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Smuggling in India Report 2024-25 88
iii. Misuse of Drawback Scheme
The duty drawback scheme provides the refund and defraying of duties and taxes
paid on inputs or raw materials used in export goods. As benefits are linked to
export value and tariff classification, exporters often resort to overvaluation or
misdeclaration and misclassification to misuse the scheme for ineligible benefits.
Instances of drawback claims without realisation of export proceeds within the
permitted time, have also been detected.
Case 10: Misclassi cation of brass components to claim drawback
In April 2024, DRI detected a case wherein an
exporter was misclassifying brass case cups and
bullet jacket cups to avail undue drawback benefit
of ₹7.79 crore.
iv. Misuse of EOU and SEZ Schemes
The EOU and SEZ schemes are primarlily aimed to boost exports and enhance for-
eign exchange earnings. However, exporters have been found diverting duty-free
imported goods into the Domestic Tariff Area (DTA), in violation of the conditions
prescribed under the EOU and SEZ schemes. Such malpractices defeat the very
purpose of the scheme, not only causing substantial revenue loss to the exchequer
but also undermining the credibility and effectiveness of India’s export promotion
framework.
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