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

Mehta Textiles Pvt Ltd of Surat imported a machine and paid customs duty of Rs 5,00,000 on 1 March 2025. The machine is easily identifiable and was never used. It is entered for export on 10 January 2027, and the proper officer permits clearance and loading under section 51. Assume the two-year period has not been extended and the goods are identified to the officer's satisfaction. Is drawback under section 74 allowable?

Drawback is allowable at 98% of the duty paid, i.e. Rs 4,90,000. Entry for export on 10 January 2027 is within two years of payment of duty on 1 March 2025, and the goods are identifiable, so section 74 conditions are satisfied.

  1. AYes, 98% of the duty, i.e. Rs 4,90,000
  2. BNo, because the goods were entered for export more than two years after payment of dutyCorrect
  3. CYes, 100% of the duty, as the machine was unused
  4. DNo, because drawback under section 74 is available only for goods exported as baggage

Explanation

Section 74(1)(b) requires the goods to be entered for export within two years from the date of payment of duty. Payment was on 1 March 2025, so the period ended on 1 March 2027. Hmm: 10 January 2027 falls within this period, so the claim is not time-barred. Checking again, the correct treatment is 98% of Rs 5,00,000 = Rs 4,90,000, so option A is correct and the 'no' options are wrong.

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