Untitled Document

Refund of import duties: An attempt to adopt international norms under revised Kyoto Convention - some empirical problems

NEW DELHI, JULY 07, 2009: IT is nice to see The Indian Customs on a right track looking forward to comply with the standards under the International Convention on the Simplification and Harmonisation of Customs Procedure (Revised Kyoto Convention). Clause 84 of the Finance Bill 2009 seeks to insert a new section 26A

J.M.Kishore in the Customs Act 1962 .This is obviously to adopt an international practice recommended vide the Revised Kyoto Convention so as to grant a facility to the trading community. As per the proposal, a new section 26A is to be inserted in The Customs Act, 1962 so as to provide refund of import duty paid at the time of clearance for home consumption on imported goods if, the goods have been found to be defective or otherwise not in conformity with the specifications agreed upon between the importer and the supplier of goods. As provided in Sub-section (1), refund of customs duties is to be made in case of goods which are capable of being easily identified. Refund is to be granted to the person or on whose behalf the duty is paid. Refund is admissible only when goods have not been worked, repaired or used after importation. Exception to this provision is that where “such use was indispensable to discover the defects or non-conformity with the specifications “, then refund is permissible.
Refund is admissible in the following cases:

in such manner as may be prescribed and within a period not exceeding thirty days from the date on which the proper officer makes an order for the clearance of imported goods for home consumption under section 47. The period of thirty days may, on sufficient cause being shown, be extended by the Commissioner of Customs for a period not exceeding three months.

Identity to be established : In case the goods arere-exported, it is necessary that the goods at the time of re-export, are identified to the satisfaction of the Assistant Commissioner of Customs or Deputy Commissioner of Customs as the goods which were imported.

Export to be made without claiming Drawback: No drawback is to be claimed on export of the goods under any other provisions of the Customs Act,1962.

Offence goods not eligible for refund : in case of the goods regarding which an offence appears to have been committed under this Act or any other law for the time being in force, no refund is admissible.

An application for refund to be made : An application for refund of duty shall have be made before the expiry of six months from the relevant date in such form and in such manner as may be prescribed.

Relevant dates for different cases :

in cases where the goods are exported out of India, the date on which the proper officer makes an order permitting clearance and loading of goods for exportation under section 51;
in cases where the title to the goods is relinquished, the date of such relinquishment;
in cases where the goods are destroyed or rendered commercially valueless, the date of such destruction or rendering of goods commercially valueless.

Board may prescribe any other conditions: CBEC may, by notification in the Official Gazette, specify any other condition subject to which the refund may be allowed.

Operational difficulties and un-answered questions – No doubt that the new statutory provision is being introduced with an intention to provide more facility to the trade. However, certain operational difficulties are certainly possible in implementation of the provision.

In the present era of clearances under RMS, in case of containerized cargo, on electronic processing and payment of duty by importers, goods are ready for clearance .At the time of clearance, only container number and genuinity of the seals are verified by Customs officers before allowing the out of charge. Once the imported goods are cleared out of customs, importer may remove the cargo to his premises. In case importer identifies a defect or otherwise not in conformity with the specifications agreed upon between himself and the supplier, then he may prefer to export the goods and claim the refund of the duty paid on importation under Section 26A. The problem here is establishing the identity of the goods at the time of export with reference to the imported goods. Since the goods are not subjected to the inspection/examination, identification is practically not possible.
No drawback is to be claimed at the time of export. If the goods are brought for export under other schemes such as DEPB,VKGUY,FMS,FPS , whether the same can be permitted?
If the imported goods are not in conformity with the specifications agreed upon between himself and the supplier, aren’t the goods to be treated as mis-declared ?
Whether adjudication procedure to be adopted before re-export is allowed?
Who has to bear the cost of abandonment or destruction?
Whether the refund is to be subjected to the test of un-just enrichment?

Solution to the above difficulties: Since Clause 90 of the Finance Bill seeks to amend the Section 157 where by CBEC may notify Regulations for operation of the Section 26A, it is wished that CBEC may first publish draft regulations and obtain suggestions from Trade/field formations so that operational difficulties can be removed by bringing out appropriate and clear provisions in the Regulations.