Drawback Circular No. 03/2001-Cus.

16th January 2001


Government of India
Ministry of Finance
Department of Revenue
Central Board of Excise & Customs

Sub: All Industry Rates of Drawback in respect of man-made fabrics falling under Chapters 54, 55 and 58 of the Drawback Table – regarding,

Silk & Rayon Textiles Export Pi-emotion Council and Indian Spinners”” Association have represented to the Board that certain exporters of man-made power loom processed fabrics are using the input – grey fabric imported i-nder Advance Licence/DEEC Scheme and DFRC-cum Drawback Scheme and are availing Central Excise allocations of All industry Rates of Drawback, available to such man-made fabrics. This facility is being availed despite the fact that the input “grey fabric” does not suffer any Excise Duty/Countervailing Duly. Such a practice has led to unintended accrual of drawback benefits.

2. The issue has been examined in the Board, It Is clarified here that the All Industry Rates of drawback for any export product are determined by taking into consideration the duty incidence suffered on various inputs used in the manufacture of such goods. The basic aim of allowing drawback is to relieve these duties so that the export products become competitive in the international market. Hence, only such export product are entitled to drawback where the inputs suffer duties whether of customs or of central excise, Though, General Note 2 to the Drawback -“table precludes admissibility of drawback to the exports effected against the duty exemption schemes, the first proviso to the said note allows extension of limited drawback rate to the extent of central excise allocation for such exports effected against DEEC/Advance Licence Scheme or the DFRC Scheme where the Countervailing duty is paid/payable in cash.

3. It is also clarified that the AH Industry Rate of Drawback for the man-made fabrics falling under Chapters 54, 55 and 58. of the Drawback Table have been .determined by taking into consideration the duty suffered on the inputs i.e. yarn, dyes, chemicals and packing materials. All these rates are on “All Central Excise basis is only the Central Excise duties and no Customs duties on these inputs have been considered. While formulating these rates, me Central Excise duty payable at the processing stage of me manufacture of these fabrics has not been included/considered. This position is well known to the field formations as well as the trade for, past many years. However, these instructions were reiterated and also made applicable to DFRC Exports vide the Ministry”s earlier Circular No.98/2000-Cus dated 29.11.2000.

4. In the Standard Input/Output Nouns obtaining in the Handbook of Procedures (EXIM Policy) it is observed that certain norms indicate Fibre/Yarn/POY as an input while others indicate Grey Fabric as an input against the resultant product man-made fabrics. The exporters have also been issued Advance Licences and DFRCs accordingly. Though Fibre/Yarn/POY are chargeable to Central Excise duties, the Grey Fabric is exempted from the Central Excise levy. It is, therefore, obvious that the exports of man-made fabrics against Advance Licence or under DFRC Scheme which involve Grey Fabric as an input don”t merit to be extended drawback at the All Industry Rates fixed for the man-made fabrics in the Drawback Table. These rates are applicable only to such exports of processed fabrics against the Advance Licence /DEEC/DFRC Scheme where the input used is POY/Fibre/Yarn,

5. All the .past cases of export of man-made fabrics against Advance Licence/DEEC Scheme and DFRC Scheme, where the input used is Grey Fabric, should be reviewed and steps be taken to recover the drawback already sanctioned. For future exports, the exporters may be directed to clearly declare on the shipping bills the inputs used in the manufacture of such fabrics and the drawback be allowed strictly only in such cases where the inputs like fibre/POY/yarn are duty paid or where the duty would be payable on such inputs.

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.

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