Duty draw back

This query is : Resolved

Querist : Anonymous

Querist : Anonymous (Querist)

09 July 2014 Dear Sirs,

We are a manufacturing unit in South India. We imported a machine in Sept 2013 and paid Import duty. We used the machine in production and now want to re export it. Will we be able to recover the import duty paid at the time of Importation and if yes then how much of it. Please mention the relevant sections as well for the reference.

Also, we have some local buyers for the machine, but in that case, will it be possible to recover / pass the Cenvat credit. if yes, please mention the sections/provisions in the law.

What is the procedure in both the above cases and which one to be adopted.

Thanks.

Querist : Anonymous

Querist : Anonymous (Querist)

24 July 2014 Can someone please reply to the query. Its very urgent.

Asha Kanta Sharma online

Asha Kanta Sharma

(Expert)
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21 July 2024 In your scenario, you have imported a machine in September 2013, paid import duty on it, used it in production, and now you have options to either re-export the machine or sell it domestically. Let's address each option regarding duty drawback and CENVAT credit:

### Re-export Option:

1. **Duty Drawback:**
- Duty drawback refers to the refund of customs duty paid on imported goods when those goods are re-exported. The objective is to encourage exports by refunding the customs duty paid at the time of importation.
- The duty drawback rates are determined based on the Customs Tariff Act and relevant notifications issued by the Central Board of Indirect Taxes and Customs (CBIC). These rates vary depending on the category of goods and are subject to specific conditions and procedures.

2. **Procedure for Duty Drawback:**
- To claim duty drawback, you need to follow these steps:
a. File a claim with the customs department providing details of the import and subsequent re-export of the machine.
b. Submit necessary documents such as import invoices, shipping bills for re-export, proof of payment of import duty, etc.
c. Customs authorities will verify the claim and process the refund based on the applicable duty drawback rates.

3. **Relevant Sections and Provisions:**
- The provisions for duty drawback are primarily governed by Section 74 to Section 76A of the Customs Act, 1962, and related notifications issued by CBIC.

### Domestic Sale Option:

1. **Utilization of CENVAT Credit:**
- If you decide to sell the machine domestically instead of re-exporting it, you can utilize the CENVAT credit available on the import duty paid at the time of importation.
- CENVAT credit allows you to offset the customs duty paid on imported goods against the excise duty payable on manufactured goods or service tax liability on taxable services.
- The utilization of CENVAT credit is governed by the CENVAT Credit Rules, 2004, under the Central Excise Act, 1944.

2. **Procedure for Utilizing CENVAT Credit:**
- You can utilize CENVAT credit by adjusting it against your excise duty liability at the time of manufacturing or against your service tax liability if applicable.
- Maintain proper records and documentation of CENVAT credit availed and utilized to comply with audit requirements.

3. **Relevant Sections and Provisions:**
- The utilization of CENVAT credit is covered under the CENVAT Credit Rules, 2004, and relevant provisions of the Central Excise Act, 1944.

### Decision:

- **Re-export:** If you re-export the machine, you can claim duty drawback which will refund the import duty paid, subject to compliance with procedures and conditions.

- **Domestic Sale:** If you sell the machine domestically, you can utilize the CENVAT credit on the import duty paid to offset your excise duty or service tax liability.

### Conclusion:

Both options (re-export and domestic sale) have their benefits depending on your business strategy and market conditions. If re-exporting is feasible, duty drawback provides a direct refund of import duty paid. If you sell domestically, utilizing CENVAT credit allows you to recover the import duty indirectly by offsetting it against your indirect tax liabilities.

For precise implementation and compliance, it's advisable to consult with a customs and excise duty expert or a tax consultant who can guide you through the specific procedures and ensure compliance with all statutory requirements.

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