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CA Final · Indirect Tax Laws · Importation and Exportation of Goods

Kaveri Industries imported a machine and paid duty on 10 March 2023. It used the machine for some months and now wants to re-export it and claim drawback under section 74 of the Customs Act, 1962. How is the drawback rate determined?

For used goods, drawback is at the rate the Central Government fixes by notification, considering duration of use, depreciation in value and other relevant circumstances. The flat 98 per cent rate does not apply, and use of the goods does not by itself bar drawback.

  1. AFixed at 98% of the duty, as for unused goods
  2. BSuch rate as the Central Government fixes by notification, having regard to the duration of use, depreciation in value and other relevant circumstancesCorrect
  3. CFixed by the proper officer at his discretion on each case
  4. DNo drawback is allowed once the goods have been used

Explanation

Section 74(2) says that for goods used after importation the drawback rate is that fixed by the Central Government by notification, having regard to duration of use, depreciation and other relevant circumstances. The 98% rate applies under sub-section (1) to the general case, and sub-section (2) overrides it for used goods. Used goods are not barred from drawback.

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