Drawbacks of the Cost Accountants

This article throws light upon the six major drawbacks of the cost accountant relating to export. The drawbacks are: 1. In the Context of Customs and Central Excise Levies in India, Export Drawback Connotes 2. Conditions when Drawback is Payable 3. Determination of Drawback Rates 4. Categories of Drawback Rates 5. Procedure for Brand Rate/Special Brand Rate 6. Extended Scheme for Manufacturer-Exporter: Registered Partnership Firms.

Drawback # 1. In the Context of Customs and Central Excise Levies in India, Export Drawback Connotes:

(i) Refund of duty on goods which have been imported on payment of import duty and re-exported outside India;


(ii) Refund of duties of customs chargeable under the Customs Act on imported materials used in the manufacture of goods exported to any place outside India; and

(iii) Refund of duties of customs and central excise paid on materials (imported and/or indigenously produced) used in the manufacture of goods exported to any place outside India.

Thus, ‘duty drawback’ in relation to the export of indigenously manufactured goods means refund of duties paid on:

(i) Raw materials;

(ii) Component parts;

(iii) Packing materials and


(iv) Catalysts and Consumable consumed in the production and export thereof.

These duties may be duties of customs paid on imported materials and/or duties of central excise paid on indigenous materials.

Drawback # 2. Conditions when Drawback is Payable:

The drawback is payable only if the following conditions are satisfied, namely:

(i) Duty has been paid on importation.


(ii) The goods must be exported to places outside India.

(iii) The goods are not likely to be smuggled back to India.

(iv) The market value of goods is not less than the amount of drawback claimed.

(v) The drawback due is not less than Rs. 5.


(vi) The goods are exported within two years from the date of payment of duty, and

(vii) The goods which are sought to be exported should be capable of being identified, to the satisfaction of the customs authorities, as the goods which were imported into India and on which duty has been paid on importation.

Drawback # 3. Determination of Drawback Rates:

The rates of import duty or central excise duties prevailing immediately after the introduction of the Finance Bill or its enactment are adopted for the purpose of determining the drawback due, and the drawback rates are reviewed to take into account any changes.

The drawback rates are fixed according to:

(i) Weight of goods,

(ii) Area,

(iii) Quantity,

(iv) Export f.o.b. value,

(v) K.V.A.,

(vi) Length.

Drawback # 4. Categories of Drawback Rates:

The drawback rates are of three categories:

(i) All industry rates,

(ii) Brand rates, and

(iii) Special Brand rates.

The Central Government notifies each year All Industry rates or amount of duty drawback in respect of certain classes of goods. Where the Central Government has not notified an ‘all industry rate’ in respect of an export product listed in the schedule to the Drawback Rules, the Brand Rates are fixed in respect of individual products of manufacturers separately for the particular brand of goods.

The manufacturer or exporter of such goods shall have to apply to the Directorate of Drawback for determining a brand rate for his product?

Whenever a manufacturer or exporter finds that the amount of drawback fixed by the Central Government as ‘all industry rate’ falls short by less than 75% of his expectation of incidence (actual sufferance), he is eligible to apply for fixation of a ‘Special Brand Rate’ for his product.

Drawback # 5. Procedure for Brand Rate/Special Brand Rate:

Manufacturers/Exporters desirous of brand rates/special brand rates and provisional drawback rates determination for their products should, before exporting such products, apply in the prescribed forms of application and enclose therewith the statements in forms; DBK—I, DBK—II and DBK—III.

Such application should be made separately for each type of product having different incidence of duty. Under the existing procedures, data furnished by the manufacturer or exporter in the Drawback Statements I, II and III are verified by the jurisdictional Assistant Commissioner of Central Excise.

With a view to expediting the process of fixation of the brand/special brand rates, etc. Ministry of Finance (Department of Revenue), Government of India, New Delhi’s letter No. 609/118/84—DBK, dated 29.6.1984, permits the cost accountants to certify the aforesaid documents.

Drawback # 6. Extended Scheme for Manufacturer-Exporter: Registered Partnership Firms:

Department of Revenue, Ministry of Finance, Government of India vide its circular no. 50/96-Customs dated 22nd October, 1996 has extended the scheme for the fixation of the Simplified Brand Rate to manufacturer-exporters who are registered partnership firms and produce a Registration certificate to this effect.

Such registered partnership firms who have been manufacturing export product for at least two years shall produce a certificate from jurisdiction Assistant Commissioner of Central Excise to this effect.

By extending the scheme to partnership firms, scope for practising cost accountants has been thereby extended for certifying application form for fixation of drawback rates under Rule 6(1)(a) (Brand Rate)—simplified brand rate fixation scheme.

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