Rs. 1 Lakh Duty Drawback Claimed Rs. 10 Lakh Lost: A Compliance Wake-Up Call

An exporter claimed Rs. 1 lakh in duty drawback, ignored customs notices, and lost over Rs. 10 lakh. Learn why duty drawback compliance is non-negotiable for Indian exporters.

What would you do if a Rs. 1 lakh benefit turned into a Rs. 10 lakh nightmare? That is exactly what happened to an Indian exporter who claimed duty drawback, ignored two customs notices, and watched everything spiral out of control. Their IEC got blocked at every Indian port. Shipments   both imports and exports — were stuck for two weeks. Add demurrage charges, legal fees, and lost business, and the total damage crossed Rs. 10 lakh. All for a Rs. 1 lakh claim.

This is not a rare case. It is a pattern that plays out more often than most exporters would like to admit. And the root cause is almost always the same — poor duty drawback compliance.

What Is Duty Drawback and Why Does It Matter?

Duty drawback is a refund mechanism under Indian customs law. When you export goods that were manufactured using imported raw materials, the government refunds a portion of the customs duties you paid on those inputs. It is governed by the Customs Act, 1962, and the rates are notified under the Duty Drawback Rules.

Sounds straightforward, right? The problem is that many exporters treat duty drawback as free money. They file the claim, pocket the refund, and forget about the compliance trail that follows. That is where the trouble begins.

How One Missed Notice Can Block Your Entire Business

Here is how it typically unfolds. An exporter claims duty drawback on a shipment. Customs later sends a notice — maybe asking for proof of forex realisation or a Bank Realisation Certificate (BRC). The exporter ignores it. A second notice follows. Ignored again.

Now customs flags the IEC — the Importer Exporter Code — which is essentially your licence to do business across Indian ports. Once blocked, nothing moves. No imports, no exports, no revenue. The exporter is left scrambling for a lawyer while containers sit at the port racking up demurrage charges by the day.

In the case we are discussing, two weeks of this chaos cost over Rs. 10 lakh. The original drawback claim? Just Rs. 1 lakh.

The Compliance Basics Every Exporter Must Follow

Duty drawback compliance is not complicated. It just requires discipline. Here is what every exporter should be doing as standard practice.

First, maintain a Bank Realisation Certificate for every export invoice. The BRC is your proof that you actually received foreign exchange for the goods you exported. Without it, your drawback claim has no leg to stand on. If customs asks and you cannot produce it, expect trouble.

Second, respond to customs notices within 15 days. This is non-negotiable. A customs notice is not a suggestion — it is a legal communication. Ignoring it does not make it go away. It escalates the situation and puts your IEC at risk.

Third, if you have not received forex for your exported goods, repay the drawback voluntarily. Holding on to a drawback amount when you have not earned the corresponding foreign exchange is a compliance violation. It is better to return the money proactively than face penalties and port-level blocks later.

Fourth, keep a compliance calendar. Track your BRC timelines, notice response deadlines, and drawback reconciliation dates. A simple spreadsheet or calendar reminder can save you lakhs in avoidable losses.

Duty Drawback Is an Incentive, Not an Entitlement

The government designed duty drawback to support exporters, not to subsidise non-compliance. Every rupee you claim comes with a responsibility — to maintain records, respond to authorities, and ensure your forex realisation is in order.

Think of it this way. Duty drawback compliance is the cost of doing business as an exporter. Ignore it, and a small benefit can quickly become a massive liability — just like our Rs. 1 lakh claim that cost Rs. 10 lakh.