Drawback - Definition - Law Dictionary Home Dictionary Definition drawback

Definition :

Drawback, 'drawback' means the repayment of duties or taxes previously charged on commodities, from which they are relived on exportation, State of Uttar Pradesh v. Delhi Cloth Mills, (1991) 1 SCC 454 (468).

The term used in commerce to signify the remitting or paying back upon the exportation of a commodity of the duties previously paid on it.

A drawback is a device resorted to for enabling a commodity affected by taxes to be exported and sold in the foreign market on the same terms as if it had not been taxed at all. It differs from a bounty in this, that the latter enables a commodity to be sold for less than its natural costs, whereas a drawback enables it to be sold exactly at its natural cost. Were it not for the system of drawbacks it would be impossible, unless when a country enjoyed some very peculiar facilities of production, to export any commodity that was more heavily taxed at home than abroad. But the drawback obviates this difficulty, and enables merchants to export commodities loaded at home with heavy duties, and to sell them in the foreign markets on the same terms as those fetched from countries where they are not taxed.

Most Articles imported or to be exported into or out of this country may be stored in warehouses for subsequent exportation in bonded warehouses (see 45 & 46 Vict. c. 72; 63 & 64 Vict. c. 7; 5 & 6 Geo. 5, c. 89; 11 & 12 Geo. 5, c. 32). In this case they pay no duties if imported; and, of course, get no drawback on their exportation.

Sometimes a drawback exceeds the duty or duties laid on the article; and in such cases the excess forms a real bounty of that amount, and should be so considered.

See (English) Customs Consolidation Act, 1876 (39 & 40 Vict. c. 36), ss. 100, 104, and 117 et seq. Consult Smith's Wealth of Nations.