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CA Final · Indirect Tax Laws · Classification of Imported and Export Goods

Kaveri Exports imported a machine and paid duty on 15 June 2023. It used the machine in India for some months and now wishes to re-export it on 1 March 2025. Which statement correctly reflects section 74 of the Customs Act, 1962?

For used goods, the drawback rate is whatever the Central Government fixes by notification, having regard to duration of use, depreciation in value and other relevant circumstances. The ninety-eight per cent rule in section 74(1) is displaced by sub-section (2) for goods used after importation.

  1. ADrawback is 98% of duty paid because entry is within two years
  2. BThe rate of drawback is as fixed by the Central Government by notification, having regard to duration of use, depreciation and other relevant circumstancesCorrect
  3. CDrawback is not available for any goods that have been used
  4. DThe rate is fixed by the Assistant Commissioner in each case based on the invoice value

Explanation

Section 74(2) overrides sub-section (1) for used goods: the rate is what the Central Government fixes by notification, considering duration of use, depreciation and other circumstances. The 98% rate applies to unused goods, so option one is wrong.

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