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Circular on Speedy Refunds under Service tax - No 187/6/2015 dated 10/11/2015

cashekar 
on 13 November 2015

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Yes. What you heard is correct!! In the endeavour of making India a better place for doing business, CBEC seems to have finally taken up its initiative. CBEC vide circular no 187/6/2015 – Service Tax dated 10/11/2015 has come with a scheme for speedy disbursal of pending refund claims. It has always been the cry of the Industry, especially Service Sector into export of Services, for faster processing of its Refund Claims. Service Sector has seen bizarre situations where the Claims are processed after years. Department has been consistently facing the wrath of Indian Judicial for  for such an un-reasonable delay in processing refunds under flimsy grounds or for raking up litigation on a settled matter.

Applicability of the Scheme

a. Scheme is applicable to Service Exporters filing refund claims under Rule 5 of Cenvat Credit Rules 2004.

b. Applicable on Refund Applications filed on or before 31-3-2015 pending for being disposal by the department.

c. Pending for disposal means the cases where an Adjudication order is not passed by the authority.

d. Typically, the scheme is applicable for all the refund claims filed by exporters under Rule 5 which is at Show Cause Notice Stage or at PH stage. However, consequent to PH, if an order is passed, then the scheme would not apply to such cases.

e. Scheme is not applicable to cases pending before the authority due a remand order by appellate authority.

Documents to be submitted

a. In case of Companies, a Certificate from its Statutory Auditor (assumed to be from current Statutory Auditor in absence of any specific mention in the circular) in the prescribed format (enclosed as Annexure I). And in case of Non-Companies, a Certificate from a Chartered Accountant (same as enclosed in Annexure I).

b. An undertaking from Claimant (enclosed as Annexure II)

Operation of the Scheme

a. On receipt of the above referred documents, the jurisdictional AC/DC gives a dated acknowledgement to the claimant.

b. Within 5 days of receipt of such application, 80% of the refund claimed would be provisionally paid and an administrative order of paying such refund would be issued. Since the order is purely an administrative order, it is free from review.

c. Process of verification of refund claim thus starts on granting 80% of refund provisionally.

d. On verification, if everything seems fine, the balance refund would be granted.

e. If the authority finds some mistake, it has to communicate the same to the claimant giving the details of discrepancy found and the amount it states to have been wrongly sanctioned or claimed. Claimant can exercise the option under Sec 73(3) of FA 1994 under which, on a direction of the Central Excise Officer, if he feels that the contentions are correct, can pay the same and the officer, in terms of Sec 73(3) is precluded from issuing any Show Cause Notice.

f. It seems from the wordings of Circular that the there is no option for issuing a SCN without issuing a communication, giving the claimant an opportunity under above discussed Sec 73(3).

g. Refund order thus passed, is subject to the review of jurisdictional Commissioner. On such review, if any amount is found in admissible, apart from filing an appeal to set aside the order, officer has to also issue a SCN for amount not covered under original SCN. However, the option under Sec 73(3) as discussed above has to be again given to the claimant wrt to the new proposals.

Some thoughts of author about the Scheme

a. The scheme is something which the Industry has yearned for years. The scheme is very beneficial to the service exporters where the stakes are high. Particularly, working capital needs of the industry would be satisfied with this paradigm shift of assessment from “First Adjudication then Refund” to “First Refund then Adjudication”. What had taken years for processing of one refund claim would now take not more than a month to get the refund in their account.

b. Department was under pressure to expedite processing of claims only from the judicial fora. Now with the shift of assessment from “First Adjudication then Refund” to “First Refund then Adjudication”, officers would face the pressure even from the CBEC. This would collectively make the entire process of adjudication faster and transparent.

c. Author also feels that there may not be much issues at the ground level of implementation as the circulars issued are binding on the department and they would be strictly adhered by central excise officers.

d. Various malpractices are expected to come down.

e. Though the option under Sec 73(3), prescribed in the notification is handy, in the opinion of author,the pre-formatted communications followed by pre-formatted SCNs with same allegations may continue.

f. Since 80% of the amount would be sanctioned on receipt of documents, which include the documents at the time of filing refund, if any document is not filed at the time of filing refund, refund may not be granted. Author feels that if any documents are missed out at the time of filing refund claim, the same should be entertained along with the declaration to be submitted now.

g. Statutory Auditors and Chartered Accountants are to exercise extreme diligence in certifying the records as it is seen that most of them practicing direct taxation and Audits may not be completely abreast with the changes in Indirect Taxes and the law laid down by Indian Judicial fora in the subject matter.

For any clarification with regard to the article, you could get in touch with:

CA Chandra Shekar – shekar@ca-sny.com
CA B L Subramanya – subramanya.bl@ca-sny.com
Govind Sarda– govind.sarda@ca-sny.com

Annexure-l

To,

The Deputy/Assistant Commissioner of Central Excise/Service Tax

Date:

Madam/Sir

1. This is to certify that for M/s _____, STC No.

1.1 The refund claim for Rs. ______ for the quarter is complete in all aspects with all the relevant documents and has been filed within the prescribed time limit.

1.2 The amount of Rs.________ claimed as refund for the quarter __________by M/s _____________ in their application for refund dated_____ is correct as per their books of accounts and relevant records and the same is in accordance with the provisions of rule 5 of the CENVAT Credit Rules, 2004, read with the notification no. ______ issued thereunder.

1.3 M/s _________ is eligible to take CENVAT credit in terms of the CENVAT Credit Rules, 2004, the amount which is being claimed as refund.

1.4 The services which are claimed to be exported, qualify to be treated as exports in terms of the rules in force at the time of the said export.

Signature of the statutory auditor/chartered accountant/ authorized signatory of the statutory auditor/chartered accountant

Annexure-2

To

The Deputy/Assistant Commissioner of Central Excise/Service Tax

Date:

M/s ____________, STC No.____________ hereby undertake that for any amount provisionally paid to me for the refund claim for Rs.______ for the quarter_________, filed on ____, in case there is a difference between the amount provisionally paid to me and the amount found to be admissible,         I shall pay the said differential amount upon intimation about its inadmissibility, along with applicable interest thereon.

Signature of the claimant


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