Refund rules need more than good intentions

The Central Board of Excise and Customs (CBEC) has issued instructions for speedy disbursal of part of refund claims of services exporters, under Rule 5 of the Cenvat Credit Rules, 2004. However, getting the certificate prescribed might not be easy.

Rule 5 allows refund of unutilised credit for exports made without payment of excise duty or service tax. The claims of many services' exporters for such refunds are pending at the operating levels. CBEC now envisages provisional disbursement of 80 per cent of the amount claimed as refund within five working days of presenting a certificate, from the statutory auditor in the case of companies or a certificate from a chartered accountant (CA) for others, with an undertaking to return any excess payment. After making the provisional payment, the authorities have to check the refund claims for correctness and either sanction the balance amount or demand the excess amount paid provisionally.

This is available only for refund claims filed before March 1 this year that has not yet been disposed off. No time limit is prescribed for disbursal of the balance amount.

CBEC requires the statutory auditor or CA to certify that the refund claim is complete in all aspects, with the relevant documents filed within the prescribed time limit, the amount claimed as refund is correct as in their books of accounts and relevant records, the claim is in accordance with the relevant statutory provisions, the amount claimed is eligible to be taken as Cenvat credit in terms of the relevant rules and the services claimed to be exported qualify to be treated so.

Now, it might be difficult for most CAs to certify compliance with such legal requirements when doubts persist on many issues like eligibility for taking Cenvat credit, time limits, refund, etc, all under litigation at various levels.

The idea of provisional payment of 80 per cent of the refund claimed is not new. For select categories of merchandise exporters, CBEC circular 828/5/2006-CX, dated April 20, 2006, already provides for refund of 80 per cent of the unutilised credit within 15 days of presenting a claim, under the same Rule 5, and the balance 20 per cent within 45 days. This circular was made applicable to claim of refund of service tax on specified taxable services received by an exporter and also used for export of goods. However, the experience is that most authorities at the operating levels do not follow these instructions. Very few exporters might have received the provisional payments envisaged in above circulars.

There is no doubt that the intention behind the CBEC circulars is to help exporters of goods or services quickly get their refunds and, thus, improve their cash flow.

The good point about the latest circular from CBEC is that it prescribes a monitoring mechanism for a speedy refund and asks the principal commissioners to ensure there are no complaints about delay. CBEC should also prescribe a similar monitoring mechanism in respect of claims for refund of unutilised credit from merchandise exporters.
tncrajagopalan@gmail.com