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Introduction on Duty Drawback

Introduction on Duty Drawback :

An important principle in the levy of customs duty is that the goods should be consumed within the country of importation. If the goods are not so consumed, but are exported out of the country, the cost of export goods gets unduly escalated on account of incidence of customs duty.

The re-export of the goods imported into the country is broadly on two occasions:

(a) Where the goods are sent back as such to the foreign country owing to any of the following mentioned reasons:-

(i) Goods not conforming to the specification of the order

(ii) Goods not permitted to be imported into the country on account of trade-restriction.

(iii) Goods after being imported are temporarily retained in the country and later taken out of the country. In other words, the very objective of the importation was limited to temporary retention in India.

(b) Where the goods are used in the manufacture of other articles and such other articles are exported.

The latest cause for relief of import duty paid is when the goods are ultimately exported. This factor gained greater importance with the establishment of 100% Export Oriented Units where goods manufactured are mainly exported to earn foreign exchange.

The principal method of encouraging the export of goods has been the drawback of customs and the central excise duties paid on inputs or raw materials and service tax paid on the input services used in the manufacture of export goods.

On parallel plane was placed the goods imported by tourists and other passengers transmitting through India. Under this category was the motor vehicles brought by tourists which were used in the country for a short period of 6-12 months alone. The grant of duty relief is contingent upon factual export of the goods.

This consequentially necessitated grant of the rebate or drawback at the port of export of the goods. This in turn necessitated formulation of certain rules and the procedure for regulating the application for grant of drawback and the rates at which such drawback could be granted.

Mohit Sharma
Mohit Sharma

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