Brand Rate Fixation Duty Drawback of Customs Duty

What is the Brand Rate Fixation Duty Drawback?

Brand Rate Fixation Duty drawback under customs is put in place to allow a rebate of the customs duty that was paid at the time of import of goods into India.

Section 75 of the Customs Act, 1962: Duty drawback receivable when the imported materials are used in manufacturing or processing of goods within India and then such goods are exported outside India.

Duty drawback is allowed as per the applicable duty drawback rates. Following are the two ways to calculate the duty drawback rate in India under Brand Rate Fixation:

1. Brand Rate Fixation as per Rule 6 of the Customs and Central Excise Duties Drawback Rules, 2017.

2. Special Brand Rate as per Rule 7 of the Customs and Central Excise Duties Drawback Rules, 2017.

Fixing the All Industry Rate only for some standard products is possible. It cannot be possible to correct for special types of products. In such cases, the Brand Rate is fixed under Rule 6 and Rule 7 of the Duty Drawback Rules, 2017 as amended from time to time.

The application shall be made to the Jurisdictional Principal Commissioner or Commissioner of Customs, having jurisdiction over the place of export with all required information, data, details, and documents. Application should be made within three months from the relevant date. This time limit can be extended by a further three months by the Assistant Commissioner and a further 6 months by the Principal Commissioner/Commissioner of the Customs Department.

Validity of Brand Rate Fixation

Brand Rate as fixed will continue till new rates are notified.

Special Brand Rate of Duty Drawback - All Industry Rates (AIR) are fixed on an average basis. Thus, a particular exporter may find that the actual customs duty paid on inputs is higher than AIR fixed for his exported goods/product. In such case, he can apply under Rule 7 of Drawback Rules, 2017 for fixation of Special Brand Rate, within (2 -3) months from the date of the Let Export Order.

The Condition of Eligibility is that AIR Fixed should be less than 80% of the duties paid by him.

Exporters Can Apply for Special Brand Rate Fixation Even After Accepting AIR

In Alfa level (India) Ltd. Vs. UOI 309 ELT 17 (Bom HC DB), It has been held that exporter can apply for a special brand rate fixation even after accepting AIR [CBIC Circular dtd 30-12-2011 has been held as invalid and against the rules].

Rule 7 (3) of the Drawback Rules, 2017 states that exporters can claim duty drawback rate on a provisional basis and file applications for a differential amount on a provisional basis under Special Brand Rate.

Provisional Rate of Duty Drawback

By the Principal Commissioner of Customs, the provisional rate can be fixed under Rule 6 (2) of drawback rules. In such cases, the exporter can get provisional duty drawback on the execution of Customs Bond (Surety/Security - as the case may be) before the Principal Commissioner/Commissioner of the Customs

Calculation of value Addition in Case of Imported Material Supplied Free of Cost

If material is supplied Free of Cost by the Foreign Buyer, the notional value of imported materials supplied free of cost will be added to both of CIF Value of inputs and FOB Value of exports to determine where there is a Positive Value Addition (PVA). [MF (DR) Circular No. 25/2006-Cus dated 19-09-2006].

The upper limit of the Drawback Rate

The duty Drawback rate shall not exceed 33% of the market price of export goods.

Drawback (Brand Rate Fixation)

Forms and procedures have been prescribed for submitting details to Jurisdictional Customs Authorities (Principal Commissioner/Commissioner as the case may be), who will fix the rate of Duty Drawback (DBK). The rates should be fixed expeditiously within two months. Duty drawback rates can also be fixed retrospectively.

Application for Brand Rate Fixation of Duty Drawback Rate

The Exporter/Manufacturer has to make an application for Brand Rate Fixation as per the following procedure.

1. Filing of Application: Within two months of exports before the Jurisdictional Principal Commissioner/Commissioner of Customs.

2. Application Covering Lette: Provide the basic details about the company, export products, FOB Value, Present Market Value, Manufacturing Process Flow in brief, by product and wastage, etc.

3. DBK I Statement : The statement is Bill of Material I.e. Raw material and Components going into manufacturing of export product. This should include packing materials but should exclude consumables like oil, lubricant, grease, etc. which are used in running machinery, minor materials may be excluded. Details like description, quantity, weight wastage, by-product, and its value. This statement is required to be signed by the Production in Charge and further certified by a Chartered Engineer in the branch of engineering of the export product.

4. DBK II Statement: This statement gives details of the import of material/components obtained during three months prior to the date of shipment and opening stock on the date three months back. Cross-reference of a serial number of DBK I statement should be given. Details like quantity, BoE No, assessable value, Customs Duty paid, etc. are required. The statement should be certified by a Chartered/Cost Accountant.

5. DBK IIA Statement: This statement is a stock position of all imported inputs mentioned in DBK IIA. This should give details of inputs that were in stock three months prior to the date of shipment and subsequent receipts. The statement should be certified by Chartered/Cost Accounts.

6 .DBK III Statement: This statement gives details of indigenous material/components obtained three months prior to the date of shipment and opening stock on the date three months back. Cross-reference to the serial number in the DBK-I statement should be given. Details like quantity, HSN Code, Invoice Number, etc. This statement should be certified by a Chartered/Cost Accountant.

7. DBK IIIA Statement: This statement is a stock position of all indigenous input mentioned in DBK III. This should give details of inputs that were in stock three months prior to the date of shipment. This statement should be certified by a Chartered/Cost Accountant. All these statements are to be certified by an authorized person of the manufacturer and certified by a Chartered Engineer/CA/Cost Accountant.

8. Working Sheet with declaration: A working sheet should be submitted with a declaration and certificate from CA/CMA by five specified categories of exporters as specified in MF (DR) Circular No. 54/2016-Cus dtd 22-11-2016. Original Duty Paying Documents like Bill of Entry (BoE), TR-6/GAR-7 Challan, and Invoices should be submitted. (Certified Copies are now also being accepted as per MF (DR) Circular No. 54/2016-Cus dtd 22-11-2016).

9. The annexures should be in proper order and flagged/marked to facilitate checking: In the case of merchant exporters, a declaration furnishing details of the supporting manufacturer shall be submitted.

Drawback Rate Fixation Procedure

Step 1: Application for duty drawback Brand Rate Fixation along with prescribed DBK Statements, inputs, information, documents, and working sheets should be submitted to the jurisdiction Principal Commissioner/Commissioner of Customs in Duplicate. The application can be sent by Registered/Speed Post or Hand Delivery at the Counter.

Step 2: Two copies of the above statement should be submitted to the Assistant/Deputy Commissioner of Customs having jurisdiction over the factory. The data is verified by the Officers of the Customs Department.

Step 3: While verifying data, duty-paying documents may be defaced by the verifying officer to the extent of drawback claim {Self-attested documents are now accepted as per simplified procedure}. However, about 5% of self-attested copies of original documents may be verified on a test check basis based on risk parameters – MF (DR) Circular No 54/2016-Cus dtd 22-11-2016.

Step 4: The verification report should be carried out in 15 days. After verification, the verification Report will be forwarded to the Principal Commissioner/Commissioner’s office. The Commissioner shall also scrutinize the report. The Brand Rate will be approved by AC/DC if up to 5 lakhs and by Joint/Addl. Commissioner above 5 lakhs without upper limit.

Step 5: Deduction for duty involved in waste: If some waste is sold, the customs duty portion allocable to input gone into waste should be reduced, but on the basis of scrap value and not the Original Value.

Step 6: Duty drawback letter to specify other benefits availed by exporter: The Letter of duty drawback issued by the Commissioner should specify whether the manufacturer exporter or supporting exporter has or has not availed benefits of ITC/Duty-Free Procurement/AA/DFIA etc. this is because duty drawback depends on whether exporter has or has not availed on these benefits

Step 7: Post Audit of fixation of brand rate: One set of documents relating to the fixation of brand rate shall be provided by the department to the Directorate General of Export Promotion (DGEP), New Delhi and one set will be provided to the Customs Audit Department.

Fixation of rate in case of deemed export

In the case of Deemed Exports, the brand rate is fixed by DGFT. The same application forms may be used for making applications to DGFT. Forms of statements (DBK-I to DBK IIIA) are given in Appendix 35 of HBP Vol.1.

Key Initiatives to Ensure Time-Bound and Expedited Disbursal of Duty Drawback:

1. All field formations have been instructed to credit at least 90% of Duty Drawback within three days and complete deposits in the exporters’ account within T+2 days.
2. No deductions if export proceeds are short-realized up to 12.5% of FOB value on account of agency commission and foreign bank charges.
3. Levies such as Education Cess, Social Welfare Surcharge, etc. have been included in the Brand Rate of Duty Drawback.

Filling of Supplementary Claims

In case the drawback received is less than due, for whatever reason, a supplementary claim is required to be filed in the prescribed form (Appendix III) within the prescribed time limit of 3 months. A maximum delay of 9 months can be condoned by AC/Drawback on sufficient cause being shown. Therefore, in case of delay the supplementary claim should be accompanied with a request for condition of delay and reasons for delay. It may be noted that there is no provision to sanction the differential drawback amount on the basis of letters/representations, without a supplementary claim.

Conclusion

Brand Rate Fixation allows exporters to get a refund on the customs duty paid when importing goods. By following the right steps and submitting the required documents, exporters can get the correct duty drawback rates. If the actual duty paid is higher than the All Industry Rate (AIR), exporters can apply for a Special Brand Rate. It’s important to apply on time and meet all requirements to get the refund quickly and correctly, which helps improve cash flow and make Indian exports more competitive.

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