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

Meridian Traders Pvt Ltd imported equipment and paid customs duty of Rs 5,00,000 on 1 June. The equipment is easily identifiable, was never used, and is entered for export with the proper officer's order permitting clearance and loading. Assuming all conditions are met, what drawback is repayable under section 74 of the Customs Act, 1962?

The drawback is Rs 4,90,000. Section 74 allows ninety-eight per cent of the import duty to be repaid on re-export of identifiable, unused goods entered for export within two years of duty payment. Ninety-eight per cent of Rs 5,00,000 equals Rs 4,90,000.

  1. ARs 5,00,000, being 100% of the duty
  2. BRs 4,90,000, being 98% of the dutyCorrect
  3. CRs 4,75,000, being 95% of the duty
  4. DRs 2,50,000, being 50% of the duty

Explanation

Section 74(1) provides that ninety-eight per cent of the duty paid on importation is repaid as drawback if the goods are identified and entered for export within two years of payment of duty. 98% of Rs 5,00,000 = Rs 4,90,000. Option 1 ignores the 98% cap. Rate fixing by notification under section 74(2) applies only to used goods.

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