Subject: Circular No. - 42 / 2011-Customs, dated 22-09-2011
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Date: Wed, 28 Sep 2011 15:11:39 +0530

F.No. 609/82/2011-DBK

Government of
India

Ministry of
Finance

(Department of
Revenue)

Central Board of
Excise & Customs

Circular
No. -  42 /
2011-Cus.,

New
Delhi, dated 22nd September, 2011

To

All
Chief Commissioners of Customs / Customs (Prev.).

All
Chief Commissioners of Customs & Central Excise / Central
Excise.

All
Director Generals under CBEC.

All
Commissioners of Customs / Customs (Prev).

All
Commissioners of Customs & Central Excise / Central
Excise.

Subject:  All Industry Rates of Duty Drawback,
2011-12 - Reg.

Sir/
Madam,

The
Ministry has announced the revised All Industry Rates (AIR) of Duty Drawback
2011-12 vide Notification No.  68 /
2011- Cus. (N.T.), dated 22.09.2011. The rates of duty drawback are effective
from 01.10.2011. The Notification may please be downloaded from
CBEC website www.cbec.gov.in and perused for
details.

2.
As in previous years, the drawback rates have been determined on the
basis of certain broad parameters including, inter alia, the prevailing prices of
inputs, Standard Input Output Norms (SION), share of imports in the total
consumption of inputs, FOB value of export goods and the applied rates of duty.
The incidence of duty on HSD/Furnace Oil has been factored in the drawback
calculations. The incidence of service tax paid on taxable services which are
used as input services in the manufacturing or processing of export goods has
also been factored. The Commissioners may ensure that the exporters do not avail
of the refund of this tax through any other mechanism while claiming the All
Industry Rates of duty drawback.

3.
The drawback schedule this year incorporates items which were hitherto
under the DEPB scheme. Thus, the total number of items in the drawback schedule
now number approximately 4000.  While incorporating these DEPB items in
the Drawback schedule, care has been taken to classify them at the appropriate
four digit level.  However, there
may be some doubts about the classification of these DEPB items in the drawback
schedule notified. Be that so as it may, it may please be noted that the rates
of drawback as specified for these items in the drawback schedule is not to be denied in all such
cases. For easy reference, a
list of all the DEPB items falling under a particular product code and serial
number with the corresponding drawback tariff item has also been separately
hosted on the CBEC website.  All
field formations are requested to inform the Board about specific item/s (if
any) on which there are doubts regarding the classification.

4.
Broadly speaking, most of the items which are already covered under the
duty drawback schedule will suffer a minor reduction in the existing drawback
rates. The reduction is mainly on account of the reduction in basic customs duty
on crude petroleum as well as a reduction in central excise duty on diesel.

5.
In respect of items covered under the DEPB Scheme, major exporters
operating under the DEPB Scheme are mainly from the Engineering sector including
the auto and auto component industry, Chemicals, Pharmaceuticals, Textiles and
the marine sector. It has been decided to provide a smooth transition for items
in these sectors while incorporating these in the drawback schedule.  As a transitory arrangement, these items
will suffer a modest reduction from their DEPB rates, ranging from 1% to 3% for
most items.

6.
Presently, the DEPB rates are available for two wheelers, three wheelers,
commercial vehicles and tractors. Appropriate duty drawback rates have been
provided for these items in the proposed schedule without any value cap.
Exporters of passenger cars are presently opting for brand rate of duty
drawback. Government has received requests from these exporters; appropriate All
Industry Rate of duty drawback for export of Passenger Cars has been provided in
this year’s Drawback Schedule.

7.
As a general policy, it has been decided that there will be no value cap
on items in the drawback schedule, where the composite duty drawback rate is
less than or equal to 3%. Further, there are certain goods especially in
engineering and chemicals sectors where because of the wide variation in prices,
no value cap has been assigned. You may like to exercise due diligence to
prevent any misuse consequently. At the same time, it may also be ensured that
the process of scrutiny of such items does not result in hardship to the
exporters and the export consignments are not held up.

8.
Doubts have been raised as to the eligibility of exporters to claim the
composite rate of duty drawback in situations covered under Para 15(ii) of
Notification No. 84/2010- Customs(N.T.)  in the light of the expression “when no
Cenvat facility has been availed for the goods under export” being mentioned in
the said para,  . The doubt has
apparently arisen because Para 15(i) ibid mentions the words “that no Cenvat
facility has been availed for any of the inputs or input services used in the
manufacture of the export product”. It is hereby clarified that drawback is
reimbursement of input duties suffered in the manufacture of export goods and as
long as no Cenvat credit has been availed for any of the inputs or input
services used in the manufacture of the export product, the composite rate of
drawback is permissible on export of such goods. The expression “When Cenvat
facility has not been availed”, in Para 15 of the above mentioned notification,
as far as the drawback provisions are concerned, has always meant Cenvat
facility on inputs and input services, and is to be understood as such .The
drawback notification has  been
suitably amended to further clarify the matter.

9.
There has been some confusion regarding the eligibility of drawback rates
for tufted bath mats made of
cotton. A new entry has been created under the 4-digit category 5703
which specifies the applicable rate for tufted floor-coverings etc. made of
cotton. It is understood that in previous years, exporters of this item were
given DBK at the residuary rate corresponding to 570399 @ 2.5%. This was not the
intention. In fact the heading 570501 in the previous Schedule qualified for the
same rate as that of woven cotton floor coverings falling under heading (570204)
@8.9%. It is clarified that the benefit of the rate as existing at the relevant
point for 570501 is to be allowed to all exports of tufted cotton bathmats. In
all such cases wherever the assessments are not provisional, the exporters shall
be allowed to file supplementary drawback claims and the claims shall be
processed accordingly.

10.        In
2010-11, the description “ENA” (Extra Neutral Alcohol) was incorporated in the
heading 2207. There has been some confusion that claims made prior to the
notification of last year were not covered under the new description and there
was a request for clarification. It is clarified that “ENA” is otherwise covered
under the heading 2207 as ethyl alcohol and would cover all periods, including
those prior to 20th, September 2010.

11.        Under
the heading 8307, the description has been amended to provide drawback on
flexible tubing whether or not coated with PVC. It is clarified that the rate
under the heading 8307 is applicable to the flexible tubing whether or not coated with PVC, and
the rate would be applicable even for past periods, prior to the
amendment.

12.
It was
clarified vide circular no. 25/2007 dated 16th July 2007, that
drawback is to be allowed for articles under tariff items 7323 of the drawback
schedule without making any deduction towards the lids, handles etc. provided
they retain the character of iron or steel articles classifiable under the said
tariff item. It is clarified that the same logic shall also be applicable for
the goods falling under tariff items 8211 and 8215 of the drawback
schedule.

13.       There has
been a dispute regarding classification of FIBC (Flexible intermediate bulk
containers). It has been represented that the field formations are classifying
the FIBCs under Chapter 39 whereas the FIBC finds a specific mention under
tariff item 630502 of the drawback schedule and the exporters are being denied
drawback mentioned against the heading 630502 in the Drawback Schedule. It is
hereby clarified that FIBCs which are made of manmade textile material would be
classifiable under drawback tariff item 630502. FIBCs which are big or bulk bags
or super sacks made of polymers of ethylene and other plastic material would
however, be classifiable under chapter 39 of the drawback
schedule.

14.
Benefits under the DEPB scheme are available only upto September 30,
2011. Thus, all exports under DEPB scheme upto and including September 30, 2011,
where the “Let Export Order”(LEO) has been issued by the Customs officer shall
be eligible for the issue of DEPB Scrips. Since,
export consignments with ‘Let Export Order’ after  this date would no longer be eligible for
benefits under the DEPB scheme, it is likely that there may be a rush of DEPB
export consignments before this date  causing extra load on the EDI system. All
Custom officers posted at ports under your jurisdiction may be directed to take
due care and ensure that DEPB export consignments are accorded priority and
processed/cleared expeditiously. Further, officers handling export
assessment/examination with specific regard to DEPB Shipping Bills must ensure
that the bills in the EDI queue are cleared expeditiously. If for any valid
reason, the LEO cannot be given on the EDI on the said date, then the
Commissioner of Customs may allow an endorsement of the LEO on the DEPB shipping
bills manually. However, this may only be allowed as an exception. Suitable
Public Notices/Standing Orders may be issued in this
regard.

15.        The
Notification and the new Drawback Schedule may be perused carefully to note the
changes made therein. Though all care has been taken, the possibility of
inadvertent errors/omissions cannot be ruled out. It is requested that any
error/omission noticed during the implementation of the rates be brought to the
notice of the Board immediately for suitable corrective action.

16.
The
Public Notice and Standing Order for guidance of the trade and staff may be
issued. Difficulties faced, if any in implementation of the changes may be
brought to the notice of the Board at once.

Kindly acknowledge receipt of this
Circular.

(Najib
Shah)

Joint
Secretary (Drawback)