All
Industry Rates of Drawback in respect of man-made fabrics falling under Chapters
54, 55 and 58 of the Drawback Table – regarding.
Silk
& Rayon Textiles Export Promotion Council and Indian Spinners Association
have represented to the Board that certain exporters of man-made powerloom
processed fabrics are using the input-grey fabric imported under Advance Licence/
DEEC Scheme and DFRC-cum Drawback Scheme- and are availing Central Excise
allocations of All Industry Rates of Drawback, available to such man-made
fabrics, This facility is being availed despite the fact that the input ‘grey
fabric’ does not suffer any Excise Duty/ Countervailing Duty. Such a practice
has led unintended accrual of drawback benefits.
2.
The issue has been examined in the Board. It is clarified here that the All
Industry Rates of drawback for any export product are determined by taking into
consideration the duty incidence suffered on various inputs used in the
manufacture of such goods. The basic aim of allowing drawback is to relieve
these duties so that the export products become competitive in the international
market. Hence, only such export product are entitled to drawback where the
inputs suffer duties whether of customs or of central excise. Though, General
Note 2 of the Drawback Table precludes admissibility of drawback to the exports
effected against the duty exemption schemes, the first proviso to the said note
allows extension of limited drawback rate to the extent of central excise
allocation for such exports effected against DEEC/ Advance Licence Scheme or the
DFRC Scheme where the Countervailing duty is paid/payable in cash.
3.
It is also clarified that the All Industry Rate of Drawback for the man
made fabrics falling under Chapter 54, 55 and 58 of the Drawback Table have been
determined by taking into consideration the duty suffered on the inputs i.e.
yarn, dyes, chemicals and packing materials. All these rates are on All Central
Excise basis as only the Central Excise duties and no Customs duties on these
inputs have been considered. While formulating these rates, the Central Excise
duty payable at the processing stage of the manufacture of these fabrics has not
been included/considered. This position is well known to the field formations as
well as the trade for past many years. However, these instructions were
reiterated and also made applicable to DFRC Exports vide the Ministry’s
earlier Circular No.98/2000-Cus dated 29.11.2000.
4.
In the Standard Input/Output Norms obtaining in the Handbook of
Procedures (EXIM Policy) it is observed that certain norms indicate Fibre/Yarn/POY
as-an input while others indicate Grey Fabric as an input against the resultant
product man-made fabrics. The exporters have also been issued Advance
Licences and DFRCs accordingly. Though Fibre/Yarn/POY are chargeable to
Central Excise duties, the Grey Fabric is exempted from the Central Excise levy.
It is, therefore, obvious that the exports of man-made fabrics against Advance
Licence or under DFRC Scheme which involve Grey Fabric as an input don’t merit
to be extended drawback at the All Industry Rates fixed for the man-made fabrics
in the Drawback Table. These rates are applicable only to such exports of
processed fabrics against the Advance Licence/DEEC/DFRC Scheme where the input
used is POY/Fibre/Yarn.
5.
All the past cases of export of man-made fabrics against Advance
Licence/DEEC Scheme and DFRC Scheme, where the input used is Grey Fabric,
should be reviewed and steps be taken to recover the drawback already
sanctioned. For future exports, the exporters may be directed to clearly declare
on the shipping bills the inputs used in the manufacture of such fabrics and the
drawback be allowed strictly only in such cases where the inputs like fibre/POY/yarn
are duty paid or where the duty would be payable on such inputs.
6.
Suitable Public Notice for information of the trade and standing orders
for guidance of the staff may kindly be issued on the above lines.
7.
Receipt of the Circular may please be acknowledged.
(Shri.S.S.Renjhen)
Joint Secretary to the Govt. of India.