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

Meera Exports Pvt Ltd imported a machine, paid customs duty of Rs 5,00,000 on importation, and the machine is easily identifiable. It has not been used in India. The machine is entered for export, and the proper officer makes an order permitting clearance and loading under section 51, within two years of payment of duty. Identity is established to the satisfaction of the proper officer. What amount of drawback is repayable under section 74(1)?

The drawback is Rs 4,90,000. Section 74(1) allows ninety-eight per cent of the import duty to be repaid where easily identified imported goods are entered for export within two years of payment of duty and identity is established. 98% of Rs 5,00,000 equals Rs 4,90,000.

ARs 4,90,000, being 98% of the duty paidCorrect
BRs 5,00,000, being 100% of the duty paid
CRs 4,75,000, being 95% of the duty paid
DRs 2,50,000, being 50% of the duty paid

Explanation

Section 74(1) provides that ninety-eight per cent of the duty paid is repaid as drawback when the goods are identified, and are entered for export within two years of payment of duty. 98% of Rs 5,00,000 = Rs 4,90,000. The 100% option ignores the 98% ceiling. The 50% option has no basis for unused goods.

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