RoDTEP / Duty Drawback Benefits for Exports to Nepal & Bhutan Should be Governed by FTP or Respective Customs Notifications in Case of Inconsistency?

[Manoj Mishra]

I seek views on an apparent inconsistency between the FTP provisions and the specific Customs NN governing RoDTEP and Duty Drawback for exports to Nepal and Bhutan.

As per the recent FTP Amendment in Para 2.52 and 2.53 of the Foreign Trade Policy (FTP) 2023 - 30/2026-27 - Foreign Trade Policy, the provisions relating to Nepal and Bhutan have been revised. However, I could not find any corresponding amendment in:

• Duty Drawback Notification Goods specified if exported under claim for drawback are likely to be smuggled back into India - Supersession Notification No. 49-Customs (G.S.R. 225), dated the 1st February, 1963 - G.S.R. 1318 - Customs -Tariff
• RoDTEP Notification Manner to issue duty credit for goods exported under the Scheme for Remission of Duties and Taxes on Exported Products (RoDTEP) Notified. - 76/2021 - Customs - Non Tariff

Both of the above notifications contain their own specific conditions for claiming benefits on exports to Nepal and Bhutan.

My query is:

In case of exports to Nepal and Bhutan, should eligibility for Duty Drawback and RoDTEP be determined strictly as per the respective Customs notifications, or can reliance be placed on the amended FTP provisions where the two appear to be inconsistent?

[Sanjeev Agarwal]

In my view, eligibility for Duty Drawback and RoDTEP for exports to Nepal/Bhutan should presently be determined by the respective Customs notifications. The amended FTP provisions cannot, by themselves, be treated as overriding those conditions.

1. FTP Paras 2.52/2.53

The amendment permits export contracts with Nepal and Bhutan to be denominated and settled in INR. However, Para 2.53's provision granting export benefits against INR realisation specifically applies to countries other than Nepal and Bhutan.

Therefore, the amendment does not expressly confer a general entitlement to export incentives on Nepal/Bhutan exports merely because payment is received in INR.

2. Duty Drawback

The relevant drawback restrictions arise independently under section 76(2) of the Customs Act, 1962 and the corresponding Customs notification.

Accordingly, the specific Nepal/Bhutan conditions in that notification continue to govern drawback eligibility. An amendment to FTP under section 5 of the FT(D&R) Act should not ordinarily be regarded as an implied amendment of a notification issued under the Customs Act.

3. RoDTEP

The same principle applies to RoDTEP, although there is a stronger argument for harmonisation.

Notification 76/2021-Customs (N.T.), issued under section 51B of the Customs Act, contains specific conditions for exports to Nepal/Bhutan, including the prescribed condition regarding realisation against an irrevocable LC in freely convertible currency.

Unless that notification is correspondingly amended, I would regard its specific condition as continuing to apply.

Conclusion

Issue	Position
INR settlement with Nepal/Bhutan	Permitted subject to FTP/RBI framework
Duty Drawback	Customs notification governs
RoDTEP	Notification 76/2021 governs
FTP amendment overriding Customs conditions	Not a safe position presently

Thus, I would not recommend claiming Drawback or RoDTEP contrary to the applicable Customs notification merely by relying on amended Paras 2.52/2.53.

For RoDTEP, a reasonably arguable litigation position may exist based on harmonising the later FTP with Notification 76/2021, but that is materially different from saying that the Customs condition has automatically ceased to apply.

The fundamental distinction is:

FTP may determine whether and how the export/payment is permissible; the Customs notification independently determines whether the statutory fiscal benefit is admissible.

[Shilpi Jain]

RoDTEP originates from the FTP. Section 51B of Customs gives the credit and controls its use.

In this backdrop can a customs notification restrict RoDTEP claim in case of INR realisation when FTP allows it.

Also to note that for exports to Bhutan - INR is the only currency that can be paid for exports to Nepal and Bhutan subject to an exception in case of Nepal as provided in Foreign Exchange Management (Manner of Receipt and Payment) Regulations, 2023

AI Summary

Export incentive eligibility for Nepal and Bhutan remains subject to specific Customs conditions despite INR settlement under the FTP.
Eligibility for Duty Drawback and RoDTEP on exports to Nepal and Bhutan is distinguished from the permissibility of INR settlement under the FTP and foreign-exchange framework. Specific Customs notification conditions are treated as independently governing fiscal-benefit eligibility. Drawback conditions continue unless amended under customs law. RoDTEP conditions, including realisation against an irrevocable letter of credit in freely convertible currency for Nepal and Bhutan exports, are likewise treated as continuing unless correspondingly amended. Harmonisation with amended FTP provisions may be arguable but does not automatically displace Customs conditions.