No Duty Drawback to Merchant Exporters on Export of Mobile Phone: DRI

Duty Drawback - Merchant Exporters - Export of Mobile Phone - DRI - Taxscan

The Directorate of Revenue Intelligence (DRI) instructed field officers that no Duty Drawback to merchant exporters on the export of mobile phones.

“Some merchant exporters of Mobile Phones are exporting Mobile Phones after activation and unlocking of mobile phones in unsealed/tempered condition of boxes and claiming export incentives,” the circular said.

In this regard, DRI sought clarification from Joint Secretary (Drawback Division) and after examination of the issue OSD (Drawback Division), CBIC, New Delhi clarified that the matter has been examined in Board, Rule 2(e) of Customs and Central Excise Duties Drawback Rules, 2017 (Rules 2017) defines manufacture as including processing of or any other operation carried out on goods and that the term manufacturer shall be construed accordingly. Clause (i) of the second proviso to Rule 3(1) of Rules, 2017 provided that no Duty Drawback shall be allowed on the export of goods that have been taken into use after manufacture,” the circular added.

It was noticed that some merchant exporters of mobile phones are undertaking various activities on mobile phones like activation and unlocking of mobile phones by inserting an Indian SIM card in India and placing a call for about 5 minutes or testing of handsets or re-flashing of software for a particular region, etc.

It is undisputed that these activities are all post-manufacturing and post packaging activities undertaken by merchant exporters before export. As the mobile phone packages are opened and the mobile phones are suitably worked upon for sale in destination countries, thereby they are already taken into use by merchant exporters.

Hence, the DRI clarified that such activities disentitle them for Duty Drawback.

Therefore, the DRI stated that all the field formations under charge of field officers may be suitably alerted for necessary compliance with the above clarification and to ensure dis entitlement of Duty Drawback and other export incentives on such activities.

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