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CMA Final · Indirect Tax Laws and Practice

Duty Drawback Chapter Guide for CMA Final Paper 19

Duty drawback is a refund of customs duty paid on imported goods or materials when they leave India again. Section 74 covers re-export of duty-paid imported goods, with 98% of duty repaid. Section 75 covers imported materials used in goods made for export. To solve questions, check conditions first, then compute the refund.

What this chapter covers

Duty drawback is the customs law's way of making sure duty does not burden exports. If you paid customs duty on imported goods and then send them out of India, the law lets you claim back the duty. The Customs Act, 1962 deals with this in three sections: Section 74, Section 75 and Section 75A.

The chapter has two routes. Under Section 74, the same imported goods are re-exported, so you refund duty paid on those goods. Under Section 75, imported materials go into goods that are manufactured, processed or otherwise worked on in India and then exported. Section 75A adds the interest rules for late payment and for wrongly paid drawback.

This chapter links to the rest of Paper 19 in a few places. It sits next to the valuation, duty payment and export-import procedure topics, because you need to know what duty was actually paid and when goods are treated as entered for export. It also connects to export promotion schemes. Remember that MEIS and SEIS appear in the syllabus list but have been discontinued, so treat them as historical and do not mix them up with drawback.

Duty drawback is a compact chapter with fixed conditions, so it suits both Section A MCQs and a short written answer. MCQs can test the 98% figure, the two-year window, the one-month interest period or the two-month recovery period. A descriptive question can give you a case about a re-export or an exporter and ask you to decide whether drawback is allowed and how much. If you learn the conditions word by word, these marks are easy to secure.

Duty Drawback: topics in the order to study them

  1. 1Duty Drawback: Meaning, Scope and TypesStart here to see the idea of refunding duty on exports and the split between the Section 74 route and the Section 75 route.
  2. 2Section 74: Drawback on Re-export of Duty-Paid GoodsThis is the core rule with the most testable conditions: easy identification, 98% of duty, and entry for export within two years.
  3. 3Rate of Drawback and Used Goods DeductionStudy this after Section 74, because it explains how the rate changes for goods that were used after import and how Section 75 rates work.
  4. 4Procedure, Claim and Conditions for DrawbackFinish with the claim process, time limits and interest, which tie all the earlier rules into a complete answer.

How to prepare Duty Drawback

This chapter rewards precise recall of conditions and a clear way of applying them to a case. Prepare it in these steps.

  1. Read Sections 74, 75 and 75A once in plain words, and note which section deals with which situation.
  2. Make a one-page table for Section 74: what goods qualify, the percentage repaid, the identification test and the time limit.
  3. Learn the used goods rule: under Section 74(2), the rate is whatever the Central Government fixes by notification, having regard to duration of use, depreciation in value and other relevant circumstances. No fixed percentage applies.
  4. Understand Section 75 as a notification-and-rules scheme: the Government notifies goods, and rules fix the payment, such as the actual duty paid or an average amount for that class of goods.
  5. Memorise the Section 75A periods: interest if drawback is not paid within one month of filing the claim, and payment within two months of demand for drawback wrongly paid.
  6. Practise case questions with this order: is the condition met, which section applies, what is the amount, and what is your conclusion.
  7. Revise by writing the conditions from memory and checking them against the Act's wording.

Common mistakes in Duty Drawback

  • Treating drawback as a refund of 100% of duty under Section 74.

    Fix: Write 98% of such duty every time you state the Section 74(1) rule, and remember it applies only if the conditions are met.

  • Quoting a fixed deduction percentage for used goods.

    Fix: State that the rate under Section 74(2) is fixed by notification of the Central Government, based on duration of use, depreciation in value and other relevant circumstances.

  • Mixing up Section 74 and Section 75.

    Fix: Ask one question first: are the same imported goods going out again, or were imported materials used in making the exported goods? The first is Section 74, the second is Section 75.

  • Ignoring the identification and two-year conditions in a case question.

    Fix: Check the conditions before any working. If goods cannot be identified, or were entered for export after two years with no extension, Section 74 drawback fails.

  • Confusing the two periods in Section 75A.

    Fix: Link one month to the government paying a claim late, and two months to the claimant repaying after a demand.

  • Treating MEIS or SEIS as current benefits alongside drawback.

    Fix: Write them as discontinued, historical schemes and keep them separate from duty drawback.

Last-day revision: Duty Drawback

  • Section 74 applies to imported goods, capable of being easily identified, on which duty was paid on importation, when they are exported.
  • Under Section 74(1), 98% of the duty is repaid as drawback, subject to the conditions.
  • The goods must be identified to the satisfaction of the Assistant Commissioner or Deputy Commissioner of Customs as the goods that were imported.
  • The goods must be entered for export within two years from the date of payment of duty.
  • The Board can extend the two-year period on sufficient cause being shown.
  • For used goods, the rate under Section 74(2) is fixed by Central Government notification, considering duration of use, depreciation and other circumstances.
  • Goods are deemed entered for export on the date used to compute the rate of duty under Section 16.
  • For provisional assessment, the date of payment of provisional duty is treated as the date of payment of duty.
  • Section 75 covers imported materials used in manufacture, processing or any operation on goods that are then exported, through notification and rules.
  • Section 75 drawback can equal the duty actually paid on the materials or an average amount fixed in the rules.
  • Under Section 75A(1), interest is payable if drawback is not paid within one month of filing the claim.
  • Under Section 75A(2), erroneously paid drawback must be repaid with interest within two months of demand.

Duty Drawback practice questions

Duty Drawback in other exams

The same ground in other exams, if you are preparing for more than one or want another angle on it.

Duty Drawback: frequently asked questions

How much drawback is allowed on re-export of duty-paid goods?

Under Section 74(1), 98% of the duty paid on importation is repaid as drawback. This applies when the goods are easily identified, identified to the officer's satisfaction as the imported goods, and entered for export within two years from the date of payment of duty.

What is the time limit for exporting goods to claim drawback under Section 74?

The goods must be entered for export within two years from the date of payment of duty on their importation. The Board may extend this period by such further period as it thinks fit, if sufficient cause is shown.

Is there a fixed rate of drawback for used goods?

No fixed percentage is given in the Act. Section 74(2) says the Central Government fixes the rate by notification, having regard to the duration of use, depreciation in value and other relevant circumstances.

When is interest payable on drawback?

Under Section 75A(1), if drawback is not paid within one month from the date of filing the claim, the claimant gets interest from the date after that month ends until payment. Under Section 75A(2), if drawback was paid erroneously or becomes recoverable, the claimant pays interest as well, within two months of the demand.

How is this chapter tested in the CMA Final Paper 19 exam?

Expect MCQs on the conditions, periods and percentages in the sections, and written questions that give a case and ask whether drawback is allowed. Answer by naming the section, checking each condition, and then giving the amount and your conclusion.