The finance ministry has notified safeguards, conditions and limitations for grant of refund of Cenvat credit under Rule 5 of the Cenvat Credit Rules, 2004. The idea is to enable manufacturers and service providers, who take credit for duty paid on inputs and service tax paid on input services and export goods and services without payment of excise duty or service tax, to a refund of unutilised credit on the basis of a formula specified in Rule 5 of the Rules.
The latest notification (numbered 27/2012-CE (NT) dated June 18) calls for a single refund application (separate for goods and services) every quarter in the prescribed Form A, along with, for exporters of services, a certificate in Form A1 from the auditors of the claimant. The notification specifies what is meant by ‘the value of goods cleared for export’, ‘total value of goods cleared’, ‘value of services exported’, ‘value of all services, other than export’ and others. One of the conditions is that the refund claimed should not be more than the amount in the balance at the end of the quarter for which the refund claim is being made or at the time of filing of the refund claim, whichever is less.
In the latest dispensation, there is no requirement for the exporter to show he is unable to utilise the credit in any other manner. However, the condition that the same duties or taxes should not have been claimed by way of duty drawback is in force. Exporters of services have to furnish copies of bank realisation certificates for the services exported. Form A calls for bank account details of the claimant. The refund will be credited to that account.
A useful provision in the notification says the claimant should debit the amount claimed as refund from his Cenvat credit account at the time of making the claim. And, in case the amount of refund sanctioned is less than the amount of refund claimed, the claimant may take back the credit of the difference between the amount claimed and amount sanctioned.
Refund of unutilised credit has always been a problematic issue. In 2006, the Central Board of Excise and Customs (CBEC) had drawn up a scheme for making ad hoc interim refunds, of 80 per cent of the amount claimed, within 15 days, subject to final settlement of the claim within 30 days. The scheme failed as the field formations were not following the instructions of the board. In January 2010, CBEC gave detailed clarifications on various issues relating to refunds, including the issue of nexus — one-to-one correlation between inputs and input services with the export goods or services exported. Even so, at the ground level, the manufacturer exporters and services exporters continued to face delays and denials of their refund claims.
The latest dispensation does not require the kind of correlation between exports and input services used in such exports that was needed earlier. Duties or taxes paid on any goods or services that qualify as inputs or input services will be entitled to be refunded in the ratio of the export turnover to total turnover. The scheme eliminates voluminous documentation or verification and raises hopes of exporters for quick refunds.
