Dear Professionals,
We are happy to tell you that our article "Happy Intermission in 'SAD'
Movie" has been published on the leading website on taxation
Taxindiaonline.com. The response of our readers has encouraged us to
prepare this piece on the topic of Refund claim of Special Additional
Duty (4%) granted to the importers under Notification No. 102/2007-
Cus. You all can access the Article on the following link:
http://www.taxindiaonline.com/RC2/inside2.php3?filename=bnews_detail.php3&newsid=11200#
For the convenience of readers of this group, we are enclosing
hereunder our Article:
HAPPY INTERMISSION IN 'SAD' MOVIE
Prepared By: -
CA. Pradeep Jain
CA. Preeti Parihar
Sukhvinder Kaur, LLB(FYIC)
Introduction: -
The importer-dealers are over the moon these days. Their SAD-ness is
going to turn into happiness. Government granted exemption to the
importers from Special Additional Duty which is levied @ 4% under
Section 3(5) of the Customs Tariff Act, 1975 by way of refund. But due
to a no. of procedural formalities and slackness at the departmental
end, 80% of the claims were reviewed as pending at the major custom
houses as on 31.3.2010. This induced the Board to issue a Circular for
fixing a time limit for granting the refund of SAD. This critique is
about the happy intermission of the SAD refund movie.
History behind refund:-
The refund is available to dealers only who pay VAT on his sale.
Actually, this levy was in lieu of sales tax. The local manufacturer
pleaded that they have to pay sales tax on sale to Indian customer but
on import, there is no such tax for importer. As such, it is cheaper
to import. So, the Government introduced this special additional
custom duty. The Cenvat credit of the same was allowed to
manufacturers and it can be adjusted for payment of Excise duty. But
the dealer importers have to bear it and it became part of their cost.
But while trading the goods, they have to pay sales tax again. They
pleaded for the waiver if they are paying sales tax on their sale. The
Government agreed to it and said that they will get exemption by way
of refund. If they have not passed on Cenvat of such duty on his sale
then he can claim refund. As such, this scheme of refund was
formulated.
Utility of such levy:-
Further, in the opinion of the authors of this article, the goods are
normally imported by manufacturers or dealers. A consumer rarely
imports directly. The manufacturer gets the Cenvat credit of such duty
and the dealer either pass on the credit to manufacturers or he gets
this SAD refund. Then what is need of such levy? Everyone who is
paying it, getting the benefit of the same.
Notification granting refund of Special Additional duty: -
Notification No. 102/2007-Cus, dated 14.09.2007 granted the exemption
by way of refund of Special Additional duty (SAD) to the importer/
dealer of imported goods. The importer was to pay the duties at the
time of import of goods and later claim the refund of 4% SAD from the
Department.
The refund was subject to following conditions as prescribed in the
said Notification:-
- Declaration regarding non-passing of Cenvat of SAD: - The dealer,
while issuing the sale invoice, shall indicate on the invoice that
Cenvat credit in respect of SAD is not admissible.
- No unjust enrichment: - The importer could not pass on the incidence
of duty to the buyers.
- Payment of VAT/CST: - The importer was required to pay the
appropriate CST/VAT on the sale of imported goods on which he has paid
SAD.
- Time Limit for filing refund: - The refund claim is to be filed
within one year from the date on which SAD has been paid by the
importer.
- Documents required to be filed with the refund claim: - In the
Notification, it was provided that the claimant will have to attach
the following documents: -
• Document evidencing payment of the said additional duty;
• Invoices of sale of the imported goods in respect of which refund of
the said additional duty is claimed;
• 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.
Documents to be filed with the Refund: -
The board circular prescribed minimum documents for the refund but the
field formalities are real players and they have asked a number of
documents from the poor dealer. With the refund claim of 4% SAD, the
importer was required to file a lot of documents to satisfy the
Department that they have complied with the conditions prescribed in
the Notifications.
Following documents were being insisted upon by the Department to be
attached by the claimant: -
(i) Original TR-6 Challan (Triplicate Copy)
(ii) Duplicate Bill of Entry (Importer's Original Copy).
(iii) All Original Sales Invoices along with Summary of Sales Invoices
of imported goods of all Bills of Entry sold from various location/
branch of the importer containing Invoices No. & dated and amount of
ST/VAT paid on the imported goods for which Refund is claimed
(Annexure – B)
(iv) Self Certified Copy of VAT Return
(v) Self Certified Copy of VAT Challan Paid of the respective month.
(vi) Sales Tax return and receipt along with 201A form
(vii) Declaration appointing Chartered Accountant for preparation of
Annual Financial Accounts for Year------
(viii) Self Declaration regarding not passing the duty incidence of 4%
(SAD) to the buyers of the imported goods (Annexure – C).
(ix) Self certified copy of Sales Register
(x) Self certified copy of Purchase and Sales
(xi) Balance sheet containing details for the particular (SAD)
shipping bills. (Note: the same has to be certified by C.A)
(xii) Receivable Accounts for SAD (Note: the same has to be certified
by C.A)
(xiii) Refund Calculation Worksheet with Declaration (Annexure- A)
As such, there is a long list of documents to be annexed with the
refund claim. Department was insisting on furnishing of all these
documents/certificates alongwith the refund claim. This made the
filing of refund claim of SAD a very cumbersome process. Even after
filing of all these documents, the Department was not keenly
sanctioning the refund claim.
Circular No. 6/2008-Cus, dated 28.04.2008: -
The trade and commerce associations represented against the same. The
board has adhere to their demands and issued Circular No. 6/2008-Cus,
dated 28.04.2008 providing the procedure to be adopted by the field
formations to settle expeditiously refund claims of 4% SAD filed by
importers under the Notification No. 102/2007-Cus. In this circular,
the Board had directed that the field formations will ensure the
disposal of refund claims within a period of 3 months from the date of
receipt.
The bulk of documents to be filed with the refund claim of SAD as
mentioned above were also prescribed to be furnished in this
Circular.
However, even with detailed instructions the refund claims were not
being sanctioned speedily. Another aspect which was helping in the
delay was that no interest was payable in case of delay in sanctioning
of the refund claim. This was also prescribed in the Circular No.
6/2008-Cus.
Issuance of Circular for speedy sanctioning of refund of SAD: -
During the process of review at the major custom offices, it was
noticed that around 80% of the claims were pending with the custom
department. It was also noted that many refunds were being denied on
one pretext or the other by the Department. On one hand they had paid
the SAD at the time of import and had not passed on the incidence of
this duty and on the other hand they had paid the VAT. Due to this,
the delay and the denial of refund claims were causing a great
hardship to the Trade and Industry. This induced the Board to issue a
Circular clarifying certain issues to speed up the process of
disbursing the refund claims. Circular No. 18/2010-Cus, dated 18/2010-
Cus. has been issued for clearance of pending 4% SAD refund claims.
For the Accredited Clients in terms of Circular No.42/2005-Customs
dated 24.11.2005 which were registered with the Customs, it was
provided that refund claim should be sanctioned in full on preliminary
scrutiny of 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
invoices of sale and also to the effect that the burden of 4% CVD has
not been passed on by the importer to the buyer.
Thus, now only a few documents are required for sanctioning of the
refund claim of SAD.
Another step taken was to do away with the procedure for pre-audit for
ACP clients. And it has also been provided that the detailed scrutiny
should be done only at the post-audit stage.
Further, the Board has provided that the refund claims should be
sanctioned within maximum time period of 30 days.
Another step taken was that the sales invoices were prescribed to be
filed only in electronic form (CD or other media) and submission of
paper documents was done away with.
An option was given to the claimant to accept the payment of refund of
4% SAD through RTGS (Real Time Gross Settlement) or NEFT (National
Electronics Funds Transfer) System. This has been done to enable
timely payment of refund amount. The Board has also prescribed the
form in Annexure-I for necessary authorisation for payment of refund
directly in the Bank Account of the claimant.
Further, it has been provided that for examining the unjust enrichment
aspect, the audited Balance sheet and Profit and Loss Account (PLA)
will not be insisted upon. Thus, the claimant is not required to
submit the said documents. With regard to unjust enrichment aspect,
the certificate from Chartered Accountant for the purpose of
satisfying the condition that the burden of 4% CVD has not been passed
on by the importer to any other person as well as the self-declaration
to the effect that he has not passed on the incidence of 4% CVD to any
other person, have been provided to be sufficient documents.
The Board has also provided that only the following documents will be
required to be filed alongwith the refund claim by the importer: -
1. Document evidencing payment of the Special Additional Duty (SAD).
2. Invoices of sale of the imported goods in respect of which refund
of the said SAD is claimed.
3. 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.
4. Certificate from a statutory auditor / CA who certifies the final
accounts in respect of correlation of VAT payment, payment of 4% SAD
amount and unjust enrichment as prescribed in Board's circular No.
6/2008-Customs dated 28.4.2008 and 16/2008-Customs dated 13.10.2008.
5. Copy of the Consignment Sale Agreement. (in case of sale through
consignment agents / stockists).
6. Self-declaration / Affidavit (for e.g. in case of submission of
invoice in soft form in lieu of paper documents, in case of
fulfillment of the doctrine of unjust enrichment to the effect that
the applicant has not passed on the incidence of 4% SAD to any other
person).
7. Any other document considered necessary in support of the claim.
Not only this, but the Board has also directed that Commissioner of
Customs shall personally monitor all cases of 4% CVD refund claims
pending for more than 30 days so as to ensure that these are disposed
of within the overall time limit of three months.
Before parting: -
The Board Circular No. 18/2010-Cus, is a welcome step. The Board has
taken notice of the difficulties faced by the importers claiming
refund of 4% SAD and have provided for steps that will ensure speedy
disposal of refund claims. Also, Board has prescribed fewer documents
to be filed alongwith the refund claim. This will reduce the burden of
the importer and will help him in filing refund claim with lesser
difficulty.
In the end, it is said that although the Board has issued Circular for
speedy sanctioning of the refund claim but this goal can only be
achieved if the provisions of the Circular are implemented in spirit
by the Departmental officers. But expecting the full implementation of
the Board Circular is wishful thinking as they are not going to do so
and the only sufferer will be the importer. So, we can not say it is
happy ending. Seeing the behavior of field formalities, we can say
that it is intermission only, PICTURE TO ABHI BAKI HAI DOST.
********
Kind Regards,
CA PRADEEP JAIN, ( B.Com Hons.,F. C.A.)
Address:
"Sugyan"
H - 29, Shastri Nagar, Jodhpur (Raj.)
Mobile : +91-9928111481
Phone No. : 0291-2439496, 2611496, 3258496
Fax No. : 0291-2439496
--------------------------------------------------------------
Branch Office: -
Address:
1008, 10th Floor, Sukh Sagar Complex,
Usmanpura, Ashram Road,
Ahmedabad-380013
Phone No. : 079-32999496, 27560043
Mobile No. : 093777659496, 09377649496
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