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Regarding Audit Report No. 15/2011-12, Section 2 Duty Drawback Scheme
October, 14th 2013
                                                                                               Instructions

                                          F.No. 603/01/2011-DBK
                                             Government of India
                                Ministry of Finance, Department of Revenue
                                    Central Board of Excise & Customs
                                              Drawback Division

                                                                   New Delhi, dated the 11th October, 2013
To

All Chief Commissioners of Customs / Customs (Prev),
All Chief Commissioners of Customs & Central Excise,
All Directors General of CBEC / Chief Commissioner (AR), CESTAT
All Commissioners of Customs/ Prev/ Customs & Central Excise/ Central Excise
All Commissioners of Customs (Appeals)/ Customs & Central Excise (Appeals)

         Subject: Audit Report No. 15/2011-12, Section 2 ­ Duty Drawback Scheme: regarding

Ma'am/Sir,

       Reference is drawn to Board's Circular No.46/2011-Cus dated 20.10.2011, Instruction dated
31.7.2013 and Circular No. 35/2013-Cus dated 5.9.2013 related to the above subject. The outcomes
reported by field formation on the Audit observations were reviewed further.

2.      The Audit Report highlighted aspects on the compliance side which Internal Audit did not notice. A
better performance by Internal Audit would have enabled remedial actions to be taken earlier. Board directs
that Commissioners should appropriately strengthen their Internal Audit wings to achieve desired diligence
levels and a significantly improved performance in areas such as payment of re-export drawback, cases of
manual processing of drawback and the determination/fixation of brand rates.




3.      Special cells were created for reconciliation of sales proceeds of exports under duty drawback
scheme vide the Circular No. 5/2009-Cus. Instruction No. 609/119/2010-DBK dated 18.1.2011 emphasized
methodical and time bound feeding of details in the BRC module and Instruction No. 609/35/2013-DBK dated
4.4.2013 directed that exporters should not be asked to submit BRC/negative statement more than once. This
direction has a systemic aspect that there will be management of BRC submissions through a proper receipt
and acknowledgement procedure and subsequent monitoring that details were fed in the BRC module. Board
directs all Commissioners to ensure this. A similar receipt and acknowledgment procedure should also be
ensured for exporters who file brand rate letters issued by Central Excise formations.

4.      From amongst the sample verifications of declarations (submitted and accepted with respect to settled
AIR claims) requested by Audit, instances of recovery were reported by field formations. The field formations
reported that they too are conducting random/sample post-facto checks as directed by Board and in certain
instances these too led to recoveries/detection of cases. This suggests the importance of regular sample
checking of the veracity of declarations accepted for disbursing AIR drawback claims. These are to be
regarded as a form of audit checks. Accordingly, the Board directs that a proper record of such checks should
be maintained. Detections that indicate lower FOB/realization should also be intimated to RA/DGFT for
necessary action when any benefit under FTP is involved. Further, the Commissionerates may collate data on
the performance of these and similar checks w.r.t. AIR drawback payments in the enclosed format. This may
be refined by field formations. The Chief Commissioners may monitor the sufficiency of such checks on
monthly basis. The Board shall request this information at a future date.

5A.     The time taken in fixation of brand rates by Central Excise field formations was examined by Audit.
The Board has noted that after the decentralization of brand rate fixation work the normal procedure (in terms
of Circular No. 14/2003-Cus dated 6.3.2003) of brand rate fixation was available in which verification is to be
done in 15 days and brand rate is fixed in 10 days after receipt of verification report. Subsequently, the
Member (Customs) D.O. letter No. 609/110/2005-DBK dated 26.8.2005 conveyed decision of the Board on
two measures of trade facilitation. Briefly, the first measure was to make re-available the revised simplified
procedure to five categories of exporters in which the Central Excise would, subject to certain conditions,
grant provisional brand rate letters within maximum 15 days and do the post verification within 2 months. The
details may be seen in the letter dated 26.8.2005. The second facilitation measure was that the other
exporters (i.e. other than the said five categories) may be granted All Industry Rate (AIR) in respect of
applications filed under Rule 7 of Customs, Central Excise Duties and Service Tax Drawback Rules, 1995
(Drawback Rules, 1995) pending verification and fixation of brand rates under the normal procedure. For
granting this second facilitation a specific time line is not prescribed.

5B.      In this regard the Board directs that once a complete application for fixation of brand rate under/in
terms of Rule 7 of the Drawback Rules, 1995 has been filed with the jurisdictional Central Excise w.r.t.
exports made under claim of brand rate of drawback in the shipping bills and request made, on or alongside
the said application, for grant of drawback on relevant AIR provisionally, the Central Excise officer who is to
fix the brand rate should, ensuring that the exporter is eligible for the relevant AIR, authorize provisional brand
rate letter within 7 days to claim the drawback. Apart from other pertinent details, the said letter should show
the shipping bill No. and date/item wise relevant drawback tariff item No.(including whether `A' or `B' column)
of the AIR Schedule, rate and cap of drawback being granted, and the amount of drawback (equivalent to the
relevant AIR with cap) bifurcated into Customs and/ or Central Excise/Service Tax components. The
bifurcation should be based on claim in the application for fixation of brand rate filed in terms of said Rule 7.
This is so that the components remain aligned with claimed `actual' incidence. The final brand rate letter
should adjust the provisionally granted amount. Even if brand rate request is denied, the rejection letter
should be endorsed to the Customs formation with request to treat the provisional brand rate letter as final
and update the record.




5C.     Reports collated from the field formations on time taken to finalize brand rates show that there are
reasons attributable to both exporters and the Department. Insofar as time attributable to the Central Excise
formations is concerned, the Board is of the view that the respective Commissioners have a primary
executive responsibility to ensure concerted and sustained action for disposing brand rate work in prescribed
time frame. Daily monitoring by Commissioner, of the applications and of brand rate work by
Divisions/Ranges and headquarter Unit, should be institutionalized and positive results achieved over next 3
months and maintained in future. The Chief Commissioners are requested to guide their Commissioners
where the time attributable to the department exceeds prescribed time frame.

                                                                                                  Yours faithfully,

                                                                                                  (Rajiv Talwar)
                                                                      Joint Secretary to the Government of India
                                                                                                                                                     FORMAT
                                                                                                                                (it can be refined or expanded by Commissioner)
Month ____ Year _____

                                                  Part A                                                                                                                                                                                                                                                                         PART B
 Summary of sample verifications conducted on post facto basis on specific declarations made in AIR                                                                                                                                                                                                                   Summary of PMV enquiries
 drawback cases                                                                                                                                                                                                                                                                                                       conducted in deserving cases,
                                                                                                                                                                                                                                                                                                                      if any
                 Non-availing of                                          Goods declared by                                             Actual freight in Others (specify nature                                                                                                   Total
               CENVAT credit on                                           merchant exporters                                          cases where price    of check such as for
                inputs and input                                            or manufacturer                                           declared on CIF or       correctness of




                                                                                                                                                                                                                                                                                                                                                                                                                                                      Nature of goods and exporters involved in mis-declaration
                    services                                                exporters as not                                          C&F basis (This is   negative statement,
                                                                               having been                                             to cover cases of       genuineness of
                                                                            manufactured or                                          export incentives as positive statement,




                                                                                                                                                                                                                                                                                                                                                                                                   Amount of drawback to be recovered (in Rs. Lakh)
                                                                          exported in terms of                                               well)         debit notes raised by




                                                                                                                                                                                                                                                                                                                                                    No. of enquiries in which wrong PMV detected
                                                                           rule 19(2), CER or                                                               foreign buyers after
                                                                           by availing rebate                                                               initial realization by
                                                                          on material used in                                                             exporter, reduction in
                                                                             manufacture or                                                                  invoice value after
                                                                          processing in terms                                                                   proceeds are
                                                                             of rule 18, CER                                                              negotiated or realized,




                                                                                                                                                                                                                                                                                                                       No. of enquiries conducted
                                                                                                                                                                      etc)
                                                     Amt. (in Rs. lakh)




                                                                                                                Amt. (in Rs. lakh)




                                                                                                                                                                           Amt. (in Rs. lakh)




                                                                                                                                                                                                                                      Amt. (in Rs. lakh)




                                                                                                                                                                                                                                                                                                 Amt. (in Rs. lakh)
               Total No. verified




                                                                          Total No. verified




                                                                                                                                     Total No. verified




                                                                                                                                                                                                Total No. verified




                                                                                                                                                                                                                                                           Total No. verified
                                                     to be recovered




                                                                                                                to be recovered




                                                                                                                                                                           to be recovered




                                                                                                                                                                                                                                      to be recovered




                                                                                                                                                                                                                                                                                                 to be recovered
                                    recovery reqd.




                                                                                               recovery reqd.




                                                                                                                                                          recovery reqd.




                                                                                                                                                                                                                     recovery reqd.




                                                                                                                                                                                                                                                                                recovery reqd.
                                    No. in which




                                                                                               No. in which




                                                                                                                                                          No. in which




                                                                                                                                                                                                                     No. in which




                                                                                                                                                                                                                                                                                No. in which
Jurisdiction

 
 
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