Refunds and Rebates in Service Tax

Transcription

1 Refunds and Rebates in Service Tax BY Faculty: CA Manish Gadia On Saturday 10 th December, 2011 Organised By WIRC of ICAI Jointly with Borivli Kandivli (East) CPE Study Circle of WIRC

2 1. Background Refund and Rebate under Service Tax CA Manish Gadia CA Manish Gadia It has always been the intention of the government to promote export in India and to achieve this government has always tries to avoid the cascading effect of taxes on these exports. Indirect tax liability been created / collected at the stage of inception and Service tax been one of them these taxes having a direct implication on the goods / services exported. 2. Applicable Rules and Notification s Under service tax refund / rebate is given vide following notifications, 2.1. Notification No. 11/2005- ST, dated 19th April (Rebate of service tax paid on Exported services) Notification No. 12/2005- ST, dated 19th April (Rebate of service tax paid on taxable Input services used in providing taxable Exported services) Notification No. 17/2009- ST, dated 7 th July (Refund of service tax paid on specified input services used for export of goods) Rule 5 of Cenvat Credit Rules, 2004 vide Notification No. 5/2006-CE(NT) dated 14 th March, 2006, - (Refund of unutilized Cenvat credit resulting as a result of export of Goods / services). 3. Notification No. 11/2005, dated 19 th April 2005 (Rebate of service tax paid on Exported services) This notification provides that subject to the conditions, limitations and procedures, rebate of the whole of the service tax and cess paid on all taxable services exported in terms of rule 3 of the said rules, to any country other than Nepal and Bhutan Conditions and Limitations the taxable service has been exported in terms of rule 3 of the said rules and payment for export of such taxable service has been received in India in convertible foreign exchange; the service tax and cess, rebate of which has been claimed, have been paid on the taxable service exported; the amount of rebate of service tax and cess admissible is not less than five hundred rupees; and that in case,- 1 This notification substituted the earlier Notification No. 41/2007 dt Page 2 of 21

3 the service tax and cess, rebate of which has been claimed, have not been paid; or the taxable service, rebate on which has been claimed, has not been exported, the rebate paid, if any, shall be recoverable with interest as per the provisions of section 73 and section 75 of the Finance Act, 1994 (32 of 1994) as if no service tax and cess have been paid on such taxable service Procedures claim of rebate of service tax and cess paid on all taxable services exported shall be filed with the jurisdictional Assistant Commissioner of Central Excise or Deputy Commissioner of Central Excise, as the case may be, such application shall be accompanied by, documentary evidence of receipt of payment against taxable service exported and for which rebate is claimed, payment of service tax and cess on such taxable service exported; a declaration that such taxable service, rebate of service tax and cess paid on such service is claimed, has been exported, in terms of rule 3 of the said rules, along with the documents evidencing the export of such taxable service; 3.3. Other documents which are required Form ASTR 1 given in the said notification Authority letter if refund claim is processed by a person other than the assessee himself. 4. Notification No. 12/2005, dated 19 th April (Rebate of service tax paid on taxable Input services used in providing taxable Exported services) This notification provides that subject to the conditions, limitations and procedures, rebate of the whole of the duty paid on excisable inputs or the whole of the service tax and cess paid on all taxable input services (herein after referred to as input services ), used in providing taxable service exported in terms of rule 3 of the said rules, to any country other than Nepal and Bhutan 4.1. Conditions and Limitations the taxable service has been exported in terms of rule 3 of the said rules and payment for export of such taxable service has been received in India in convertible foreign exchange; the duty, rebate of which has been claimed, has been paid on the inputs; the service tax and cess, rebate of which has been claimed, have been paid on the input services; Page 3 of 21

4 the total amount of rebate of duty, service tax and cess admissible is not less than five hundred rupees; no CENVAT credit has been availed of on inputs and input services on which rebate has been claimed; and that in case, the duty or, as the case may be, service tax and cess, rebate of which has been claimed, have not been paid; or the taxable service, rebate for which has been claimed, has not been exported; or CENVAT credit has been availed on inputs and input services on which rebate has been claimed, the rebate paid, if any, shall be recoverable with interest as per the provisions of section 73 and section 75 of the Finance Act, 1994 (32 of 1994) as if no service tax and cess have been paid on such taxable service Procedures The provider of taxable service to be exported shall, prior to date of export of taxable service, file a declaration with the jurisdictional Assistant Commissioner of Central Excise or Deputy Commissioner of Central Excise, as the case may be, describing the taxable service intended to be exported with, description, quantity, value, rate of duty and the amount of duty payable on inputs actually required to be used in providing taxable service to be exported; description, value and the amount of service tax and cess payable on input services actually required to be used in providing taxable service to be exported The Assistant Commissioner of Central Excise or the Deputy Commissioner of Central Excise, as the case may be, shall verify the correctness of the declaration filed prior to such export of taxable service, if necessary, by calling for any relevant information or samples of inputs and if after such verification, the Assistant Commissioner of Central Excise or the Deputy Commissioner of Central Excise is satisfied that there is no likelihood of evasion of duty, or as the case may be, service tax and cess, he may accept the declaration The provider of taxable service shall, obtain the inputs required for use in providing taxable service to be exported, directly from a registered factory or from a dealer registered for the purposes of the CENVAT Credit Rules, 2004 accompanied by invoices issued under the Central Excise Rules, 2002; receive the input services required for use in providing taxable service to be exported and an invoice, a bill or, as the case may be, a challan issued under the provisions of Service Tax Rules, claim of rebate of the duty paid on the inputs or the service tax and cess paid on input services shall be filed with the jurisdictional Assistant Page 4 of 21

5 Commissioner of Central Excise or Deputy Commissioner of Central Excise, as the case may be, after the taxable service has been exported; such application shall be accompanied by, invoices for inputs issued under Central Excise Rules, 2002 and invoice, a bill, or as the case may be, a challan for input services issued under Service Tax Rules, 1994 in respect of which rebate is claimed; documentary evidence of receipt of payment against taxable service exported, payment of duty on inputs and service tax and cess on input services used for providing taxable service exported, rebate of which is claimed; a declaration that such taxable service, has been exported in terms of rule 3 of the said rules, along with documents evidencing such export Other documents which are required Form ASTR 2 given in the said notification Authority letter if refund claim is processed by a person other than the assessee himself. 5. Refund under Notification No. 17/2009-ST dt It is the basic understanding that Tax cannot be exported. Exporter of goods use various services on which service tax is payable. Thus indirectly service tax was been exported. To overcome this situation, government tried to resolve this situation by introducing notification no. 41/2007-ST, dated 6 th Oct 2007 and providing refund to exporter of goods for service tax paid by them on certain specified taxable services. This notification is not been substituted by Notification No. 17/2009-ST dt Some of the frequently asked question in context of the refund of service tax by exporter of goods are given below Q.1. what are the specified services? A.1. Specified services are given in table below. Sr. No. Category of Services with classificat ion Taxable Services Conditions (1) (2) (3) (4) 1. General Service provided to an Exporter shall submit Page 5 of 21

6 Insurance business services 65(105)(d) 2. Port Services 65(105)(zn ) 3. Technical testing and analysis services 65(105)(zz h) 4. Technical inspection certification services 65(105)(zzi ) 5. Other Port Services 65(105)(zzl ) 6. Transport of Goods by Road 65(105)(zz p) 7. Transport of Goods in exporter by an insurer, including a reinsurer carrying on general insurance business in relation to insurance of said goods. Service provided by a port or any person authorised by the port in respect of the export of said goods. Service provided by a technical testing and analysis agency, in relation to technical testing and analysis of said goods. Service provided by a technical inspection and certification agency in relation to inspection and certification of export goods. Service provided by other port or any person authorised by that port in respect for export of said goods. (i) Service provided for transport of said goods from the inland container depot to the port of export; (ii) Service provided to an exporter in relation to transport of export goods directly from the place of removal, to inland container depot or port or airport, as the case may be, from where the goods are exported. (i) Service provided for transport of said goods from the inland container CA Manish Gadia document issued by the insurer, including re-insurer, for payment of insurance premium and the document shall be specific to export goods and shall be in the name of the exporter. (i) Exporter shall certify that the benefit of exemption provided vide notification number 18/2009-S.T. has not been claimed; and (ii) details, those are specified in the invoice of exporter relating to export goods, are specifically mentioned in the lorry receipt and the corresponding shipping bill. Invoice issued by the exporter in relation to export goods shall indicate the inland Page 6 of 21

7 containers by rail services 65(105)(zz zp) 8. Cleaning Activity 65(105)(zz zzd) 9. Storage and warehousi ng services 65(105)(zz a) 10. Courier Services 65(105)(f) 11. Custom house agent's services 65(105)(h) depot to the port of export, and (ii) services provided to an exporter in relation to transport of export goods directly from the place of removal to inland container depot or port or airport, as the case may be, from where the goods are exported. Specialised cleaning services namely disinfecting, exterminating, sterilising or fumigating of containers used for export of said goods provided to an exporter. Service provided for storage and warehousing of said goods. Service provided by a courier agency to an exporter in relation to transportation of time sensitive documents, goods or articles relating to export, to a destination outside India. Service provided by a custom house agent in relation to export goods exported by the exporter. CA Manish Gadia container depot or port or airport from where the goods are exported. (i) The receipt issued by the courier agency shall specify the importer exporter code (IEC) number of the exporter, export invoice number, nature of courier, destination of the courier including name and address of the recipient of the courier; and (ii) exporter produces documents relating to the use of courier service to export goods. Exporter shall produce,- (i) invoice issued by custom house agent for providing services specified in column (3) specifying,- (a) number and date of Page 7 of 21

8 shipping bill; (b)number and date of the invoice issued by the exporter relating to export goods; (c)details of all the charges, whether or not reimbursable, collected by the custom house agent from the exporter in relation to export goods; (ii) details of other taxable services provided by the said custom house agent and received by the exporter, whether or not relatable to export goods. 12. Banking and Financial Services 65(105)(z m) (i) Service provided in relation to collection of export bills; (ii) Service provided in relation to export letters of credit such as advising commission, advising amendment, confirmation charges; (iii) Service of purchase or sale of foreign currency, including money changing provided to an exporter in relation to export goods. 13. Banking and Financial Services (Foreign Exchange Broker) 65(105)(zz k) Service of purchase or sale of foreign currency including money changing provided to an exporter in relation to export goods. Page 8 of 21

9 14. Supply of Tangible Goods Services 65(105)(zz zzj) 15. Clearing and forwarding agent's services 65(105)(j) 16. classified under any subclause of clause (105) of section 65 Service of supply of tangible goods for use, without transferring right of possession and effective control of tangible goods, provided to an exporter in relation to goods exported by the exporter. Service provided by a clearing and forwarding agent in relation to export goods exported by the exporter. Payment of service tax paid on services commonly known as terminal handling charges. CA Manish Gadia Exporter shall produce,- (i) invoice issued by clearing and forwarding agent for providing services specified in column (3) specifying,- (a)number and date of shipping bill; (b) description of export goods; (c) number and date of the invoice issued by the exporter relating to export goods; (d) details of all the charges, whether or not reimbursable, collected by the clearing and forwarding agent from the exporter in relation to export goods; (ii) details of other taxable services provided by the said clearing and forwarding agent and received by the exporter, whether or not relatable to export goods. Page 9 of 21

10 Q.2. is there any other condition to be satisfied other then listed in above table? A.2. Following further condition also to be satisfied: (a) the specified services for which refund is claimed by the exporter of the goods should be received and used by the exporter for export of the said goods; (b) the exporter claiming the refund has actually paid the service tax on the specified services to input service provider; (c) no CENVAT credit of service tax paid on the specified services used for export of said goods has been taken under the CENVAT Credit Rules, 2004; Q.3. Who can claim the exemption under this notification? A.3. Only exporter (Manufacturing exporter or Merchant exporter) of goods who has actually paid the service tax on specified services can claim exemption under this notification. The person liable to pay service tax under sub-section (1) or sub-section (2) of section 68 of the Finance Act 1994 (as amended) shall pay the service tax as applicable but shall not be eligible to claim exemption under this notification. The exemption under notification 17/2009-ST Dt. 7 th July, 2009 shall be claimed by exporter of goods by filing a refund application. Q.4. Is registration compulsory to claim exemption under this notification A.4. Yes, The exporter or merchant exporter who is not registered under Central Excise or Service tax will be required to file a declaration in the Form A-2 as prescribed in Notification 17/2009-ST dtd. 7 th July, 2009 to Assistant Commissioner of Central Excise or the Deputy Commissioner of Central Excise who shall after due verification allot a service tax code (STC) number to the exporter within seven days from the date of receipt of the said Form. Q.5. To whom refund of service tax under this notification is to be filed? A.5. The Exporter shall claim the exemption by filing a refund of service tax paid on specified services to Sr No. Type of Exporter 1 Manufacturer Exporter 2 Other than Manufacturer Exporter Authority to whom the application is to be made A.C./ D.C. of Central Excise having jurisdiction over the factory of the manufacturer or warehouse. A.C./D.C. of Central Excise having jurisdiction over the registered office of such exporter. Q.6. Is there any time limit for claiming exemption under this notification? Page 10 of 21

11 A.6. Yes, the claim for refund is to be filed within one year from the date of export of the goods. (Explanation.- For the purposes of this clause the date of export shall be the date on which the proper officer of Customs makes an order permitting clearance and loading of the said goods for exportation under section 51 of the Customs Act, 1962 (52 of 1962) Q.7. Is there any time limit for granting refund of service tax on specified services under this notification by the department? A.7. Yes, the time limit prescribed for processing the claim is One month from the date of filing of the claim. Q.8. Is there any document that is to be filed along with the refund application towards exemption under this notification? A.8. Yes, Refund application i.e. Form A-1 is to be accompanied by following documents, a) Document evidencing export of the said goods like bill of lading, Shipping Bill, etc. b) Proof of realisation of Export proceeds like FIRC. In cases where banks do not issue FIRC for the reason that payments are received by cheque, then duly certified bank statement. c) Document evidencing payment of service tax on the specified services for which claim for refund of service tax paid is filed like TR 6 challans, or invoices of input service provider issued under Rule 4A of Service Tax Rules, 1994 along with proof of payment of the same. d) Further apart from above, notification also prescribes agreement entered with buyer of goods in respect of certain services, in that case copy of agreement with buyer. Details of certain services require agreement are given in the table as given in A.1 above. e) Copy of certificate evidencing exporter registered with export promotion council sponsored by ministry of commerce or ministry of textiles. f) (i) Where the total amount of refund sought is, upto 0.25% of the total declared free on board value of export a certificate from the exporter or the authorised person to the effect that specified service, to which the document pertains, has been received, the service tax payable thereon has been paid and the specified service has been used for export of goods under the shipping bill number. (Draft format given refer Annexure). (ii) where the amount of refund sought under a claim is more than 0.25% of the declared free on board value of export, such certification, shall be done by Auditor appointed under the Companies Act, 1956 or the Income Tax Act, 1961, as the case may be Q.9. Exporters exporting to a customer regularly, the FIRC are made on running account basis by the banks. Therefore, it is often not possible to show the Page 11 of 21

12 linkage between the export invoice and the remittance. What is the remedy available? A.9 Where FIRCs are issued on consolidated basis, the exporters should submit self-certified statement along with FIRC showing the details of export in respect of which the FIRC pertains. Exporters should also maintain a register showing running account which should be reconciled between the export and the remittance periodically. Q.10. Is there any other condition or point to take care of after getting refund of service tax under the said notification? A.10. a) Yes, One thing in particular is to be taken care of by the exporter is that the sale proceeds in respect of the said exported goods should have been realised by or on behalf of the exporter in India within the period allowed under the Foreign Exchange Management Act, 1999 (42 of 1999), including any extension of such period. In case the exporter fails to satisfy the said condition than such service tax refunded shall be recoverable under the provisions of the Finance Act 1994 (As amended) and the rules made there under, as if it is a recovery of service tax erroneously refunded. b) One more point to be considered is that the said specified services should be linked to exports. Exporter will be eligible to claim exemption of the said services under this notification even if the said services does not fall under the definition of Input services as defined in Cenvat Credit Rules Q.11. Whether refund would be admissible on specified taxable service received prior to the date it is notified in the said notification, if such services are used in relation to goods which are exported subsequent to the date on which such taxable services are notified under notification No. 41/2007- ST? A.11. NO Q.12. Whether original documents such as invoice, BL, SB, BRC etc. are to be attached with the refund claim? A.12. No, The said documents are to be submitted in the manner prescribed in the notification i.e. where the, 1) where the exporter is a proprietorship concern or partnership firm, the documents enclosed with the claim shall be certified by the exporter himself along with a certificate 2) and where the exporter is a limited company, the documents enclosed with the claim shall be certified by the person authorised by the Board of Directors. Q.13. The input service provider providing services to the exporter provides various services. But he has registration of only one service. Can refund Page 12 of 21

13 be denied on the grounds that the taxable services that are not covered under the registration are not eligible for such refunds? A.13. Supreme Court in the case of Formika India vs. Collector of Central Excise TIOL-599-SC-CX has held that refund should not be denied on technical grounds. (Should we look for technical grounds / procedural grounds). 6. Refund under Rule 5 of Cenvat Credit Rules, Conditions and procedures for claiming refund under this rule was prescribed vide notification no. 5/2006-Central Excise (N.T.) dt. 14 th March This notification provided for refund of CENVAT credit in respect of (a) input or input service used in the manufacture of final product which is cleared for export under bond or letter of undertaking; (b) input or input service used in providing output service which has been exported without payment of service tax, This notification further provides as under, 6.1. The final product or the output service is exported in accordance with the procedure laid down in the Central Excise Rules, 2002, or the Export of Services Rules, The claims for such refund are submitted not more than once for any quarter in a calendar year. Provided that where,- (a) the average export clearances of final products or the output services in value terms is fifty percent or more of the total clearances of final products or output services, as the case may be, in the preceding quarter; or (b) the claim is filed by Export Oriented Unit, the claim for such refund may be submitted for each calendar month 6.3. The manufacturer or provider of output service, as the case may be, submits an application in Form A given in said notification to the Deputy Commissioner of Central Excise or the Assistant Commissioner of Central Excise, as the case may be in whose jurisdiction the factory from which the final products are exported is situated along with the Shipping Bill or Bill of Export, duly certified by the officer of customs to the effect that goods have in fact been exported; or the registered premises of the service provider from which output services are exported is situated along with a copy of the invoice and a certificate from the bank certifying realization of export proceeds 6.4. The refund is allowed only in those circumstances where a manufacturer or provider of output service is not in a position to utilize the input credit or input service credit allowed. Page 13 of 21

14 6.5. The refund of unutilised input service credit will be restricted to the extent of the ratio of export turnover to the total turnover for the given period to which the claim relates i.e..maximum refund Total CENVAT credit taken on input services during the given period export turnover Total turnover The application in Form A, along with the prescribed enclosures and the relevant extracts of the records maintained under the Central Excise Rules, 2002, CENVAT Credit Rules, 2004, or the Service Tax Rules, 1994, in original, are filed with the Deputy Commissioner of Central Excise or the Assistant Commissioner of Central Excise, as the case may be, before the expiry of the period specified in section 11B of the Central Excise Act, 1944(1 of 1944) i.e. one year. Relevant date for filing of refund of credit in respect of Export services is the date when the payments of service (exported) is received and not date of providing the service- COMMISSIONER OF CENTRAL EXCISE, PUNE I Vs EATON INDUSTRIES P Ltd TIOL-166-CESTAT-MUM Other documents which are required Form A given in the said notification Authority letter if refund claim is processed by a person other than the assessee himself Copy of invoices of input service providers Copy of invoices for service exported FIRC from bank Relevant extract of CENVAT register Statement of input service invoices and details of payment made Details as given in para below Declaration certifying the correctness of the particulars given by the claimant Circular no. 828/5/2006-CX, dated 20th April 2006 (Simplified procedures for sanction of refund of unutilised credit/rebate claims in cases of export ) Department has specified simplified procedures to grant refund to certain exporters claiming refund under the said rule. This simplified procedures is hereby given in the form of extract from the said circular herein below, 3.. The refund/rebate sanctioning authority shall immediately scrutinize the refund/rebate claim and check whether the refund/rebate application is complete and is covered by all the requisite documents. Once the preliminary scrutiny is completed, 80% of the rebate claimed will be sanctioned within 15 days of (a) filing of the rebate claim; or (b) filing of document evidencing payment of duty including the periodical return, which ever is later, provided all the documents filed along with the claim are, prima-facie, found to be in order. In case of refund of unutilised credit under rule Page 14 of 21

15 5 of the CENVAT Credit Rules, 2004, 80% of the refund amount will be sanctioned within 15 days of filing of the claim, provided the requirements of Notification no. 5/2006 C.E.(NT) dated are complied with. The balance amount shall be paid after completion of the verification and other formalities in the prescribed manner within 45 days from the date of filing of the claim. Pre/Post Audit will be completed as per the norms laid down in this regard vide Circular no. 809/6/2005 CX dated Subsequently, if any discrepancy is noticed at the time of scrutiny of the periodical returns, necessary action for recovery of erroneous refund would be initiated in accordance with Rules. 4. This simplified procedure for sanction of refund/rebate is applicable only to the following categories of exporters having good track record i.e. exporters against whom no offence case has been booked by the Department during the preceeding three years or/and where no recovery of short levy is pending on date. (a) (b) (c) (d) (e) (f) All exporters who have an export turnover of Rs. 5 crores in the current year or the preceding financial year. Public Sector Undertakings including PSUs of the State Government. Star Export Houses as specified under Chapter 3.5 of the Foreign Trade Policy, Manufacturer-exporters registered with Central Excise who have been exporting during the previous two financial years and have minimum export of Rs. 1 crore or more during the preceding financial year. Manufacturer-exporters registered with Central Excise who has paid duty of Rs. 1 crore or more during the preceding financial year. All Export Oriented Units Circular No. 120/01/2010-ST, dated 19th Jan 2010 (Clarification on problems faced by exporter in claiming the refund). The circular clarifies on certain issues in respect of granting of refund to the exporter mainly in respect to exporter of services At the outset, the Board clarified that the entire purpose of Notification No. 5/2006-CX (NT) is to refund the accumulated input credit to exporters and zero-rate the exports. Accumulated credit and delayed sanction of refund causes cash flow problems for the exporters. Therefore, the sanctioning authorities were directed to dispose of the refund claims expeditiously based on the following clarifications in the circular Issue 1 : Page 15 of 21

16 The language of Notification No. 5/2006-CX (NT) permits refund only for such services that are used in providing output services. In other words, the view being taken is that to be eligible for refund, input services should be directly used in the output service exported The Board clarified that there cannot be different yardsticks for establishing the nexus for taking of credit and for refund of credit. Even if different phrases are used under different rules of CENVAT Credit Rules, they have to be construed in a harmonious manner The following test can be used to see whether sufficient nexus exists. In case the absence of such input/input service adversely impacts the quality and efficiency of the provision of service exported, it should be considered as eligible input or input service. In the case of BPOs/call centres, the services directly relatable to their export business are renting of premises; right to use software; maintenance and repair of equipment; telecommunication facilities; etc. Further, in the instant example, services like outdoor catering or rent-a-cab for pick-up and dropping of its employees to office would also be eligible for credit on account of the fact that these offices run on 24 x 7 basis and transportation and provision of food to the employees are necessary pre-requisites which the employer has to provide to its employees to ensure that output service is provided efficiently. Similarly, since BPOs/call centres require a large manpower, service tax paid on manpower recruitment agency would also be eligible both for taking the credit and the refund thereof. On the other hand, activities like event management, such as company-sponsored dinners/picnics/tours, flower arrangements, mandap keepers, hydrant sprinkler systems (that is, services which can be called as recreational or used for beautification of premises), rest houses etc. prima facie would not appear to impact the efficiency in providing the output services, unless adequate justification is shown regarding their need Issue 2 : One-to-one co-relation between inputs and outputs and scrutiny of voluminous record Based on the success in one of another refund notification to exporter of Goods [Notification No. 17/2009-ST],wherein similar type of problem was been faced, the board has decided to implement the similar procedure under this notification also, wherein The exporter should, along with the refund claim, file a declaration containing the following details, S. No. (Rs. in lakh) Details of goods/services exported on which refund of input credit is claimed Details of shipping bill/ Bill of export/export documents etc. (1) (2) (3) Details of input credit on which refund claimed Page 16 of 21

17 1. 2. No. Date Date of export order Goods/ service exported Invoice No., date and Amount Name of service provider/ supplier of goods Service tax/ Central Excise Regn. No. of service provider/ supplier of goods Details of service/ goods provided with classification under FA 1994/ Central Excise Tariff CA Manish Gadia Service tax/ Central Excise duty payable Date and details of payment made to service provider Documents attached Total export Total domestic Total amount of to evidence the during the clearances during input credit amount of service tax period for which the period for claimed as paid refund is which refund is refund claimed claimed (4) (5) (6) (7) The declaration should be certified by a person authorized by the Board of Directors (in the case of a limited company) or the proprietor/partner (in case of firms/partnerships) if the amount of refund claimed is less than Rs.5 lakh in a quarter. In case the refund claim is in excess of Rs.5 lakh, the declaration should also be certified by the Chartered Accountant who audits the annual accounts of the exporter for the purposes of Companies Act, 1956 (1 of 1956) or the Income Tax Act, 1961 (43 of 1961), as the case may be The Assistant or Deputy Commissioner may, after verification of the fact that the input credit has been correctly claimed, sanction the refund on the basis of the declaration. In case there is a doubt about the correctness of the claim of CENVAT credit on any service, the undisputed amount may be refunded and the balance claim may be decided after following the dispute settlement process Issue 3 : Filing of Quaterly refund claims In this respect the clarification provided by the department is been reproduced as below, As regards the quarterly filing of refund claims and its applicability, since no bar is provided in the notification, there should not be any objection in allowing refund of credit of the past period in subsequent quarters. It is possible that during certain quarters, there may not be any exports and therefore the exporter does not file any claim. However, he receives inputs/input services during this period. To illustrate, an exporter may avail of Rs.1 crore as input credit in the April June Page 17 of 21

18 quarter. However, no exports may be made in this quarter, so no refund is claimed. The input credit is thus carried over to the July- September quarter, when exports of Rs.50 lakh and domestic clearances of Rs.25 lakh are made. The exporter should be permitted a refund of Rs.66 lakh (as his export turnover is 66% of the total turnover in the quarter) from the Cenvat credit of Rs.1 crore availed in April-June quarter. The illustration prescribed under para 5 of the Appendix to the notification should be viewed in this light. However, in case of service providers exporting 100% of their services, such disputes should not arise and refund of CENVAT credit, irrespective of when he has taken the credit, should be granted if otherwise in order. Such exporters may be asked to file a declaration to the effect that they are exporting 100% of their services, and, only if it is noticed subsequently that the exporter had provided services domestically, the proportional refund to such extent can be demanded from him Issue 4 : Incomplete Invoices In this respect the clarification provided by the department is been reproduced as below, In case of incomplete invoices, the department should take a liberal view in view of various judicial pronouncements by Courts. It had earlier been prescribed in circular No.106/09/2008-ST dated that the invoices/challans/bills should be complete in all respect. This circular was issued with reference to notification No.41/2007 dated as specific services eligible for refund under the notification has been specified. Thus, a stricter requirement exists under the said notification for ascertaining the actual service which has been used in the export of goods. In the case of refund under Rule 5, (i) so far as the nature of the service which has been received by the exporter can be ascertained; (ii) tax paid therein is clearly mentioned; and (iii) other details as required under rule 4(a) are mentioned, the refund should be allowed if the input service has a nexus with the service/goods exported as discussed earlier. In any case, the suggested Chartered Accountant s certificate should clearly bring out the nature of the service and this will assist the officer in taking a decision. 7. Refunds u/s 11B 7.1. Section 83 of the act provides for applicability of section 11B of the Central Excise Act, 1944 to the service tax for claim of refund Conditions for claiming refund The refund claim must comply with the following conditions: Page 18 of 21

19 1. It should be made in duplicate to concerned AC/DC in form - R. 2. It should be filed before the expiry of the limitation period of one year from the date of payment of tax. 3. Proof should be attached that the incidence of tax has not been passed on to any person i.e. tax has been borne by the applicant. 4. Copy of Challan, return, etc. evidencing payment of tax should be attached. 5. Copy of invoice should be attached Doctrine of unjust enrichment Since service tax is indirect tax, it is recoverable from customer. The doctrine of unjust enrichment can be explained in plain simple words as If you recover the amount from customer and again claim refund, you will get double benefit and therefore this benefit will not be allowed. This concept is referred as Doctrine of unjust enrichment in terms of Rule 12B of the Central Excise Act 1944, which has been made applicable to the Service tax. As per the doctrine of unjust enrichment, refund will be granted to assessee only if assessee had not passed on the tax burden to his customer/client. It will be presumed that assessee has passed on the burden of service tax. Thus, assessee will have to prove that he has not passed on the burden to his customer. If he is unable to prove it, refund will be paid to Consumer Welfare Fund and not to assessee, as provided in section 12C of Central Excise Act. If assessee has shown the amount of service tax separately in invoice (which assessee is legally required to do), it will be difficult for assessee to establish that he has not passed on the tax burden to the client Interest The Finance (No. 2) Act, 1998 has made the provisions of Section 11BB of the Central Excises Act, applicable for the purpose of Service Tax which inter alia provides that in case the refund is not given within 3 months from the date of receipt of refund application, interest should be paid at such rate, not below 5% and not exceeding 30% per annum as is fixed by the Central Government by Notification in the Official Gazette, for the period commencing from the date immediately after the expiry of the said 3 months till the date of refund. At present the rate of interest is 6% on delayed refund. Also where an amount deposited by an appellant in pursuance of an order passed by the Commissioner (Appeals) or the Appellate Tribunal, under the first proviso to section 35F of the Central Excise Act, 1944, is required to be refunded consequent upon the order of the appellate authority and such amount is not refunded within three months from the date of communication of such order to the adjudicating authority unless the operation of the order of appellate authority is stayed by a superior court or tribunal, interest shall be paid at the applicable rate after the Page 19 of 21

20 expiry of three months, under the provisions made in section 35FF of the Central Excise Act, Refund of tax paid under mistake of law If Service tax was not leviable, then whatever payment was made did not relate to service tax at all. It was merely an erroneous collection and payment by the receiver of service. Therefore, provisions relating to refund of service tax, including those relating to unjust enrichment, cannot have any application to the return of the amount. [HEXACOM (I) LTD. V. CCE, JAIPUR 2003 (156) E.L.T. 357 (Tri. - Del.)] This judgment was latter on followed in various cases. However Mumbai CESTAT in case of Commissioner Of Central Excise, Pune-III V. M/s Beharay & Rathi Constructions [2009-TIOL-178-CESTAT-MUM] has given contradictory view. Page 20 of 21

21 Draft Format for declaration / certificate at A8 (f)(i) Annexure - On Letter head To Assistant / Deputy Commissioner of Service tax Address of Jurisdiction Declaration cum certificate pursuant to Notification No. 17/2009-Service tax, dated 7 th July We <name of the company> are registered with service tax / Excise Department having registration number. 2. We are exporter of <name / category of goods> and have exported the said goods during the period <period>. 3. For exporting the said goods we have incurred expenses towards the specified services as mentioned in the notification and have paid service tax on such services. 4. Notification No. 17/2009-Service tax, dated 7 th July 2009 provides for refund of service tax paid on such specified services subject to such other conditions as prescribed in the notification. 5. For this purpose of refund of service tax on specified services we have submitted all the relevant documents to the department for verification and processing of our refund claim. 6. We now therefore state and declare that specified service, to which the document pertains, has been received, the service tax payable thereon has been paid and the specified service has been used for export of goods under the shipping bill number. Thanking you For <Name of the company> <Name of the person> <Proprietor / Partner / Director / Authorised> Disclaimer:- The opinion and views expressed in this book are those of the compliers. The WIRC of ICAI and Borivali Kandivali (East) CPE Study Circle of WIRC does not necessarily concur with the same. While every care is taken to ensure the accuracy of the contents of this compilation, complier, WIRC of ICAI and Borivali Kandivali (East) CPE Study Circle of WIRC are not liable for any inadvertent errors. Page 21 of 21