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Mere verbiage, not action, on duty drawback

To address some systemic and compliance-related weaknesses in assessing export goods and payment of duty drawback to exporters, the Central Board of Excise and Customs (CBEC) has issued a Customs Circular No 46/2011.

Section 74 of the Customs Act, 1962, warrant verifying of parameters such as physical properties, weight, marks and numbers, test reports, documentary evidence, etc, for identification of the goods and determination of ‘use after import’. Dated October 20, the circular says for grant of drawback on re-export of imported goods under Section 74, detailed speaking orders, following the principles of natural justice, are to be issued on whether a drawback is proposed to be sanctioned fully or partly or proposed to be denied.

Further, while processing drawback claims, whether under Section 74 or Section 75, any deficiency noticed shall be communicated to the exporter in a clear manner within 10 days. Brand rate fixation and drawback disbursement must be completed within the time limits specified in the CBEC Citizen’s Charter, says the circular. Field formations shall ensure proper data entry in the system’s relevant module and monitoring cells are to periodically verify these and monitor the process.

The instructions are meant well but amount to little more than exhortation. The major problem in re-export of imported goods is identification, especially where identification marks are missing or where the goods weren’t exported in the original packing or where the identification marks aren’t mentioned in the import documents. These can be substantially resolved by allowing Central Excise formations to certify if the goods exported are the same as those imported, whether the goods have been used after imports and if so, for how long.

In case of drawback claims, field formations are required to ensure periodic sample checks on export declarations, including classification, description, weight, etc. They are also required to apply the valuation rules on the export goods declared, availment/reversal of Cenvat, wherever applicable, realisation of export proceeds, actual freight payment certificates, etc. Many instructions have been issued in the past on these aspects. CBEC should consolidate all its instructions and issue one Master Circular on drawback matters.

It should also revisit the stipulation that Drawback Special Brand Rates could be claimed only when the All Industry Rates compensate less than 80 per cent of the actual duty incidence. A study of reasons for delay in fixing the brand rate or denial of such requests will bring out the problems exporters face at the ground level.

With abolition of the Duty Entitlement Passbook scheme, many exporters are being exposed to the drawback scheme for the first time. They would greatly benefit if all the instructions and clarifications are found in the said Master Circular and reforms made in the process for fixing Duty Drawback Brand Rates or Special Brand Rates.