Drawback - Re-determination after claiming AIR in Shipping Bill - Board Instructions only for Pune Commissioner?
AS per Rule 3 of the Customs, Central Excise Duties and Service Tax Drawback Rules, 1995, a drawback is allowed on export of goods at such amount or at such rates as determined by the Central Government. If the amount of drawback determined is less than four-fifth of the duties and taxes suffered on inputs/input services used in manufacture of export goods, the exporter may request the Commissioner to re-determine the drawback rate, under Rule 7 of the Rules.
Some exporters claim the drawback fixed by the Government, at the time of export and later apply for a special rate from the Commissioner. The Provisional rate amount is credited into the exporter's bank account based on the shipping bill.
This procedure was going on smoothly till the Year 2011, when the CBEC in a letter in F. No. 606/04/2011-DBK dated 30.12.2011, addressed to the Commissioner of Central Excise, Pune I Commissionerate clarified the issue as follows:
Thus, provisions do not provide that an exporter can avail the AIR Drawback first at the time of export under specified sub serial/ tariff item number of the AIR schedule and then file for determination of the Brand Rate under Rule 7. Exporter's declaration of tariff item number other than 9801 on the Shipping Bill is declaration that he is satisfied with the AIR rate and opts for it. Any other interpretation would also undermine the entire EDI procedure in this respect.
This upset the applecart in Pune. Based on the Board letter, the Commissionerate started rejecting applications for revision of drawback rates under Rule 7 after the exporters have taken the rates (known as AIR) at the time of export. The Commissioners (Appeals) routinely rejected the appeals. Matters started travelling up to the Revision Authority and the Revision Authority recently passed an order upholding the Department's stand.
The Joint Secretary (Revision) noted that initially the applicant exported the goods and claimed All Industry Rate of drawback. Subsequently, the applicant by terming the same as an inadvertent error wanted to change the same into a claim of fixation of Brand Rate. The lower authorities have objected to it stating that applicants failed to indicate their intention to avail brand rate of drawback under rule 7 at the time of export in the relevant Shipping Bills, and violated the provisions of drawback rules as well as Circular/clarification issued by the CBEC.
The Authority relied on the Board clarification mentioned above and observed, "The said clarification unambiguously states that opting of AIR drawback under rule 3 in the Shipping Bills disentitles exporter from claiming brand rate of drawback. The said clarification has neither been withdrawn nor set aside by any court of law. As such, the said clarification is very much is existence. Moreover, exporter has to carefully choose a scheme which is beneficial to him at the time of filing Shipping Bill. After choosing a scheme he can not be allowed to change it subsequently." And he upheld the order of the lower authority.
However the Commissioner (Appeals), Pune-III had earlier allowed such an appeal. The Commissioner (Appeals) observed,
It is an admitted position that prior to receipt of Board's above referred letter dated 30.12.2011, Brand Rates were being regularly fixed under Rule 7 by Special Brand Rate Unit of Pune-III Commissionerate after sanction of Drawback at AIR under Rule 3 by Customs authorities. Further, it has also been noticed that no appeal has been filed till date in respect of such Brand Rates fixed for the period earlier to 30.12.2011. Thus it clearly emerges that on receipt of Board's said letter dated 30.12.2011, the practice of fixation of Special Brand Rate has undergone a change in the Special Brand Rate Unit of Pune-III Commissionerate even though there has been no change in legal provisions governing Drawback in the Customs Act or DBK Rules. Further neither the Board's letter dated 30.12.2011 is in Public domain nor any Circular has been issued by the Board since 30.12.2011 making it mandatory to mention Tariff Item 98.01 in the Shipping Bills when the exporter intends to claim Drawback under Rule 7 of DBK Rules after claiming and getting Drawback amount at All Industry Rate under Rule 3 immediately after export of goods. It is also noticed that the said letter dated 30.12.2011 issued by the Board is only a reply given on certain doubts raised by Pune-I Central Excise Commissionerate. It is also a fact that no Public Notice has been issued by Pune-III Commissionerate informing exporters about change of practice of fixation of Special Brand Rate under Rule 7 .
He allowed the appeal and directed the Department to fix the Special Brand Rate. We don't know whether the Department has appealed against the order of the Commissioner (Appeals).
Now does this apply to Pune only? Why did the Board give such an important clarification only to the Pune Commissioner?
1 . CBEC letter in F. No. 606/04/2011-DBK dated 30.12.2011