Government of India
Ministry of Finance
Department of Revenue
Central Board of Excise & Customs
New Delhi, the 25th May, 2009
Circular No. 16/2009-Customs
Sub: - Grant of All Industry rate of duty drawback to merchant exporters– reg.
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.
- 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.
- 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.
- 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”.
- 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.
- 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.
- 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.
- 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.
- 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.
- Receipt of this Circular may kindly be acknowledged.
Yours faithfully,
(Sanjay Kumar Roy)
Technical Officer (Drawback)
F.No.609/137/2007-DBK
Annexure
Declaration to be submitted by merchant exporters who purchase goods from
traders for export
- Shipping bill no. and date
- Description of goods
- Export Invoice no. and date
- 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