Drawback Circular No. 5/2001 Cus.
19th January, 2001
Government of India
Ministry of Finance
Department of Revenue
Sub: Drawback on Ready – made Garments – Deduction for f.o.b. value on account of Imported/indigenous hangers – regarding.
A representation has been received from the Apparel Export Promotion Council that certain Customs formations are following a practice of deducting the value of hangers from the f.o.b. value of the hanger packed garments for the purpose of allowing drawback even though the Customs Notification No. 16/2000 dated 1.3.2000 (vide Serial No. 115), exempts hangers imported by bonafide exporters, from both the basic Customs duty and the countervailing duty.
2. The issue has been examined in the Board. It is observed that vide an earlier Circular No. 42/96-Cus dated 12.8.96, it was clarified that drawback could be allowed under section 74 of the Customs Act, 1962, on the hangers imported on payment of Customs duty when such hangers are re-exported along with ready-made garments provided the value of the hanger is not included in the value of garments. For such benefit, the hangers and ready-made garments are declared as two distinct commodities on the Shipping Bill though for the sake of convenience and on the instructions of the overseas buyers, the hangers have been packed along with the ready – made garments.
3. It is also clarified here while formulating the All Industry Rates of Drawback for the ready-made garments, the duty incidence on a account of hangers has not been included. The hangers supplied along with the garments are either sourced locally or they are imported. The local procurement in any case is against a price while the imported hangers could have been supplied either free of charge or against payment. In view of such different modes of procurement it is not possible to lay down a uniform criteria to address the issue.
The Board has, therefore, decided that :-
a. where the hangers are imported duty free under notification No.16/2000-Cus dated 1.3.2000 and have been supplied free of charge, their value should not be deducted from the value of the garments while computing the drawback amount However, if the hangers are imported on payment basis, their value shall have to be deducted, no matter these were imported duty free under notification No.16/2000-Cus. In such cases, a suitable declaration should be obtained from the exporters:
b. whether the hangers are locally procured, suitable deduction should be made from the total value of the garments if the value of hangers is not declared separately and deducted by the exporters and
c. where the hangers are imported on payment of duty, drawback under section 74 can be availed separately by the exporters in terms of Board’s Circular No.42/96-Cus dated 12.8.96. If their value is not separately indicated in the shipping bills, suitable amendment to the declared f.o.b. value to arrive at the net f.o.b. value of the ready-made garments exclusive of hangers, may have to be made. Proper verification as to the identity of the goods and duty payment thereon has also to be done before drawback under section 74 is disbursed. A suitable declaration regarding the value/duty payment/exemption/procurement status of the hangers supplied with the ready-made garments may have to be obtained to enable action as above.
5. All pending claims of the parties may be decided accordingly.
6. Suitable Public Notice for information of the trade and standing orders for guidance of the staff may kindly be issued on the above lines.
7. Receipt of the Circular may please be acknowledged.