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Helpful change in duty drawback rule

Responding to various representations from exporters, the finance ministry has amended the Duty Drawback All Industry Rate Schedule through a notification no. 75/2011-Cus (NT) dated October 28. The Central Board of Excise and Customs (CBEC) has issued Circular no. 48/2011-Cus (NT) dated October 31, explaining the changes.

The most accommodating change is on parts made of iron, steel or aluminium through casting or forging processes, earlier covered under various serial numbers of product group 61 (Engineering) of the DEPB scheme and later incorporated in Chapter 73 or 76 of the Drawback Rate Schedule. Many of these goods merited classification more appropriately under different headings, of Chapter 84 or 85 or 87, for which no specific tariff entry had been provided. To resolve this, the said entries have now been appropriately replicated under headings 8487, 8548 and 8708 to enable exporters to claim drawback on such parts or components, irrespective of classification of such goods at any other four-digit level in chapter 84 or 85 or 87 of the Schedule.

For example, "identifiable ready to use machined parts/components made wholly or predominantly of iron/carbon steel/non-alloy steel/alloy steel (other than stainless steel) (not less than 90 per cent by weight) manufactured through casting process, not elsewhere specified", which found mention at Tariff Item no 732504, now also finds mention at 848701, 854801 and 8708064. A new note (3A) inserted in the Notes and Conditions of the Notification No. 68/2011-Cus (NT) dated September 22 says "notwithstanding anything contained in the said Schedule, any identifiable ready-to-use machined part or component predominantly made of iron, steel or aluminium, made through casting or forging process, and not specifically mentioned at six-digit level or more in Chapter 84 or 85 or 87, may be classified under the relevant tariff item (depending upon material composition and making process) under heading 8487 or 8548 or 8708, as the case may be, irrespective of classification of such part or component at four-digit level in Chapter 84 or 85 or 87 of the said Schedule."

In all such cases where existing entries have been replicated, the rates of duty drawback/value caps (wherever assigned) are the same for both the existing and replicated entries.

The CBEC has also said that so long as the alignment of tariff items and descriptions of goods in the Drawback Schedule is there at the four-digit level, there should not be any difficulty for exporters to claim drawback in line with the rate specified in the Drawback Schedule, even if there’s a difference in classification of the said items at six or more digit levels.

The helpful changes will apply to exports made from October 1 onwards. Exporters have been allowed to make supplementary claims in respect of exports made between October 1 and 28.

While these amendments and clarifications are very useful, the CBEC should also take a look at many plastic parts classified in Tariff Items 3926909901 to 3926909912 that can also be classified as parts of machinery (e.g 84799090). Exporters of such parts also deserve suitable relief, as their entitlements have gone down with abolition of DEPB scheme.