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

Mehta Traders imported a machine and paid duty on 10 March 2024. The machine, which is easily identifiable, was used briefly in India and then entered for export. Mehta claims drawback at 98% of the duty. Which statement is correct under section 74?

For used goods the drawback rate is one fixed by the Central Government by notification. Section 74(2) overrides the 98% rule of sub-section (1) and requires regard to duration of use, depreciation in value and other relevant circumstances, so Mehta cannot claim 98% automatically.

  1. A98% applies because the goods are identifiable, regardless of use
  2. BNo drawback is permitted for any used goods
  3. CDrawback for used goods is at a rate fixed by the Central Government by notification, having regard to duration of use and depreciationCorrect
  4. DDrawback for used goods is at 98% less the value of the use, as computed by the importer

Explanation

Section 74(2) says that, notwithstanding sub-section (1), the drawback rate for goods used after importation is fixed by the Central Government by notification, considering duration of use, depreciation in value and other relevant circumstances. So the 98% rate cannot be claimed as of right.

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