payment, rule 6 provides that the date of cheque in case of payment by cheque and the date of credit to the exporter’s account where exporter maintains account in the Custom House shall be deemed to be the date of payment of drawback and interest.
Recovery of excess or erroneous drawback
(d) Any excess or erroneous drawback and interest paid to the exporter can be recovered by issue of a demand under rule 7 and if such an amount is not paid within three months from the date of demand, the exporter is liable to pay interest in terms of section 75A of the Customs Act.
Exports before the commencement of these Rules.
(e) Where any goods have been exported before the commencement of these rules, the exporter can file a claim within three months from the date of commencement of these rules in the manner prescribed.
2. You are requested to bring aforesaid changes and the new rules to the notice of the field officer by standing orders/ departmental orders and also issue Public Notice/ Trade Notice for information of the exporting community. Form of acknowledgement and deficiency memo should also be prescribed urgently. Copies of your Departmental instructions/ T.N. should be endorsed to the Board with a copy to DGIACCE and its regional units.
Under Secretary to the Government of India