Exporters clearing excisable goods from a factory on duty payment and under claim of rebate on duty actually paid have a new problem. Their claims are being held up for want of a bank certificate on realisation of export proceeds or being reduced on the basis of bank certificates showing actual realisation of these proceeds.
The provocation for the demands of the field formations to present a bank realisation certificate is a recent decision of the revisionary authority (RA) in the ministry of finance in the case of Panacea Biotech Ltd [(2012 (276) ELT 412 (GOI)].
In this case, the said authority held the transaction value was as shown in the Bank Realisation Certificate (BRC), as the buyer had paid the said amount to the exporter and duty was payable on the said amount, and the rebate in cash was admissible only on the duty paid on the transaction value of the goods.
This decision of the RA is patently wrong. Even those reasonably familiar with central excise laws know once the duty is paid on the basis of an invoice raised on the buyer, that is, on the basis of price payable by the buyer, the duty cannot be altered if the buyer pays a lesser amount or does not pay, except on the basis of any quantity or other discounts agreed upfront, before clearance of the goods.
If the decision of the said authority is accepted, that duty is payable on the basis of the amount the seller actually receives from the buyer, it would mean the government has to refund the duty paid in all situations where the buyer defaults in paying the seller.
The RA has held in the case of Cadila Healthcare Ltd [2013 (288) ELT 133 (GOI)] that rebate of duty paid on free samples cannot be granted, as such samples have no market value. This, again, is a strange decision because free samples do have market value but are supplied free of charge by the manufacturer for a non-monetary consideration - that is why he pays duty on these. In the case of Ranbaxy Laboratories Ltd [2013(293) ELT 0137 (GOI)], the said Authority held, "No commercial value is mentioned on the export documents and the market value as per records becomes nil. Since the market price of export goods at the time of exportation is nil, the rebate claim becomes inadmissible in terms of condition No. 2(e) of Notification No. 19/2004-C.E. (N.T.), dated 6-9-2004."
A clear message that exporters get from this and many other decisions of the RA is that the government is keen on denying, on one pretext or the other, rebate of the duty actually paid by them.
A greater nuisance is that the field formations have started demanding BRC in all cases of rebate claims, although payment realisation is not a condition for grant of rebate. If the documents presented do establish that the goods in question have been exported and duty has been paid on the goods, rebate cannot be denied.
In a difficult global trading environment, exporters extend up to 360 days credit to buyers. They cannot afford to wait that long to get back the duty they've paid. The finance minister should look into the matter.
email: tncr@sify.com
