Circular No. 97/2003-Customs
14th November, 2003

F.No.603/32 /2003-DBK
Government of India
Ministry of Finance
Department of Revenue
Central Board of Excise  & Customs

Sub:  Fixation  of  brand  rate  of  duty drawback  by the  Central Excise  field  formations under  Rules  6  and  7  of  the  Customs  and  Central Excise  Duties  Drawback  Rules, 1995 –  Removal  of difficulties-regarding.

Attention is  invited  to  the  Customs  Circular  No.83/2003 dated  18th  September, 2003 whereby  detailed  instructions  along with  illustrations  had  been  given  for  computing  duty  drawback  by the  Central  Excise  field formations  under  rule  6 and rule 7 of  the  Customs  and  Central  Excise  Duties  Drawback  Rules, 1995.

2. The field  formations  as well as trade  have  expressed  certain  difficulties  in  implementation  of  para  3(a)(i) of  the  said  Circular. Through  this  paragraph,  the  Board had  prescribed that  while  fixing  the  brand rate of  drawback for  leather  goods  including  shoes,  shoe  uppers, etc.,   the  element of  duty  drawback  on  finished/lining  leather  has  to be provided  at  the  All Industry  Rate  available  for  finished/lining leather.   Since  the  drawback  rate for these products  are  on ad  valorem  basis  with  duty  drawback  caps,  it  was prescribed that  the  element of  drawback  on these inputs be  computed  on  the  procurement  price  of  these inputs  as  evidenced  by  local procurement  invoices.

3. It  has  been  represented  that  this  procedure  is difficult  to be  applied  where –

(a)  only raw  hides  or  wet  blue  leather,  i.e.,  unfinished  leather  is  procured  from the market  and the  same  undergoes  the  process of  finishing  in the  manufacturer exporter’s  own  factory,  or

(b) where  the  unfinished  leather (wet  blue  leather)  or  hides  are  procured  by  the  manufacturer  exporter  but  the  finishing  process  on the same is  carried out  by  the  job  workers who  subsequently  supply the  finished  leather  to the  manufacturer exporter.

4. The issue  has been examined.  It  is clarified that  in  such cases, the exporters  may be  asked   to  furnish  the purchase invoice  as  to the  procurement  of  the  raw  hides/wet  blue  leather.  They  should also furnish a  certificate from the  Chartered Accountant/Cost  Accountant as  to  the consumption and cost of  processing chemicals  used  for  its  processing  and  other  incidental  overhead  charges incurred.  The purchase price  of  raw  hides/wet  blue  leather  along  with these processing  costs and  charges  should be  reckoned for the  purposes of computing  duty  drawback  element on the  finished/lining  leather  by applying  the  All Industry  Rates of  Duty  Drawback.

5. Suitable public notices for information of the trade and standing orders for guidance of the staff may kindly be issued accordingly.    

6. The receipt of this Circular may kindly be acknowledged.

S.S.  Renjhen
Joint Secretary to the  Government of  India
Telefax No.23341079.

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