DAY 5 │ “CASH BACK FROM CUSTOMS” — DUTY DRAWBACK & RoDTEP
30-Day Series on the Customs Act 1962 and FTP 2023 – an initiative of Author CA NAVJOT SINGH where the author will dissect core provisions, recent jurisprudence and practical compliance strategies under the Customs Act 1962 and the Foreign Trade Policy 2023.
1 │ What duty drawback really is
Section 74 lets you recover up to 98 % of the duty you paid on imported goods if you re-export them. Section 75 lets you recover the duty embedded in the inputs of goods you manufacture for export. Add them together and you protect margins, improve cashflow and keep your pricing sharp.
2 │ Two statutory tracks—know which door to knock
Section 74 (Customs Act 1962)
Refund on the very same goods you imported.
- Re-export within 2 years (extendable).
- Refund scale: 98 % if unused, sliding down if goods were used.
- File shipping bill with “DBK-74” tag; claim is manual but quick.
- Section 75 (Customs Act 1962)
Refund on the duties paid on inputs that went into your export product.
- Pick All-Industry Rate (ready-made schedule) or Brand Rate (your own numbers).
- Apply through ICEGATE; money lands via drawback scroll within days of EGM.
3 | Legal guard-rails in plain sentences
- Supreme Court, Kanpur Leather Workers (2003) — Duty drawback is a statutory right, not a discretionary favour, once the rules are met.
- Supreme Court, Jain Shudh Vanaspati (1996) — For Section 74, Customs must refund duty when the importer proves identity between imported and re-exported goods; no extra conditions allowed.
- Bombay HC, Micro Inks (2019) — A Brand-Rate application filed within the extended 12-month limit must be condoned if genuine difficulty is shown.
- Gujarat HC, Nagreeka Exports (2020) — An EDI glitch is not a ground to withhold drawback; Customs must process claims manually when evidence exists.
4 | Where does RoDTEP fit?
| Point to remember | Detail in a sentence |
| Legal hook | Section 51B, Customs Act (inserted 2020) and RoDTEP Scheme Guidelines 2021. |
| What it refunds | Un-rebated central, state & local levies (e.g., electricity duty, mandi fee) that are not already covered by § 74/75 drawback or GST refunds. |
| Form of credit | ICEGATE issues a transferable e-scrip; you can pay basic duty or sell the credit. |
| Overlap rule | If AIR or Brand-Rate already covers input customs duty, the notified RoDTEP rate is scaled to avoid double benefit (CBIC Circular 15/2021-Cus.). |
| Claiming it | Tick “RDT” in the shipping bill; ICEGATE deposits the e-credit once EGM is filed and risk checks clear. |
Bottom line: Drawback puts cash in your bank for customs duties; RoDTEP puts transferable credits in your ledger for the residual domestic taxes.
5 | Workflow snapshot
- Shipping Bill – Select DBK (for § 74/75) and/or RDT (for RoDTEP).
- Let Export Order – ICEGATE locks FOB and rate.
- Scrolls –
- Cash scroll for AIR / S. 74 refund hits your bank.
- e-scrip scroll for RoDTEP appears in your ledger.
- Realization – Repatriate export proceeds within 9 months or repay drawback.
- Audit – Risk Management System may call for duty-paid invoices (for S 75) or import Bill of Entry (for § 74) plus BRC/FIRC for both.
6 | Common headaches—and quick fixes
| Challenge | Why it happens | Solution / Best practice |
| AIR too low for your niche product | Schedule rates are averages and may under‑state your actual customs duty burden. | File a Brand‑Rate application within three months of the first export shipping bill; attach duty‑paid invoices. If late, rely on Micro Inks and seek condonation with a sworn affidavit. |
| Drawback rejected because GST refund already taken | Rule 13 forbids double benefit on the same duty or tax. | Map each input tax to only one scheme: claim GST refund for GST elements; reserve customs‑duty refund for drawback. Maintain a reconciliation worksheet for audit. |
| Scroll generated but funds not credited to bank | Bank IFSC is incorrect or the account is dormant. | Download the scroll from ICEGATE, raise an e‑Sanchit ticket with the corrected IFSC and a cancelled cheque. CBIC usually re‑credits within ten working days. |
| Buyer’s quality claim reduces realisation below FOB declared | Rule 16 requires repayment if FOB falls after export. | File Form DBK II within 30 days of learning the shortfall and voluntarily repay the excess drawback to avoid demand with interest. |
| Manual shipping bill (courier/post) still unpaid | Off‑EDI shipments are processed manually and may be overlooked. | Submit Form DBK I with physical proof of export; rely on CBIC Circular 18/2021, which mandates disposal within 15 days. |
7 | Top 10 Supreme Court / High-Court judgments every exporter should bookmark
| # | Case | Key takeaway |
| 1 | Kanpur Leather Workers v. UOI 158 ELT 166 | Drawback is a statutory right, not a concession. |
| 2 | Jain Shudh Vanaspati v. UOI 86 ELT 460 | Section 74 refund follows once identity of goods is proved. |
| 3 | Citadel Fine Pharma 42 ELT 319 | Recovery under Rule 16 must issue within a reasonable time. |
| 4 | Government of India v. B.T. Patil INSC 83 | Interest @ 15% awarded for seven-year delay in drawback. |
| 5 | Sunlight Cable v. CC Neutral BHC 2023 | Higher AIR does not pre-empt IGST refund; levies are distinct. |
| 6 | Micro Inks Ltd v. UOI 369 ELT 481 | Late Brand-Rate filings within 12 months must be condoned. |
| 7 | Nagreeka Exports v. UOI 373 ELT 193 | EDI glitches cannot defeat a statutory drawback claim. |
| 8 | Vedanta Ltd v. CBIC Delhi HC 2025 | Speaking order must include all non-rebated levies in Brand Rate. |
| 9 | Stovec Industries v. UOI 265 ELT 192 | Fourteen-month recovery notice held time-barred. |
| 10 | Famina Knit Fabs v. UOI 350 ELT 481 | Photocopy invoices acceptable if duty payment independently proven. |
8 | Three quick examples
- Section 74: Import machinery @ ₹50 lakh; re-export unused within 11 months → claim 98 % of duty back.
- AIR: Cotton T-shirts, FOB ₹10 lakh, AIR cap gives ₹7 200 refund — straight to bank in 5 days
- Brand Rate: Dyed yarn, actual customs duty ₹1.5 lakh / tonne vs AIR ₹80k → approved Brand Rate ₹1.45 lakh.
9 | Your action checklist
- File DBK shipping bills with accurate FOB & weight.
- Use ICEGATE “Brand Module” if AIR < 80 % of actual duty.
- Link correct IEC; wrong codes delay credits.
- Reconcile drawback against FIRC/BRC realizations monthly.
Feedback /suggestions welcome at CA Navjot Singh | [email protected] | +91 9953357935
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