Untitled Document

SECTION 26A is proposed to be introduced in the Customs Act 1962, to provide for refund of Custom duty paid on goods imported and which are subsequently found to be defective or found not in conformity with the required specifications.

The refund under Section 26A of the Customs Act, 1962 would be subject to the following conditions.

The imported goods should not have been used or repaired after importation. An exception is provided for where the imported goods has been used only for the purpose of discovering the defect or the non conformity with specifications.
Identity of the imported goods should be established to the satisfaction of the authority.
The importer should not claim Duty Drawback under Section 74 of the Customs Act, 1962.
The goods should be re-exported or the importer should relinquish the title to the goods and abandon the said goods or the goods should be destroyed / rendered commercially valueless, in the presence of customs authority.
The time period prescribed for re-export etc is 30 days from the date of clearance for home consumption and this period can be extended by another three months upon sufficient cause being shown for the delay.
This provision would not apply if the goods are imported in violation of the Customs Act or any other law.
Application for refund should be made within a period of six months from the date of export / relinquishment of title / destruction.

As regards, re-export of imported goods as such without putting the imported goods into use, there already exists Section 74 of the Customs Act, 1962, which provides for Duty Drawback of on goods re-exported. Therefore, the refund mechanism under Section 26A of the Customs Act, 1962 to the extent it relates to re-export of goods as such, would now be an alternative or an option available to the importer.

There are, however, certain essential differences between Duty Drawback under Section 74 of the Customs Act, 1962 and refund of duty under Section 26A of the Customs Act, 1962, which are brought out below.

Time allowed for re-export under Section 74 of the Customs Act, 1962 is two years, whereas the time allowed under Section 26A of the Customs Act, 1962 is 30 days plus three months.
Under Section 74 of the Customs Act, 1962 Drawback is available both for goods which have been used after importation and those goods which are not used. Also, under Section 74 of the Customs Act, 1962 duty Drawback of up to 98% could be claimed if the imported goods are not used. The rate of Drawback under Section 74 of the Customs Act, 1962 would vary depending upon the period of use of the imported goods. Whereas under Section 26A of the Customs Act, 1962, the entire duty can be claimed as refund and the goods should not be put to use at all.

Under both the options the most important requirement is that identity of the goods should be established. Also, while the time limit prescribed for claim of Duty Drawback under Section 74 of the Customs Act, 1962 is three months plus three months and Section 26A of the Customs Act, 1962 prescribes a fixed period of six months from the relevant date, for preferring the refund claim.

There is a perception in the department that under Section 74 of the Customs Act, 1962, the importer has to provide proof of inward remittance of the proceeds for the re-export, though neither Section 74 of Customs Act, 1962 nor the Rules framed there under, namely, of Re-Export of Imported Goods (Drawback of customs duties) Rules, 1995, make any express provision for the same. The new scheme under Section 26A of the Customs Act, 1962 also does not contemplate receipt of proceeds for the re-export in order to be eligible for the refund. Therefore, it may now be clear that inward remittance for the re-exported goods is not required for claim of Duty Drawback under Section 74 of the Customs Act, 1962.