Market Purchases for Export to get Full Drawback Subject
to Declaration
Circular No. 16/2009-Customs
F.No.609/137/2007-DBK
Government of India
Ministry of Finance
Department of Revenue
Central Board of Excise & Customs
New Delhi, the 25th May, 2009
[Ref:
CBEC Circular No. 16 dated 25 May 2009]
Sub: Grant of All
Industry rate of duty drawback to merchant exporters
F.No.609/137/2007-DBK
I am directed to refer to Para (vi) of Ministry’s
Circular No. 64/98-Cus dated 01.09.1998, where it was clarified that in the
case of merchant exporter who procures the export goods from the open
market, the benefit of All Industry Rates of Duty Drawback shall be restricted
to the Customs allocation only, if any. Export goods purchased from the market
shall be treated as having availed the Modvat
facility and would not be entitled to the Central Excise allocation of the All
Industry Rate of Drawback.
2. In this
regard references have been received in the Board from the Directorate General
of Foreign Trade (DGFT), Federation of Indian Export Organizations (FIEO) and
exporters stating that some Custom Houses were insisting on non-availment of Cenvat declarations
from merchant exporters of garments who were not purchasing their goods from
manufacturers but were sourcing their export goods from traders. The Custom
Houses were denying full All Industry rate of duty drawback (including the
excise rate) in case exporters were not able to furnish such declarations. The
FIEO/DGFT and the exporters have represented that the merchant exporters
without supporting manufacturers cannot give non-Cenvat
availment declarations as they are not aware of the
manufacturers and can at best declare the names of traders from whom the goods
have been purchased. Further, most of the garments are being manufactured by
petty manufacturers/small scale cottage industries/largely unorganized sector
outside the Cenvat chain and, therefore, the higher
rate of drawback may be given on garments without insisting on any Cenvat non-availment declaration.
3. The
matter was discussed with some field formations. A view was expressed that the
proviso to Rule 3 of the Drawback Rules does not permit full drawback (both
customs and central excise portions) if Cenvat has
been taken on inputs used in the manufacture of export goods and therefore full
drawback (including the excise portion) cannot be granted to such goods.
4. The
matter was referred to the Committee constituted by the Government to formulate
All Industry Rate of Duty Drawback for the year 2008-09. The Committee in its
report for the year 2008-09 has recommended that the merchant exporters who
source their export goods from the market should be given higher rate of
drawback without any declarations as “they have to purchase the products
from the manufacturer after excise clearance i.e. after payment of excise duty.
Therefore as far as merchant exporters are concerned, the full drawback rate
has to be made available to him for neutralization of excise duty paid when
clearing the goods from the manufacturer’s premises”. The Committee has
further remarked that “in case of manufacturer exporters there could be a
possibility of double benefit if he were to claim both Cenvat
benefit as well as full duty drawback. Therefore, the only cases for checking
whether Cenvat has been availed or not, can
conceivably pertain to manufacturer-exporters and not to merchant exporters”.
5. The
report of the Drawback Committee has been examined in the Board. The goods
available in the market are deemed to be duty paid goods. Hence they bear an
element of central excise duty, which needs to be reimbursed, if such goods are
exported. Ideally, the terminal central excise duty paid at the time of
clearance from factory should be refunded. However, that is not possible in
case of export of goods purchased from the market as the trader exporter
doesn’t have duty paying documents. The next best option is to grant All
Industry Rate (AIR) of duty drawback as AIR drawback represents average
incidence of taxes suffered by inputs used in the export product. Granting this
rate on the condition that the exporter would furnish Cenvat
non availment declaration may not be proper as such
goods may have changed several hands before exports and the final exporter may
not be aware of the actual manufacturer and whether Cenvat
credit was availed on such goods.
6. As
regards the proviso to Rule 3 of the Drawback Rules, it is viewed that the
interpretation that this proviso permits only customs portion of drawback to
goods exported by merchant exporters, unless they have a supporting
manufacturer, is not correct. As mentioned earlier, the goods available in the
market are deemed to be duty paid. Even if it is assumed that such goods had
availed Cenvat, then such Cenvat
would have been used to pay the duty on final products cleared for home market.
The Cenvat availed has therefore been ‘given back’ to
the Government when such goods were cleared for local market. The only
possibility of double benefit would arise only when the exporter is able to
take the drawback of the central excise portion and also the rebate of terminal
excise duty paid on goods at the time of their clearance to the local market.
Such rebate is presently not possible in terms of No.19/04- CE (NT) and
20/04-CE (NT) as the rebate is granted only if goods are exported directly from
the factory/ warehouse and not from the market. However, as an abundant
precaution, the merchant exporters sourcing their goods from the market and
claiming central excise portion of duty drawback may be asked to specifically
declare, at the time of export, that no rebate (both input rebate and final
product rebate) shall be taken against the exports made against these shipping
bills.
7. In view
of the above, the Board has decided to accept the recommendation of the Drawback
Committee in this regard. Thus merchant exporters who purchase goods from the
local market for export shall henceforth be entitled to full rate of duty
drawback (including the excise portion). However, such merchant exporters shall
have to declare at the time of export, the name and address of the trader from
whom they have purchased the goods. They shall also have to declare that no
rebate (input rebate and also the final product rebate) shall be taken against
the Shipping bills under which they are exporting the goods. The merchant
exporters who purchase goods from traders may therefore furnish the
declaration, at the time of export, in the format annexed with this circular.
This is issued in supersession of para (vi) of
Circular No. 64/98-Cus dated 01.09.1998.
8. The
Custom Houses shall get the veracity of such declarations verified at random
and recover excess drawback in case the verification reveals that the
declaration filed by the exporter was false or double benefit has been availed
of.
9. Suitable
public notice for information of the trade and standing order for the guidance
of staff may be issued accordingly. Difficulties if any, noticed in
implementation of this circular may be brought to the notice of the Board.
Annexure
Declaration to be submitted by merchant exporters
who purchase goods from traders for export
1. Shipping
bill no. and date
2. Description
of goods
3. Export
Invoice no. and date
4. Name and
complete address of the trader from whom export goods
have been purchased.
Declaration
I, _____ ______, hereby declare that I am not the
manufacturer of the export goods and am not registered with central excise. I
have purchased these goods from a trader who is also not registered with the
central excise. I declare that no rebate (input rebate or/and final product
rebate) shall be taken against the export (s) made against this shipping bill.
Merchant exporter’s signature and seal