1. LEGAL SCENARIO:
1.1 By virtue of Notification No. 102/ 2007 dated 14.09.2007 the Central Government granted exemption, of the whole of the additional duty of customs leviable thereon under sub-section (5) of section 3 of the said Customs Tariff Act, provided certain conditions mentioned in the said notification were fulfilled. The conditions mentioned in the said notification are:
(a) The importer of the said goods shall pay all duties, including the said additional duty of customs leviable thereon, as applicable, at the time of importation of the goods;
(b) the importer, while issuing the invoice for sale of the said goods, shall specifically indicate in the invoice that in respect of the goods covered therein, no credit of the additional duty of customs levied under sub-section (5) of section 3 of the Customs Tariff Act, 1975 shall be admissible;
(c) The importer shall file a claim for refund of the said additional duty of customs paid on the imported goods with the jurisdictional customs officer;
(d) The importer shall pay on sale of the said goods, appropriate sales tax or value added tax, as the case may be;
(e) The importer shall, inter-alia, provide copies of the following documents along with the refund claim:
(i) Document evidencing payment of the said additional duty;
(ii) Invoices of sale of the imported goods in respect of which refund of the said additional duty is claimed;
(iii) Documents evidencing payment of appropriate sales tax or value added tax, as the case may be, by the importer, on sale of such imported goods.
1.2. Thereafter, after issuance of Notfn. No. 14/2009, dated 14.09.2007 which prescribed the conditions for availing refund of 4% Additional Customs duty paid vide Section 3(5) of the Customs Tariff Act, 1975, the following Circulars were issued, in context to streamlining the said refund claims viz.,
- Circular No. 06/2008 (Cus) dated 28.04.2008
- Circular No. 13/2008 (Cus) dated 13.10.2008
- Circular No.06/2009 (Cus) dated 09.02.2009
- Circular No.18/2010 (Cus) dated 08.07.2010
- Circular No. 23/2010 (Cus) dated 29.07.2010
- Circular No. 28/2010 (Cus) dated 13.08.2010
- Circular No. 11/2010 (Cus) dated 24.02.2011
The salient features of these CIRCULARS are as under are as under:-
1.2.1 Circular No.24/2007-Cus. dated 02.07.2007; emphasized upon the issue of:-
- Delay in payment of customs duty refund.
- System for receipt and acknowledgement of all Customs duty refund applications; and clarified that:
- All refund applications made by any person under section 27 of the Customs Act, whether by post or courier or personal delivery, shall be received by the department and a simple receipt, shall be issued immediately. These applications are required to be scrutinized for their completeness within ten working days of their receipt, deficiency, if any, is shall be informed within ten working days.
- Application of refund shall be processed on ‘first-come’ first served’. If refund is due in such case, an order for refund is required to be passed in terms of sub-section (2) to Section 27 or where the claim for refund is found liable to be rejected, as the case may be, a speaking order shall be passed giving complete reasons for the order. Further, in respect of the provisions of unjust enrichment, the order should indicate that this aspect has been examined based on the guidelines. That payment is made to the party within 3 days of the order passed after due audit, if any. In all such cases refund of amount shall be paid to the applicant by a cheque on the authorized bank.
- Audit System: Existing instructions on audit scrutiny of refunds shall continue. However, this does not dispense with the verification of the refund vouchers and the re-conciliation of refunds, which shall continue to be done by the Chief Account Officers.
- CVC’s instructions require that status of individual applications/matters should be made on the organization’s website and should be updated from time to time so that the applicants remain duly informed about the status of their applications.
- In pursuance of the instructions of CVC, all Commissioners of Customs shall establish mechanism for maintenance of a comprehensive database in their respective website, indicating the receipt, acknowledgement, action taken for disposal (either payment or rejection) of refund applications and those pending at the end of the month.
- Monitoring Mechanism: Chief Commissioners/Directorate General of Inspection (DGI) is requested to review the position of refunds in their respective zones/select zones, to check on the timely sanction of refund applications.
1.2.2 Circular No. 06/2008: dated 28.04.2008; issued on the subject of
- Procedure to be adopted for refund of 4% additional duty of customs, clarified as follows:-
- Manner of refund and its receipt:
- All refund applications under the aforesaid notification shall be received by the concerned field formations in their Centralized Refund Section, and the applicants would be given proper acknowledgement. The status of these refund claims shall also be displayed in the online database of customs duty refunds maintained by the respective Commissionerates.
- Time Limit;
- In the absence of specific provision of section 27 being made applicable in the said notification, the time limit prescribed in this section would not be automatically applicable to refunds under the notification;
- importers are permitted to file claims under the above exemption up-to a period of one year from the date of payment of duty;
- Only a single claim against a particular Bill of Entry be permitted to be filed within the maximum time period of one year. Filing of refund claim for a part quantity in a bill of entry shall not be allowed except when this is necessary at the end of the one year period. Further, since the Sales Tax (ST) / Value Added Tax (VAT) is being paid on periodical or monthly basis.
- There would be a single refund claim in respect of one importer in a month irrespective of the number of Bills of Entry (B/Es) processed by the respective Commissionerate.
- Documents to be enclosed with refund claim:
- The document evidencing payment of ST/VAT (in original) duly issued by or acknowledgment by the concerned ST/VAT authorities shall be submitted by the importer.
- However, a certificate from the statutory auditor / Chartered Accountant, who certifies the importer’s annual financial accounts under the Companies Act or any statute, correlating the payment of ST/VAT on the imported goods (in respect of which refund is claimed) with the invoices of sale, would be required along with the original tax / duty payment documents as proof of payment of appropriate ST/VAT for the purpose of compliance of para 2(d) & (e) of the Notification No. 102/2007 dated 14.09.2007.
- That there is no stipulation in the notification that the exemption is available only if the rate of ST/VAT is equal to or higher than the rate of additional duty of Customs; nor is there a condition that if the rate of ST/VAT happens to be lower than 4%, the refund would be restricted to the lower amount.
- Unjust enrichment:
- The principle of unjust enrichment needs to be examined in each case before sanction of refund under this notification.
- It would be expedient to allow the importer to submit a certificate from the statutory auditor/Chartered Accountant who certifies the annual accounts of the importer, that the burden of 4% CVD has not been passed on by the importer to the buyer and to fulfill the requirement of unjust enrichment.
- Only those cases where 4% CVD was paid on or subsequent to 14.9.2007, will qualify for refunds under this scheme subject to fulfillment of prescribed conditions.
- For the purpose of fulfilling the condition as mentioned in para 2(b) of the said Notification No. 102/2007 dated 14.09.2007; A stamp on the invoice (to state that no CENVAT Credit is admissible) should suffice for the purpose of para 2 (b) of the said Notification No. 102/2007 dated 14.09.2007.
- in case of 4% CVD having been paid through DEPB Scrip, the amount eligible for refund should be re-credited on the relevant DEPB Scrip.
1.2.3 Circular No. 7/2008-Cus. 28.05.2008, issued on the subject of;
- Sanction of Customs duty refunds – Unjust Enrichment, clarified as follows:-
- In terms of sub-section (2) of section 27, the concerned AC / DC of Customs has to go through the facts of the case and the material placed before him in order to determine whether the amount claimed by an applicant is refundable to him or not. Further, in terms of the first proviso to the aforesaid sub section, the AC/DC should go through the details of audited balance sheet and other related financial records, certificate of the Chartered Accountant etc., submitted by the applicant in order to decide whether the applicant had not passed on the incidence of the duty and interest thereon, if any, to any other person. The Order-in-Original passed by the AC/DC in the adjudication process should be a speaking order providing specific details including the relevant financial records that are relied upon to arrive at a conclusion whether the burden of duty or interest, as the case may be, has been passed on or not.
1.2.4 Circular No. 22/2008-Customs: dated 19.12.2008, issued on the subject of:-
Procedure relating to sanction and pre-audit of refund claims; clarified as follows:-
- Pre-audit of all refund claims will be conducted by the Assistant/Deputy Commissioner (Audit), in the Commissionerate Headquarters Office. Thereafter, the Assistant/Deputy Commissioner of Group/Division will pass an order-in-original in respect of the claim. Thereafter, the orders-in-original passed in this regard shall be subjected to review by the Commissioner concerned.
1.2.5 Circular No.16/2008-Customs dated 13-10-2008; issued Additional guidelines on refund of 4% Additional Duty of Customs (Notification No. 102/2007 dated 14.09.2007) while emphasizing on Time Limit for filing of refund claims (Ref Circular No. 06/2008) on processing of refund claims; clarified on the following issues;
- Sale invoices to be submitted in soft form for claiming refund;
- That the importers could submit the copy of invoices in electronic form (including the form of CD) as prescribed in the Information Technology Act, 2000 for the purpose of fulfillment of the condition of para 2(e) of the Notification No. 102/2007 dated 14.09.2007. The electronic media containing the information about sale invoices should, however, be submitted along with a paper declaration by the applicant indicating the invoice numbers contained in the media and subscribing to their truthfulness.
- In case of sale through consignment agent/stockist, refund of 4% AD shall be subject to the condition that by an agreement entered into between the importer and Consignment agent/stockist that consignment agent/stockiest is authorized to sell such goods on behalf of the importer and that each of the sale invoices issued by the consignment agent/stockist indicate that “the sale is made on behalf of the importer in the capacity of consignment agent/stockist”. Further, in such cases, the applicant shall submit a certificate from a Chartered Accountant to the effect that appropriate ST/VAT has been paid by consignment agent/stockist on behalf of importer and that the importer, in turn, has paid or reimbursed the ST/VAT to his consignment agent/stockist along with the correlation of ST/VAT payment with 4% CVD paid on imported goods.
- Payment of ST/VAT by cash or input tax credit.
If the Sales-Tax Authorities accept payment of ST/VAT through cash or adjustment of input tax credit, the same shall be treated as effective discharge of ST/VAT payment of imported goods.
- Submission of original copy of ST/VAT Challan:
The importer may submit copies of ST/VAT challan or copies of ST/VAT payment document in different terms evidencing payment made to the bank or ST/VAT Department towards ST/VAT along with a certificate from the Chartered Accountant.
- Unjust enrichment and its certification by Chartered Accountant:
- Submission of refund claim for part of goods in a consignment:
In the earlier Circular issued, it was clarified that 4% CVD Refund claims shall be filed on a monthly basis. Further it was stated that filing of refund claim for part quantity covered in a bill of entry shall not be allowed except when this is necessary at the end of the one year period prescribed. It is now clarified that filing of refund claim for part quantity (due to short landing, damage, defect, etc.,) shall be accepted by the Customs field formations during the same month and such cases need not await till the end of the one year period.
- For the purpose of refund of 4% AD, a certificate issued only by such a Chartered Accountant who either certifies the importer’s financial records under the Companies Act, 1956 or any ST/VAT Act of the State Government or the Income Tax Act, 1961 will be acceptable. As clarified by the Board, certificate by any other independent Chartered Accountant will not be acceptable;
1.2.6 Circular No.6/2009-Customs dated 09-02-2009; it was clarified that:-
- In case of 4% CVD having been paid through VKGUY, FPS, FMS Scrips, the amount eligible for refund should be re-credited on the relevant VKGUY, FPS and FMS Scrip.
1.2.7 Circular No.18/2010-Customs dated 08-07-2010; it was clarified that:-
- illustrative list of documents to be filed by the applicants along with Application for refund of 4% AD is given in Annexure-II of the Circular No.18/2010–Customs dated 08-07-2010;
- In respect of Accredited Clients registered with Customs in terms of Circular No.42/2005-Customs dated 24-11-2005 (ACP clients), the amount of 4% CVD refund shall be sanctioned in full, on preliminary scrutiny of the following documents (a) TR-6 Challans (in original) for CVD payment; (b) VAT/ST payment Challans (in original); (c) summary of sale invoices; and (d) certificate of statutory auditor/Chartered Accountant, for correlating the payment of ST/VAT on the imported goods with the sale invoices and also to the effect that the burden of 4% CVD has not been passed on by the importer to the buyer. The procedure for pre-audit for claims of ACP clients has been done away with and detailed scrutiny shall be done only at the stage of post audit;
- Submission of sale invoices shall be required only in electronic form (CD or other media) and submission of paper documents is accordingly dispensed with;
- A system of optional facility of directly crediting the applicant’s bank account, through RTGS (Real Time Gross Settlement) or NEFT (National Electronics Funds Transfer) System is being prescribed. Claimants desirous of availing this facility for timely payment of refund amount shall furnish necessary authorization (for payment of refund amount directly to Bank Account) to the AC/DC (Refunds) in the form prescribed under Annexure-I.
1.2.8 Circular No.23/2010-Customs dated 29-07-2010; It was clarified that:-
- In cases where the assessment is provisional, for the purpose of sanction of refund of 4% CVD, the date of payment of duty would be, the date of payment of CVD at the time of import of goods and not the date of finalization of provisional assessment. Accordingly, the Importer would be eligible to get the refund, if the claim is filed within one year from the date of actual payment of 4% CVD i.e., the date of payment of duty at the time of clearance of imported goods.
1.2.9 Circular No.27/2010-Customs dated 13-08-2010: Issued
In context on disbursing 4% Additional Customs duty refund in case of payment or 4% Additional Customs duty by DEPB, V K GUY, FMS and FPS scrips by was of re-credit mentioned that:-
- DGFT have subsequently issued a Public Notice No.38/2009-2014 dated 3.2.2010 and also a Policy Circular No.22/2009-14 dated 3.2.2010 for extending the validity of Duty Credit Scrips. Accordingly, concerned Commissionerates of Customs are required to issue a consolidated certificate indicating total amount sanctioned as refund (4% CVD). As per Public Notice, concerned DGFT / Regional Licensing Authorities (RLA) are required to issue necessary re-credit on the scrip on the basis of consolidated certificate issued by Commissionerate. Policy Circular No.22/2009-14 dated 3.2.2010 issued by DGFT also provides for sending a copy of such duty scrips where re-credit was allowed along with the details of original duty scrips so that the Customs authorities can compare the details before allowing clearance of import consignment against the scrips.
- In view of difficulties associated with change in EDI System to allow re-credit of DEPB/VKGUY/FPS/FMS Scrips in case of 4% AD refund and also the view of DGFT that modification in software at the end of DGFT (for the purpose of re-credit of 4% CVD through Electronic Message System and its transmission to the Customs) is not feasible at present, the Board has provided that the registration of re-credited duty Scrips issued by DGFT on the basis of consolidated certificate furnished by Customs should be allowed on manual basis. The facility of manual filing of Bill of Entry for utilizing the amount of re-credited CVD refund for payment of duty is also allowed. This facility has been extended up to 31-01-2011(extended up to 30/06/2011 vide Circular No. 11/2011-Customs dated: 24.02.2011) as a one-time measure and it was also clarified that only those Bills of Entries will be allowed manual processing wherein the duty involved is equal to or less than the balance amount in the re-credited scrip;
- It was also advised that re-credit amount of CVD refund should be used for payment of BCD and CVD only and not for 4% CVD so as to avoid cascading of subsequent re-credit of 4% CVD in the relevant Scrips. Further, in the interest of ensuring expeditious grant of refund of 4% CVD in cash, the importers are advised to make the initial payment of 4% CVD in cash.
2.0. GENERAL REFUND PROCEDURES:
The Board(CBEC) vide the following Circulars have sought to streamline the receipt, processing and disposal of customs duty refund claims IN GENERAL, WHICH IS EQUALLY APPLICABLE TO THE 4 % ADDITIONAL CUSTOMS DUTY REFUND. viz.,
- Circular No. 02/2007 (Cus) dated 02.07.2007
- Circular No. 07/2008 (Cus) dated 28.05.2008
- Circular No.22/2008 (Cus) dated 19.12.2008
Wherein the key guidelines pertains to:-
- System for receipt and acknowledging of all customs duty refund applications;
- Processing of refund applications and their disposal;
- Issue of cheques;
- Audit systems;
- CVC’s Instructions about transparency and disclosure about refund claim status;
- System of maintaining online database on Customs duty refunds;
- Monitoring mechanism;
- Unjust enrichment;
- Procedure relating to sanction and pre-audit of refund claims.
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CP: Mr. Ravi Jha