CBEC Clarifications on Duty Drawback 2012-13 Amendments – Effective from 10 October 2012

[CBEC Circular No. 27 dated 5^th October 2012]

Subject: All Industry Rates of Duty Drawback 2012-13.

The Ministry has notified the All Industry Rates (AIR) of Duty Drawback 2012-13 vide Notification No. 92 / 2012- Customs (N.T.), dated 4.10.2012. The notification shall come into force on 10^th October, 2012.

2. As in previous years, the drawback rates have been determined on the basis of certain broad parameters including, inter alia, prevailing prices of inputs, Standard Input Output Norms, share of imports in the total consumption of inputs, FOB value of export goods, the applied rates of central excise and customs duties, the factoring of incidence of service tax paid on taxable services which are used as input services in the manufacturing or processing of export goods, factoring incidence of duty on HSD/Furnace Oil.

3. Some of the broad aspects, from amongst the changes notified with respect to AIR of duty drawback and entries in the Schedule, are –

(a) Most, but not all, of the items that were already covered under the duty drawback schedule prior to 1.10.2011 [that is, before last year’s (2011-12) duty drawback schedule was issued] will see an increase from the existing AIR. Some of the items that will see a reduction in AIR include leather trunks and handbags, wool yarn and fabric, gaskets (84.84), lawn tennis balls, cricket balls, felt tipped/porous tipped pens and markers, goods of heading 90.02 to 90.05.

(b) In continuation of a transitory arrangement, most of the items incorporated in last year’s (2011-12) duty drawback schedule, from the erstwhile DEPB scheme, will see a reduction in the AIR rates.

(c) The existing residuary rate of 1% ad valorem (all customs) will now be either 1% composite rate with 0.3% customs component, or it will see an increase to 1.5% (customs component) or 2% (customs component).

(d) With certain exceptions, the drawback caps have not been assigned where the higher of the composite rate/customs component of the rate is 3.5% or lower. Where the AIR will be above 3.5%, not every entry has been assigned the drawback caps. Where drawback caps have been assigned, these will by and large see a relative increase.

(e) In certain cases separate tariff entries have been created, as for calcined bauxite, silicon dioxide, gauze swabs, dairies with leather covers, leather insoles, sarees with or without blouse piece under chapters 50, 52 and 54, women’s/girl’s blouses with tightening at the bottom, footwear with TPR/PU soles and canvas uppers, worked human hair, imitation jewellery made up of iron, motor cars with manual transmission, motor cars with automatic transmission, multi-speed bicycles etc. Under heading 3004 (medicaments), dosage and pack-size specifications for many items have been removed. Composite rates have been assigned in a few cases such as under heading 7321, 7415 and 8535. The unit for the drawback cap has been changed from litre to kilogram for printing inks of heading 3215.

(f) Drawback has been restored for export of Guar Gum (Tariff Item No. 130201) by providing a specific composite rate with a specific customs component.

(g) In order to continue with the existing classification of sports gloves under the drawback schedule, an appropriate exception, to the principle of alignment at four digit level with the First Schedule to the Customs Tariff Act, 1975, has been specified in the Notes and Conditions in the Notification.

4. It is requested to download the notification with the Schedule for 2012-13 from Board’s website (www.cbec.gov.in) and carefully peruse it and thereby take note of all the specific changes notified. As before, it may be ensured that exporters do not avail of the refund of service tax paid on taxable services which are used as input services in the manufacturing or processing of export goods through any other mechanism while claiming AIR. Since the changes include specification of composite rates in many cases, it needs recalling that the composite rate (when Cenvat facility has not been availed) is not available, inter alia, when rebate of central excise duty on inputs is availed or inputs are procured without payment of central excise duty, under rule 18 or 19 (2) of Central Excise Rules 2002, respectively. The due diligence is also expected to be exercised to prevent any misuse, inter alia, in the light of not all items having drawback caps and the assigned drawback caps seeing a relative increase.

5. While every effort has been made to avoid errors / omissions, these are not ruled out. If an error is noticed, please immediately inform the Board for appropriate corrective action. Difficulties faced, if any, in implementation of the changes may also be brought to Board’s notice. Suitable public notice and standing order may be issued for guidance of the trade and officers. Receipt of this Circular may be acknowledged.

F. No. 609/110/2012-DBK