Duty Drawback claiming criteria

[Tejas Vaidya]

 any rule of drawback which states that If profit margin is more than 50%. Then duty Drawback cant be claimed? e.g. purchas cost is 100 ? and selling cost is 200 ? we claim  drawback scheme. Could you please help us with rule 

[YAGAY andSUN]

Customs Authorities are empowered to check the authenticity of the Value Addition in case they have any doubt about it under the provisions of Customs Valuation (Determination of Value of Export Goods) Rules, 2007. [M.F. (D.R.) Notification No. 95/2007-Cus (N.T.), dated-13-09-2007] read with Customs and Central Excise Duties Drawback Rules, 2017. [Notification No. 88/2017-Cus. (N.T.), dated 21-9-2017.]

Further from your query it is not clear that whether your are claiming AIR Duty Drawback, Duty Drawback under Section 74, or Under Brand Rate Fixation duty drawback of Custom Duty.

 

[Tejas Vaidya]

We are exporting Commodity X ( Customized product as per requirement of customer) Purchase cost is 150 Rs. and selling (exporting)  price FOB 4.06 euro (i.e. approx 400 Rs.) Can we claim AIR Duty drawback. Could you please guide us. we have authentic Purchase order, Purchase invoice.

Due to high profit margin CHA suggest not to claim AIR Duty Drawback. we are filing shipping bill under free scheme. ( Without AIR Duty Drawback). Please advice. 

 

[YAGAY andSUN]

Please confirm whether Customs Department has rejected your DBK Claim or you received any notice from the Customs Department? If so then you must have cost sheet and basis for such huge margins.

[Tejas Vaidya]

Its not rejected yet. before filing CHA given us this suggestion. so try to understand more on such rule or provision. 

[YAGAY andSUN]

There is no such rule under the Customs and Central Excise Duties Drawback Rules, 2017 that directly states duty drawback cannot be claimed if profit margin exceeds 50%.

Legal Position:

The duty drawback is governed by:

• Section 74 and Section 75 of the Customs Act, 1962
• Customs and Central Excise Duties Drawback Rules, 2017

Drawback is a remission of duties paid on inputs used in the manufacture of exported goods, and is not conditional on the exporter’s profit margin.

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No Provision on Profit-Based Disqualification

There is no provision under the Drawback Rules that disallows a drawback based on high profits or a sale price significantly exceeding the purchase price. The eligibility is linked to:

• Actual or deemed incidence of duties on inputs,
• Correct classification under the Drawback Schedule, and
• Compliance with procedural requirements (e.g., declaration at time of export, no double benefit, etc.).

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Possible Misunderstanding

Some field officers or internal auditors raise objections if the export invoice price is disproportionately high compared to procurement cost, suspecting over-invoicing or artificial inflation of exports. However, this is not a ground for automatic denial of drawback unless:

• There is a proven case of misdeclaration, overvaluation, or fraud, or
• The exporter is availing higher drawback with CENVAT/ITC, leading to ineligible double benefits.

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Summary

There is no rule or legal bar in the Drawback Rules that restricts drawback claims based on profit margin or price differential. As long as the export is genuine, properly classified, and duties were actually paid on inputs, drawback is admissible—even if the profit margin exceeds 50%.

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[YAGAY andSUN]

We hope that now you got clarification on this matter. 

Fix a meeting with Jurisdictional Customs Department, discuss this matter meticulously with them, submit a representation along with all relevant information/data/documents i.e. PO, Invoices, Packing List etc. to claim the AIR Duty Drawback.

[Tejas Vaidya]

Thanks for the clarity

 

[YAGAY andSUN]

In case you claim higher AIR Duty Drawback, then, you might debit the accumulated ITC (Proportionately). It is mentioned in Rules and is a settled legal position.

AI Summary

Customs duty drawback eligibility not affected by profit margins under Drawback Rules 2017 A customs practitioner inquired about duty drawback eligibility when profit margins exceed 50%, citing an example where purchase cost was 100 and selling price was 200. Legal experts clarified that no provision in the Customs and Central Excise Duties Drawback Rules, 2017 disqualifies drawback claims based on profit margins. Drawback eligibility depends on actual duty incidence on inputs, proper classification, and procedural compliance, not profit percentages. The practitioner was exporting customized products with 150 purchase cost and 400 selling price, seeking AIR duty drawback guidance. Experts recommended consulting jurisdictional customs authorities with supporting documentation and noted potential ITC adjustments for higher drawback claims.