Export under returnable basis

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Nikhilendra Patel (Querist)
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27 June 2015 We have exported one crane on returnable basis. At the time of export exchange rate was 40 and now when we brought it back exchange rate is 63. What value we should declare because AO is considering the value in USD in which we exported but due to exchange fluctuation it is almost two time higher then my book value and duty is coming almost equal to cost of my crane. Please suggest.

RAMESH KUMAR VERMA

RAMESH KUMAR VERMA (Expert)
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30 June 2015 Section 74

Section 74 of the Customs Acc 1962 as amended vide Customs (Amendment) Act; 1985 allows Drawback on re-export of duty paid goods. It reads as under:

74 (1). When any goods capable of being easily identified which have been Imported Into India and upon which any duty has been paid on importation,

(i) are entered for export and the proper officer makes an order permitting clearance and loading of the goods for exportation under section 51: or

(ii) are to be exported as baggage and the owner of such baggage for the purpose of clearing it makes a declaration of its contents to the proper officer under section 77 (which declaration shall be deemed to be an entry for export for the purposes of this section) and such officer makes an order permitting clearance of the goods for exportation or

(iii) are entered for export by post under section 82 and the proper officer makes an order permitting clearance of the goods for exportation.

ninety-eight per cent of such duty shall except otherwise here in after provided be repaid as drawback, if-

(a) the goods are identified to the satisfaction of the Assistant Commissioner of Customs as the goods which Imported and

(b) the goods ace entered for export within two years from the date of payment of duty on the importation thereof:

Provided that in any particular case the aforesaid period be extended by the Board by such further period as it may deem fit.

(2) Notwithstanding anything contained in sub-section (1). the rate of drawback in the case of goods which have been used after the importation thereof shall be such as the Central Government, having regard to the duration of use, depreciation in value and other relevant circumstances may, by notification in the Official Gazette, fix.

(3) The Board may make regulations for the purpose of carrying out the provisions of this section and, in particular, such regulations may -

(a) provide for the manner in which the identity of goods imported in different consignments which are ordinarily stored together in bulk, may be established ;

(b) specify the goods which shall be deemed to be not capable of being easily identified.

(4) For the purposes of this section-

(a) goods shall be deemed to have been entered for export on the date with reference to which the rate of duty is calculated under section 16;

(b) in the case of goods assessed to duty provisionally under section 18, the date of payment of the provisional duty shall be deemed to be date of payment of duty.

Distinction Between Sec. 74 and 75 of Customs Act, 1962

There is a distinction between Sec. 74 and Sec. 75 of the CA 1962. Sec. 74 of Customs Act comes into operation when articles are imported and thereafter re-exported, such articles being easily identifiable; and Sec. 75 comes into operation when "imported materials are used in the manufacture of goods which are re-exported."

1995 Rules

The Drawback Rules for Re-export of Imported goods are reproduced in Part 2 of this book.

Drawback Defined. In terms of rule 2 (a), "drawback" in relation to any goods exported out of India, means the refund of duty paid on importation of such goods in terms of Sec. 74 of the Customs Act. (See above).

Conditions

Accordingly, for claiming drawback on re-export of duty paid goods, the following conditions need to be fulfilled:

(1) the goods are identified to the satisfaction of the customs as the goods which were imported, as per Sec. 74 (1)

(2) the goods are entered for export within two years from the date of payment of duty on the importation thereof, unless the said period is extended by the Central Board of Excise & Customs, as per Sec. 74(1)

(3) The claim for drawback should not exceed the prevailing market price or value (PMV) of the goods exported as per Sec. 76. Hence, the market value should not be less than the drawback claim or, i.e., drawback is not admissible if its claim amount is higher than the market value of the goods exported.

Identity of Goods

As per condition (1) above, the identity of the goods exported is to be established to the satisfaction of the Asstt. Commissioner of Customs as the goods, which were imported. For this purpose, special shipping bill, i.e., Drawback Shipping Bill is presented that enjoins upon the proper officer to make detailed examination to establish the above identification. Hence, if the exporter files any other SB like Dutiable SB or Free SB than Drawback SB, no drawback is admissible.

Coverage or Scope. Expor1 includes loading of provisions or store or equipment for use on board a vessel or aircraft proceeding to a foreign por1 or airpor1. Hence, Ship Stores supplied to foreign going vessels/aircrafts are eligible for drawback.

The position would be clear when goods as such are re-expor1ed, say where these were received as defective goods or wrong shipments were made by suppliers abroad or after use within the country these are being sent back. However, if the goods are expor1ed as a necessary concomitant to other articles which are manufactured in the country and for which drawback may or may not be admissible, it will be permissible to hold that the test of "those very goods being expor1ed is satisfied. This is despite the fact that broadly the impor1ed goods (OTS cans in 1his case) may at times be re-exported without any substantial change except merely as packing material.

The only issue to allow drawback on re-expor1 of goods under Section 74 of the Customs Act, is whether identity of the goods is established with reference to the expor1er"s claim under Section 74 or not. The identity of the goods need not be established with reference to import document only. Other evidence of collateral in nature, if produced, could also be considered. It would include inspection of the goods/packages comparing the examination report or other connected documents relating to import formalities with examination of goods as reflected in the Shipping Bill against which drawback is claimed.