Refund of Excise Duty - Central Excise Practice Manual (OLD) - Central Excise

REFUND OF DUTY Refund of any duty of excise is governed by section 11B of CEA. "Refund" includes rebate of duty of excise on excisable goods exported out of India or on excisable materials used in the manufacture of goods which are exported out of India. Procedure for refund claim (I). Procedure for filing application of refund claim - Refund application should be filed in the prescribed Form (earlier Form-R) in duplicate with AC/DC of central excise in charge of factory of manufacturer, with a copy to the Range Superintendent. Claim filed with Superintendent will not be treated as filing of refund; refund can be filled only to AC/ DC. The application should be signed by claimant and pre- receipted with revenue stamp on original copy, wherever necessary. Refund claim should be lodged within one year from 'Relevant Date'. Relevant date means - · In case of exports - - If goods are exported by Ship or aircraft, the date on which they leaves India. - If the goods are exported by land, the date on which the goods leave Indian frontier. - If export is by post, the date dispatch of goods by post office to a place outside India. · In case of goods returned for being remade, refined, reconditioned, or any other similar process, in any factory, the date of entry into the factory for the aforesaid purposes. · In the case of goods to which banderols are required to be affixed if removed for home consumption but not so required when exported outside India, if returned to a factory after having been removed from such factory for export out of India, the date of entry into the factory. · In case where a manufacturer is required to pay a sum on the fixed rate for a certain period in full discharge of his duty liability such as in compounded levy scheme, if after the manufacturer has made the payment on the basis of such rate for any period but before the expiry of that period such rate is reduced, the date on which notification for reduction of rate is published. · In the case of a person, other than the manufacturer, the date of purchase of the goods by such person. · In case where duty is exempted by a special order under section 5A(2), the date of issue of such order. · In case where duty is paid on provisional basis, the date of adjustment of duty after final assessment of duty. · In case where the duty becomes refundable as a consequence of judgment, decree, order or direction of appellate authority, Appellate Tribunal or any court, the date of such judgment, decree, order or direction. · In any other case, the date of payment of duty. The provisions of time limit are mandatory and excise/ customs cannot grant a refund which is filed beyond due date, thus even if eligibility of exemption is known later such as in the case of annual turnover, then also it was held that limitation of one year has to be counted strictly and not within one year from the close of financial year when annual turnover is known [CCE Vs Rallis India 2002(142) ELT]. However, there are some cases where time limit for filing refund claim is not applicable (as decided in case laws) and these are: - · In case when duty is paid under protest by the manufacturer. If duty is paid under protest by purchaser time limit is applicable. · In case when order is decided by the Appellate in favour of assessee. · In case where appeal is filed, appeal itself is treated as payment of duty under protest. Thus refund claim after expiry of one year from relevant date does not become time barred as refund will be given on the basis of appeal. · In case where duty is deposited for provisional release of goods. · Time limit does not apply to refund of penalty. Refund claim should be lodged by either- · By manufacturer, if he has not passed on the burden to buyer, or · By buyer, if he has not passed on its incidence to another person, or · By any other person, who has been informed by the Department that a refund is due to him. Application for refund claim should be accompanied with relevant documents supporting his claim and also the copies of documents or records supporting his declaration that he has not passed on the duty incidence. Following documents are required: - · Document through which duty was paid such as original TR-6 challan, PLA, etc. other documents such as invoices etc. · Proof that duty burden has been borne by the assessee and not passed. · Statement or application giving reasons why refund is being claimed. If claim is filed without requisite documents, it will not be allowed. But in case if Department itself is responsible for non-availability of required documents, the claim may be admitted so that the claim does not become time-barred. Claim for refund of less than Rs.100 shall not be entertained. For rebate, the minimum should be Rs.500 per claim. (II). Procedure followed by Department on receipt of application - The Range officer will scrutinize the claim and complete it within 2 weeks from the date of receipt of claim. The range officer will send the report of scrutiny to the Divisional DC/ AC of Central excise where the report will be scrutinized again in consultation with range superintendent and check that the refund application is complete and is accompanied with all the requisite documents. In case of any deficiency, the same should be intimated to applicant within 15 days of receipt. In the divisional office, final processing of refund claims should be completed including the verification of the fact whether the duty incidence has been passed on the buyer or not, in case the refund claim is filled by the manufacturer. Thus, e.g. of proof that burden of duty incidence has not been passed are, if amount is shown as claim receivable' in balance sheet or affidavit is given. Where it is proved that the duty incidence has been passed on, the duty refund if admissible will be sanctioned but will be ordered to be credited to the 'Consumer Welfare Fund'. Moreover refund claim cannot be filed by manufacturer on behalf/ authorization of the buyer, it has to be filed by the person who had bear the burden of duty liability. After verification, AC/ DC will pass a sanction order for refund claim. · All refund claims or sanction orders should be issued as 'Order-in-Original' (O-I-O). A separate series with suffix 'R' for numbering of O-I-O issued for sanction refund should be used. These orders will be subjected to audit. See the table below: Amount of refund allowed Type of audit and authority Authority issuing O-I-O Review u/s 35E Rs.5 lakhs or above Pre-audited at the level of jurisdictional commissioner AC/ DC of central excise Not necessarily required From Rs.50000 to Rs.5 lakhs Compulsory Post-audited at the level of Additional/ Joint Commissioner (Audit) AC/ DC Mandatory required Upto Rs.50000 Post audited O-I-O need not be passed Not required Less than Rs.50000 Post audited by DC/ AC AC/ DC Required · All refund/ rebate claim papers should be sent by the DC/ AC to the Commissionerate Headquarters for post-audit within a week of payment, irrespective of the amount involved. · For the purpose of pre-audit/ post-audit of refund claims a cell should be constituted, comprising of DC/ AC (Audit), one Superintendent and inspectors as required under the supervision of Additional/ Joint Commissioner (Audit). · The cell should complete the post-audit within three months from the date of payment. · The cell will be responsible for maintaining the records of O-I-O. They would also require to devise appropriate control to ensure that the refund claims are expeditiously sanctioned within the stipulated time limit. When the claim is sanctioned, the amount will be paid to applicant by cheque. The AC/ DC will sign the cheque book and entry in cash book. Cheque should be issued either in person or by registered post. Cases where refund is applicable [as per section 11B(2)] According to section 11B(2), the AC on being satisfied that excise duty is refundable , shall grant refund to the applicant in the following cases: - 1. Rebate of duty of excise on excisable goods exported out of India or on excisable materials used in the manufacture of goods which are exported out of India. 2. Unspent advance deposits lying in balance in the applicant's account current maintained with the Commissioner of Central Excise, 3. Refund of credit of duty paid on excisable goods used as inputs in accordance with the rules made, or any notification issued, under this Act, 4. The duty of excise paid by the manufacturer, if he had not passed on the incidence of such duty to any other person, 5. The duty of excise borne by the buyer, if he had not passed on the incidence of such duty to any other person, 6. The duty of excise borne by any other such class of applicants as the Central Government may, by notification in the Official Gazette, specify. Other cases where refund is applicable are as follows: 1. Where an application for refund has been made before the commencement of the Central Excises Law, 1991 such application shall be deemed to have been made under section 11B(2). 2. When the assessee is unable to avail benefit because of inaction of the Department, and the court decides the case in favour of assessee, even if exemption notification ceases, refund will be given as there is no law that a mistake once committed can never be rectified. 3. If assessee pays duty even when exemption notification was available, he can file refund claim later. 4. Section 11B applies to refund of Cenvat credit also. Cases where provisions of section 11D are applicable. · As per section 11D(1), every person who is liable to pay duty and has collected any amount from the buyer in excess of the duty assessed representing as duty of excise, must deposit that amount to the credit of Central Government. · Where any amount becomes payable u/s 11D(1) and has not been paid, the officer may serve notice on him to pay the amount so determined. · After assessment is completed, where any surplus is left, the amount will either be credited to the fund or as the case may be refunded to the person who has borne the incidence i.e. if he proves that burden of incidence has not been passed. · Provisions of section 11D(1) applies only to the manufacturer/ producer, it does not applies to dealers, as provisions says 'person who is liable to pay duty'. · Provisions of section 11D(1) is applicable when excess amount is specifically shown in invoice as 'Excise duty'. Thus mere fact that price is inclusive of excise duty is not sufficient to attract the provisions of section 11D. For e.g. If on provisional assessment, differential duty becomes payable which was not required or in case of filing of appeal certain amount is pre-deposited and if these duties are not shown in invoices as excise duty, provisions of section 11D will not apply. If excess amount becomes payable u/s 11D, interest will also be payable as per section 11DD. Appeal should be filed and not refund claim in case of adjudication order is passed If an order is appealable, appeal should be filed and not a refund claim. For e.g. in case of adjudication order appeal should be filed and not mere a refund. After appeal is decided he can file a refund claim. However, if duty is paid by assessee by mistake, there is no adjudication order and hence he can file only a refund claim. In case of doubt, it is advisable to file both appeal as well as refund claim, till law on the issue is fully settled. Doctrine of unjust enrichment Where the manufacturer had passed on the burden of excise duty on to the buyer, it will not be equitable to refund the duty to the manufacturer, as he will get double benefit. This is called 'unjust enrichment'. In such cases, the refund due should be transferred to a 'Consumer Welfare Fund' instead of paying it to the manufacturer. Provisions of unjust enrichment are applicable in the following situations: - · Applies in cases of refund of excise duty under section 11B of CEA. It does not apply to refund in other cases. · Duty paid under protest. · Duty paid on provisional basis. · On captive consumption of inputs and capital goods. · It will be applicable even in the writ petitions. Provisions of unjust enrichment are not applicable in the following situations: - · Rebate of excisable goods exported and materials used in manufacture of goods exported out of India, if he had exported on payment of duty and w.r.t. to material he has not availed Cenvat credit. · Refund of duty paid on inputs. · Refund of Export duty. · Duty drawback. · Refund of redemption fine and penalty. · Refund of interest. · In case excise department encashes bank guarantee, it does not amount to payment of duty, therefore unjust enrichment will not apply. · Refund of amount paid (which is not a duty) under Cenvat rules. · Refund of excess anti-dumping duty. · In case of issue of debit notes by customers that the amount was not paid by them, presumption of passing of full incidence of duty does not arise. · Duty paid under compounded levy scheme at fixed rate and when there is no change in selling price.