Scheme of Duty Drawback on Supply of Steel by Steel Manufacturer

Directorate General of Foreign Trade DGFT) has notified the Scheme of Duty Drawback on the steel supply by the steel manufacturer vide a Notification dated 01.10.2020. This Scheme allows Steel manufacturers to claim Duty Drawbacks on Steel supplied through their Services Centers, Distributors, Dealers, and Stock Yards. Duty Drawback rebates Customs and Central Excise duties chargeable on any imported materials or excisable materials used in the manufacture of Steel products exported. The present article deals with the Scheme of Duty Drawback on The supply of Steel by Steel manufacturers. Know more about the Export and Import Procedure in India

Synopsis of DGFT Notification

As per the DGFT's notification, Steel manufacturers supplying Steel against Advance Authorization through their Service Centers, Distributors, Dealers, and Stockyards, are now eligible to claim duty.

The manufacturer of Steel on the Advance Authorization holder would raise the invoice against such supplies.
Delivery of such supplies can be made through their Service Centers/ Distributors/ Dealers/ Stockyards, who will raise the tax invoice on the steel manufacturer bearing a cross-reference for such supplies.

Duty Drawback for Steel Export

As part of the Duty Drawback Scheme, relief of Customs and Central Excise duties suffered on the inputs used in manufacturing export products is allowed to Exporters. The acceptable duty drawback amount is paid to exporters by depositing it into the nominated bank account. Under The duty Drawback Scheme, an exporter can opt for either the All Industry Rate (AIR) of the Duty Drawback Scheme or the brand rate of the Duty Drawback Scheme.

Governing Law for Duty Drawback on Supply of Steel

Section 75 of the Customs Act, 1962, and Section 37 of the Central Excise Act, 1944 empowers the Central Government to grant such duty drawback to Steel manufacturers.

Scheme for All Industry Rate(AIR) of Duty Drawback

All Industry Rate(AIR) of Duty Drawback for many export products are notified annually by the Government of India after an assessment of the average incidence of Customs and Central Excise duties suffered on Inputs utilized in manufacturing export products. The AIRs are generally fixed as a percentage of the export product's Free On Board (FOB) prices.

The duty drawback claim scrutiny, sanction, and payment in 23 Custom Houses are now made through the Electronic Data Interchange (EDI) System.
This system facilitates credit of DDrawback within 72 hours from the date of shipment.
The electronic filing of Export General Manifest (EGM) in respect of related aircraft/vessels directly to the exporters, accounts in the specified bank branches.

Please click on the official link to reference the Duty Drawback Rate of various goods.

Brand Rate of Duty Drawback Scheme

In respect of export products where the AIR of duty drawback is not notified or where the exporter considers the AIR of duty drawback to being insufficient to thoroughly neutralize the incidence of duties suffered on the inputs utilized in the production of the export product, the exporters opt for Brand Rate Duty Drawback Scheme. Under this Scheme, the exporters are compensated by paying the amount of Customs and Central Excise Duty incidence incurred on the inputs used in manufacturing steel export products.

Documents Required

For the Brand Rate of Duty Drawback Scheme, the exporter has to produce documents/proof about the actual quantity of inputs utilized in manufacturing the export product, along with evidence of payment of duties.

Application Procedure

The exporter has to apply to the Directorate General of Foreign Trade
in the prescribed format along with enclosures within 60 days from the date of the export of goods.
The Application has to be submitted to the Directorate of Drawback with copies to the concerned Central Excise Commissioner, which has jurisdiction over the factory of production of the export product.
The Central Excise Authorities conduct verification of the following based on records maintained by the factory of the exporter, current production of identical goods, if being affected, etc.
- Authenticity
- The fact of utilization of inputs
- Payments of duties on the inputs

Get Drawback Brand Rate Letter

A verification report has to be sent to the Directorate of Drawback. Based on the verification report and other relevant documents submitted by the exporter, the Directorate of Drawback processes and issues a drawback Brand Rate Letter to the exporter based on the concerned Custom House payment of duty drawback. The Brand Rate Letter may be valid for a particular export or series of shipments. It may also be extended for future shipments for one or more ports on request, subject to proof of availability of related raw materials and duty evidence, etc. when verification is carried out.

Simplified Scheme of Brand Rate

According to the Brand Rate of Duty Drawback Scheme, a Simplified Scheme is also available to limited companies and registered partnership firms. Under this Scheme, a rate letter for duty drawback is issued before receipt of a verification report from the jurisdictional Central Excise Authorities based on an application made by the exporter subject to certain certifications, etc. For this, besides the Application in the prescribed format along with enclosures, the exporter is also required to submit the following documents:

Chartered Accountant/Chartered Engineer's certificate about the authenticity of consumption pattern
Duty payments as claimed
An indemnity bond undertaking to pay back the duty drawback being claimed by them if it is found later on verification that the drawback amount paid to him is more than the permissible amount has also to be furnished.

If the duty drawback is paid under Simplified Scheme after receipt of the verification report from the jurisdictional Central Excise Authority, the integrity of the Application will be counter-checked with the verification report, and recovery action will be taken.

Section 74 of the Customs Act, 1962 – Duty Drawback

In case of goods that were earlier imported on payment of duty and are later sought to be re-exported within a specified period, customs duty paid at the time of import of the goods with specific cut can be claimed as duty drawback by the exporter at the time of export of such goods. Such duty drawback is granted in terms of Section 74 of the Customs Act, 1962, read with Re-export of Imported Goods (Drawback of Customs Duties) Rules, 1995

For this, at the time of import, the identity particulars of the goods are recorded at the time of examination of import goods; at the time of export.
Cross-verification of the goods under export is done with the help of related import documents to ascertain whether the goods under export are the ones that were imported earlier.

Other Conditions for Section 74 - Drawback

If the goods are not used after import, 98% of the duty drawback is admissible at the maximum under Section 74 of the Customs Act, 1962.
If the goods are put into use in India after import (and before their export), a duty drawback is granted on a sliding scale basis depending upon the extent of use of the goods.
No duty drawback is available if the goods are put into use for a period exceeding 36 months after import.
Application for duty drawback must be made within three months from the date of the export of goods.

The Performa for claiming DDrawback on re-export of duty-paid goods under Section 74 of the Customs Act, 1962 is as follows:

Limitations on Drawback Admissibility

The Customs Act lays down certain limitations and conditions which exporters of Steel claiming drawbacks have to meet/fulfill.
No drawback will be granted under Section 75 if the market price is less than the amount of DDrawback claimed
The DDrawback is also not granted if the claim is less than Rs.50/- in individual shipments.
The government also has the power to deny drawback facilities if the export of goods is less than the value of imported material used to manufacture steel products.

Procedure for Claiming Drawback:

The DDrawback on export goods – whether under AIR or Brand Rate is to be claimed at the time of export, and requisite particulars have to be filled in the prescribed format of the shipping bill/bill of export under Drawback. A Triplicate copy of the Shipping Bill is treated as a claim for Drawback. The claim must also be accompanied by certain documents as laid down in the Duty Drawback Rules. The application form (FORM D) for a claim of DDrawback, Form for a claim of DDrawback under Rule 13 is as follows: Form for a claim of duty drawback under Section 74 of the Customs Act, 1962 on goods exported by post and Application for a supplementary claim for DDrawback under Rule 15 OF Customs and Central Excise Duties Drawback Rules is as follows: If the requisite documents are not furnished, or there is any deficiency, the claim may be returned after shipment for complying with the requirements and furnishing requisite information/documents (e.g., Brand Rate letter, which may not be available at the time of export but becomes available after shipment)