Government of India
Ministry of Finance
Department of Revenue
Central Board of Excise & Customs
CIRCULAR NO. 7/2010-CUSTOMS
New Delhi, the 23rd of March, 2010
To
All Chief Commissioners of Customs/Central Excise/Customs & Central Excise.
All Commissioners of Customs/Customs (P)/Customs & Central Excise /Central
Excise.
All Director Generals of CBEC,
Chief Departmental Representative of Customs Excise & Service Tax Appellate
Tribunal.
Sub: Recovery of drawback amount on the portion of the FOB value of export not
realized by the exporter but compensated by ECGC - reg.
Sir/Madam,
I am directed to say that payment of duty drawback is governed by provisions of
section 75 of the Customs Act, 1962 and the rules made there under. Section 75
of the Customs Act provides that where any drawback has been allowed on any
goods and the sale proceeds in respect of such goods are not realized within the
time allowed under the Foreign Exchange Management Act, 1999 such drawback shall
be deemed never to have been allowed and the Central Government may, by Rules
made under section 75 (2), specify the procedure for the recovery of the amount
of such drawback. A procedure has also been laid down under the Customs, Central
Excise and Service Tax Drawback Rules, 1995 for recovery of drawback in case of
non-realization of export proceeds. Therefore, the amount of drawback paid in
all such cases where export proceeds have not been realized has to be recovered.
- However, it has been brought to notice of the Board that some exporters are
resisting recovery of drawback in cases where export proceeds have not been
realized citing provisions in Handbook of Procedure (HBP) (Vol.1) of the Foreign
Trade Policy (FTP) discussed below.
- Para 2.25.1 of the Handbook of Procedure (HBP) (Vol.1) of the Foreign Trade
Policy (FTP) 2009–2014 provides that payment through ECGC cover would count for
benefits under FTP. The FTP 2004-09 (Para 2.25.1 of the HBP v.1) and the FTP
2002–2007 (Para 2.25.3 of the HBP v.1) also had the same provision. The DGFT
vide Policy Circular No.12/2002-2007 dated 1.11.2002 had clarified that this
provision would also be applicable to exports made or licenses issued prior to
01.4.2002.
- Further, a new provision has been made in the current FTP (Para 2.25.4 of the
HBP v.1, 2009-14) which provides that realization of export proceeds shall not
be insisted under any of the Export Promotion Schemes under the Foreign Trade
Policy, if the Reserve Bank of India (RBI) writes off the requirement of
realization of export proceeds on merits and the exporter produces a certificate
from the concerned foreign Mission of India about the fact of non-recovery of
export proceeds from the buyer. However, this would not be applicable in
self-write off cases.
- Since the Drawback scheme is governed by the provisions of the Customs Act,
1962 and the Rules made there under which clearly provide that drawback should
be recovered if sale proceeds have not been realized, it is hereby clarified
that provisions contained in para 2.25.1 and 2.25.4 of the HBP v.1 (2009-14)
would not be applicable to the Drawback scheme. Hence, ‘Drawback’ would not be
payable in cases where export proceeds have not been realised in accordance with
the provisions of the Foreign Exchange Management Act, 1999 even if the claim
has been settled by ECGC or realisation waived by RBI. Action should be taken
for recovery of drawback amount in such cases.
- A suitable Public Notice and Standing Order may be issued for the guidance of
the trade and staff. Difficulties faced, if any, in implementation of the
Circular may be brought to the notice of the Board at an early date.
Receipt of the Circular may kindly be acknowledged.
Yours faithfully,
(Pramod Kumar)
F.No.609/121/2007-DBK