Section 76 of the Customs Act, 1962 contains the provisions in respect of prohibition and regulation of drawback and no drawback shall be allowed in the following circumstances:

(a) In respect of any goods, the market price of which is less than the amount of drawback due thereon,

(b) If the Central Government is of the opinion that goods of any specified description in respect of which drawback is claimed under this Chapter are likely to be smuggled back into India.

(c) CENVAT credit claim is on inputs and input services then no duty drawback is allowed. However, if the goods have already suffered the customs duty then duty drawback is allowed to the extent of customs duties.

(d) Duty drawback is not allowed if the exporter has already availed the Duty Entitlement Pass Book (DEPB) or other export incentives.

(e) If the sale proceeds not received within the time period allowed by Reserve Bank of India.

(f) Export to Nepal and Bhutan and the export proceeds are not received in hard currency (it means USD, GBP or Pounds).

(g) drawback in respect of iron and steel, cement and rice is not allowed. [w.e.f. 29-5-2008]

(h) duty drawback is more than 1/3rd of market value of exported goods, then amount of duty drawback is restricted to 1/3rd of market value.

(i) No amount or rate of drawback is to be determined except where the amount of drawback exceeds or equal to Rs. 500/- or it is 1% or more of the FOB value of export Where the amount of drawback in respect of any goods is less than `50.

Duty Drawback

Upper limit of drawback money or rate

As per the Rule 8A of Customs, Central Excise Duties and Service Tax Drawback Rules, 1995 the drawback amount or rate determined under rule 3(i.e. the all industry rate) shall not exceed 1/3rd of the market price of export product.

Interest on drawback amount:

Any drawback payable to a claimant u/s 74 or 75 is not paid within specified time period (i.e. one month from the date of filing of drawback claim), the @6% per annum interest is payable to the claimant after the expiry of said one month till the date of payment of such drawback. Drawback has been paid to the claimant erroneously or it becomes otherwise recoverable under this Act or rules made there under, within two months from the date of demand has to pay back. Otherwise, @13% per annum interest will be levied from the date of payment of such drawback to the claimant till the date of recovery of such drawback.

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March 2021