Drawback – Excise portion when export goods are procured from market.
Export goods purchased from the market shall be treated as having availed the Modvat facility and would not be entitled to the Central Excise allocation of the All Industry Rate of Drawback.
CBEC has received references from the DGFT and FIEO that some Custom Houses were insisting on non-availment of Cenvat declarations from merchant exporters of garments who were not purchasing their goods from manufacturers but were sourcing their export goods from traders. The Custom Houses were denying full All Industry rate of duty drawback (including the excise rate) in case exporters were not able to furnish such declarations. The FIEO/DGFT and the exporters have represented that the merchant exporters without supporting manufacturers cannot give non-Cenvat availment declarations as they are not aware of the manufacturers and can at best declare the names of traders from whom the goods have been purchased. Further, most of the garments are being manufactured by petty manufacturers/small scale cottage industries/largely unorganized sector outside the Cenvat chain and, therefore, the higher rate of drawback may be given on garments without insisting on any Cenvat non-availment declaration.
Board referred the matter to the Committee constituted by the Government to formulate All Industry Rate of Duty Drawback. The Committee recommended that the merchant exporters who source their export goods from the market should be given higher rate of drawback without any declarations as “they have to purchase the products from the manufacturer after excise clearance i.e. after payment of excise duty. Therefore as far as merchant exporters are concerned, the full drawback rate has to be made available to him for neutralization of excise duty paid when clearing the goods from the manufacturer's premises”. The Committee has further remarked that “in case of manufacturer exporters there could be a possibility of double benefit if he were to claim both Cenvat benefit as well as full duty drawback. Therefore, the only cases for checking whether Cenvat has been availed or not, can conceivably pertain to manufacturer-exporters and not to merchant exporters.
The good Board has accepted the recommendations and directed:-
1. Merchant exporters who purchase goods from the local market for export shall henceforth be entitled to full rate of duty drawback (including the excise portion).
2. However, such merchant exporters shall have to declare at the time of export, the name and address of the trader from whom they have purchased the goods.
3. They shall also have to declare that no rebate (input rebate and also the final product rebate) shall be taken against the Shipping bills under which they are exporting the goods.
4. The merchant exporters who purchase goods from traders may therefore furnish the declaration, at the time of export, in the prescribed format.
5. The Custom Houses shall get the veracity of such declarations verified at random and recover excess drawback in case the verification reveals that the declaration filed by the exporter was false or double benefit has been availed of.
CBEC Circular NO. 16/2009-Cus., Dated: May 25, 2009