Procedure relating to sanction and pre-audit/post audit of refund/rebate claims - Central Excise - 809/06/2005

CIR NO.809/06/2005-CX, DT. 01/03/2005 Procedure relating to sanction and pre-audit/post audit of refund/rebate claims I am directed to invite your kind attention to Board's Circulars No. 9/83-CX 6 dated 20.6.1983 and No. 33/90-CX 8 dated 31.09.1990 vide which procedure and monetary limits for pre-audit/post audit of refund and rebate claims were prescribed. Subsequently, Board vide Circular No. 627/18/2002-CX dated 15th march, 2002 had revised the monetary limits of the claims below which selective post-audit could take place. 2. Consequent to that, Board has been receiving reports of different practices being followed in field formations regarding the sanction and pre-audit and post-audit of refund/ rebate claims. In certain Commissionerates, Order-in-Original (O-in-O) is issued in all refund/ rebate claims, where as in others, these are not issued for the rebate claims if sanctioned in full. Similarly, the pre- audit and post audit of refund/rebate claims is carried out with the concurrence/ approval of different levels of authorities in different Commissionerates. Again, there are different practices regarding refund/ rebate claims being subjected to review under section 35E of Central Excise Act, 1944. 3. The matter has been examined by Board with the twin purpose of ensuring uniformity in procedure and to enable effective monitoring of sanction of refund/rebate claims. Accordingly, it has been decided that all refund /rebate sanction orders must necessarily be issued as an Order-in-Original. A separate series with suffix 'R' for numbering of Orders-in-Original issued for sanction of refund/rebate claims may be used. However, in terms of risk to revenue, a monetary limit of Rs. 50,000/- has been fixed below which O-in-O may not be issued if the rebate is sanctioned in full. This shall also enable the department to focus on the cases where amount sanctioned is higher than Rs. 50,000/-. 4. Accordingly, in supersession of earlier instructions, Board has decided that: (i) All refund/rebate claims involving an amount of Rs. 5 lakhs or above should be subjected to pre-audit at the level of jurisdictional Commissioner. In such cases, a suitable Order-in-Original shall be passed by Deputy/Assistant Commissioner of Central Excise. Since the claim is pre-audited with the concurrence of Commissioner, the usual review proceedings under section 35E may not be necessary in such case. (ii) For the refund/rebate claims involving an amount above Rs. 50,000/- but below Rs. 5 lakhs, Orders-in-Original should be issued by Deputy/Assistant Commissioner. These O-I-Os should be subjected to compulsory post-audit at the level of Additional/Joint Commissioner (Audit). The Orders-in-Original shall also be subjected to review under section 35E. (iii) In cases of refund/rebate claims involving an amount upto Rs. 50,000/-, no Order-in-Original need be passed if the claim is sanctioned in full. However, in case the sanctioned amount is less than the claimed amount, O-in-O should invariably be issued. These sanction orders may be post-audited on the basis of the random selection by Deputy/Assistant Commissioner (Audit) in such a way that at least 25 percent. of the claims are post-audited. As Orders-in-Originals are not being passed in such smaller cases (except when not sanctioned in full), it may not be necessary to subject these sanction orders to review under section 35E. 5. All refund/rebate claim papers should be sent by the Divisional Deputy/Assistant Commissioner to the Commissionerate Headquarters {Additional/Joint Commissioner (Audit)} for post-audit within a week of payment thereof irrespective of the amount involved. Jurisdictional Commissioners of Central Excise may evolve a suitable mechanism to ensure that the refund/rebate claims papers (including those where O-in-O is not being issued for amount below Rs. 50,000/-) are received in Commissionerate Headquarters for post- audit as per prescribed norms stated in Sl. Nos (ii) and (iii) of Para 4 above. 6. For the purpose of post-audit/pre-audit of refund/ rebate claims, a cell comprising of Deputy/Assistant Commissioner (Audit), one Superintendent and Inspectors as required, under the overall supervision of Additional/Joint Commissioner (Audit) may be constituted. The cell should complete the post-audit before the expiry of three months from the date of payment. The cell shall also be responsible for maintaining the record of the Orders-in-Original issued by various rebate/ refund sanctioning authorities. The cell would also monitor and point out any missing Orders-in- Original by tracking the serial number and other relevant details. 7. Receipt of the Circular may please be acknowledged. 8. Hindi version will follow. Yours faithfully, (Vijay Mohan Jain ) Under Secretary /CX-8 F.No. 268 /25/2002-CX 8