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REFUND - CBEC Manual (OLD) - Central ExciseExtract CHAPTER 9 REFUND 1. Introduction 1.1 Refund of any duty of excise is governed by Section 11B of the Central Excise Act, 1944. By definition, refund includes rebate of duty paid on goods exported out of India or on materials used in the manufacture of goods exported out of India. A separate Chapter (No. 8) deals with rebate of Central Excise Duty. The refund claim can be filed within one year from the relevant date in the specified form by an assessee or even a person who has borne the duty incidence, to the Deputy/Assistant Commissioner of Central Excise having jurisdiction over the factory of manufacture. The limitation of one year does not apply where any duty has been paid under protest. 1.2 The "relevant date" has been defined in section 11B and refund of duty paid can be sought provided the manufacturer has not passed on the burden of duty In case the burden of duty has been passed on, the refund can be claimed by the person who has actually paid the duty otherwise the amount is liable to be deposited in the Consumer Welfare Fund created by the statute. 1.3 The Central Excise Act also provides for payment of interest on payment of refund. As per Section 11BB, if any duty ordered to be under Section 11B has not been refunded within three months from the date of receipt of the refund application in the prescribed manner and form along with the supporting documentary evidence as laid down in the relevant rules, interest at the rate notified by the Central Government shall have to be-paid on such duty from the date immediately after the expiry of three months from the date of receipt of application till the date of refund of such duty. 2. Presentation of refund claim 2.1 Any person, who deems himself entitled to a refund of any duties or other dues, or has been informed by the department that a refund is due to him shall present a claim in proper Form, along with all the relevant document supporting his claim and also the copies of documents/records supporting his declaration that he has not passed on the duty incidence. 2.2 The claim should be filed with the Deputy/Assistant Commissioner of Central Excise with a copy to the Range Officer. 2.3 The claim is to be presented in duplicate and is to be duly signed by e claimant or by duly authorised person on his behalf and shall be prereceipt (with revenue stamp on original copy, where necessary). 2.4 It may not be possible to scrutinise the claim without the accompanying documents and decide about its admissibility. If the claim is filed without requisite documents, it may lead to delay in sanction of the refund. Moreover, the claimant of refund is entitled for interest in case refund is not given within three months of the filing of claim. Consequently, submission of und claim without supporting documents will not be allowed. Even if claim is d by post or similar mode, the claim should be rejected or returned with Query Memo (depending upon the nature/importance of document not filed). The claim shall be taken as filed only when all relevant documents are available. In case any document is not available for which the Central Excise or Customs Department is solely accountable, the claim may be received so that the claimant is not hit by limitation period. 3. Scrutiny of refund claim and sanction 3.1 The Range Officer will complete the scrutiny of the papers within 2 weeks from the date of receipt of the claim in the Range Office and send a report of scrutiny to the Divisional Deputy/Assistant Commissioner of Central Excise. 3.2 The Divisional Office will scrutinise the claim, in consultation with Range, where necessary and check that the refund application is complete and is covered by all the requisite documents. This should be done at the time of receipt of refund claim and in case of any deficiency, the same should be pointed out to the applicant with a copy to the Range Officer within 15 days of receipt. 3.3 In the Divisional Offices, final processing of refund claims after the receipt of Range Officer's report should be completed including the verification of the fact whether the assessee has passed on the duty incidence to their buyer (in cases where the refund claim is filed by a manufacturer or owner of warehoused goods). The types of cases to which this provision will not be attracted are already specified in section 11B itself. Where the duty incidence has been passed on, the duty refund, if otherwise admissible, will be sanctioned but will be ordered to be credited to the Consumer Welfare Fund. The burden of proving that the duty incidence has not been passed on is on the claimant and the latter may be required to submit sufficient documentary proof for this purpose. It is clarified that the question of unjust enrichment has to be looked into on case by case basis. There cannot be a general instruction indicating the documents and/or record, which the claimant should produce as a proof that he has not passed on the duty incidence to any other person. 3.4 Claim for refund of less than Rs.100 shall not entertained in respect of all excisable commodities. For rebate, the minimum should be Rs. 500/- per claim as specified in the Notification No. 40/2001-C.E. (N.T.), dated 26.6. 2001. 4. Unjust enrichment 4.1 Text of the legal provisions relating to unjust enrichment {vide Section 11(B) (2)} is reproduced below (2) "If, on receipt of any such application, the Assistant Commissioner of Central Excise or Deputy Commissioner of Central Excise is satisfied that the whole or any part of the duty of excise paid by the applicant is refundable, he may make an order accordingly and the amount so determined shall be credited to the Fund: Provided that the amount of duty of excise as determined by the Assistant Commissioner of Central Excise or Deputy Commissioner of Central Excise under the foregoing provisions of this sub-section shall, instead of being credited to the Fund, be paid to the applicant, if such amount is relatable to (a) 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; b) unspent advance deposits lying in balance in the applicant's account current maintained with the Commissioner of Central Excise; c) refund of credit of duty paid on excisable goods used as input in accordance with the rules made, or any notification issued, under this Act; (d) the duty of excise paid by the manufacturer, if he had not passed on the incidence of such duty to any other person; (e) the duty of excise borne by the buyer, if he had not passed on the incidence of such duty to any other person; f) the duty of excise borne by any other such class of applicants as the Central Government may, by notification in the Official Gazette, specify: Provided further that no notification under clause (f) of the first proviso shall be issued unless in the opinion of the Central Government the incidence of duty has not been passed on by the persons concerned to any other person. 3) Notwithstanding anything to the contrary contained in any judgement, decree, order or direction of the Appellate Tribunal or any Court or in mi r provision of this Act or the rules made thereunder or any other law for the time being in force, no refund shall be made expect as provided in sub-section (2). 4) Every notification under clause (f) of the first proviso to sub-section (2)shall be laid before each House of Parliament, if it is sitting, as soon as may be issue of the notification, and, if it is not sitting, within seven days of its re-assembly, and the Central Government shall seek the approval of parliament to the notification by a resolution moved within a period of fifteen days beginning with the day on which the notification is so laid before the House of the people and if Parliament makes any modification should cease to have effect, the modification in the notification or directs that the notification shall thereafter have effect only in such modified form or be of no effect, as the case may be, but without prejudice to the validity of anything previously done thereunder. (5) For the removal of doubts, it is hereby declared that any notification t under clause (f) of the first proviso to sub-section (2), including any such notification approved or modified under sub-section(4), may be rescinded by the Central Government at any time by notification in the Official Gazette. 4.2 The Supreme Court in the case of M/s. Mafatlal Industries Ltd. v. Union of India (per majority of 9 Judges Bench) in their judgment dt. 19.12.1996 [1997 (89) E.L.T. 247 (S.C.)] has held: (i) If the person claiming the refund has passed on the burden of duty to another and has not really suffered any loss or prejudice, there is no question of reimbursing him and he cannot successfully sustain an action for restitution, based on Section 72 of Indian Contract Act. (Para 112) (ii) The obligation to prove that duty has not been passed on to another person is always there as a precondition to claim of refund. It cannot also be said that by giving retrospective effect to Section 11B, any vested or substantive rights are being taken away. The manufacturer has already collected the duty from his purchaser and has thus reimbursed itself. A manufacturer had no vested legal right to refund even when he had passed on the burden of duty to others. No law conferred such a right in him not Article 265 nor Section 11B. It was only on account of an incorrect view of law taken in Kanthaiyalal and that cannot be treated as a vested legal right. Correction of judicial error does not amount to deprivation of vested/substantive rights, even though a person may be deprived of an unwarranted advantage he had under the over-ruled decision. In cases, where the burden is not passed on, there is no prejudice; he can always get the refund. (Para 88). (iii) All claims for refund including those arising as a consequence of appellate/revisionary orders and/or as a consequence of orders made by High Court/Supreme Court (except where the provision under which the duty levied is declared as unconstitutional) have necessarily to be filed under Section 11B, and considered and disposed of only under and in accordance with the relevant provisions relating to refund as existing from time to time. No order of refund is to be made unless the claimant establishes that he has not passed on the burden of duty to others. In this regard sub section (3) of the amended Section 11B is emphatic. No exception can be made for the refund claim arising as a result of decision in appeal/reference/writ petitions. (iv) The jurisdiction of a Civil Court is expressly barred vide Sub Section 5 of Section 11B prior to its amendment in 1991 and sub Section (3) of Section 11B as amended in 1991. (para68). However, where the levy is unconstitutional outside the provisions of the Act or nor contemplated by the Act, the jurisdiction of Civil Court is not barred. (Para 135,137) (v) Any recoveries or refunds consequent upon the adjustment under sub-rule (5) of Rule 9B will not be governed by Section 11A or Section 11B, as the case may be. However, if the final orders passed under sub-rule (5) are appealed against or questioned in a writ petition or suit, as the case may be, assuming that such a writ or suit is entertained and is allowed/decreed then any refund claim arising as a consequence of the decision in such appeal or such other proceedings, as the case may be, would be governed by Section 11B. It is also made clear that if an independent refund claim is filed after the final decision under Rule 9B(5) re-agitating the issues already decided under Rule 9B assuming that such a refund claim lies and is allowed, it would obviously be governed by Section 11B. (Para 95). 4.3 The Hon'ble Supreme Court in the case of Union of India and others v. Solar Pesticides Pvt. Ltd. vide order dt. 4.2.2000 (Civil Appeal No. 921 of 1992) has held that the principle of unjust enrichment would be applicable in respect of cases of refund of duty paid on imported raw materials even if captively consumed in the manufacture of a final product. The Hon'ble Supreme Court has held that even for captive consumption of goods, if certain duties have been paid, whose refund is claimed, the claimant will have to establish that the incidence of duty has not been passed on, directly or indirectly, to any other person. 5. Disposal of claims where application id pending at appellate level 5.1 Cases where it is considered advisable to contest an" adverse" High court judgment, inter alia, involving substantial refund or release of any e goods by filing Special Leave Petition (SLP) including Stay in the Hon'ble Supreme Court. (a) In such cases most speedy action should be taken by concerned Commissioner to submit considered comments, grounds for appeal and all relevant papers to Board for obtaining Law Ministry's advice and if agreed filing SLP Stay Petition against the order of the High Court. (Where appropriate considering the stakes and urgency of the matter conversant officer dealing with the case be also deputed to help expedite the aforesaid action) (b) In terms of the present practice in the Supreme Court Registry, the SLPs/Stay Applications filed in the Supreme Court are listed for hearing in their own turn according to the dates of their filing. However, in case of urgency, there is a procedure of mentioning before the bench headed by the Hon'ble the Chief Justice of India for ad interim stay till the stay application is heard and disposed of by the Supreme Court. For this purpose, the Central Agency Section has to be requested to file an application with the Registrar of the Supreme Court giving reasons justifying out of turn hearing of the stay application. In case the Registrar is satisfied about the urgency, the application is included in the "List of cases for urgent mentioning" and it is then possible to mention the case on the following day before the bench headed by the Chief Justice of India. In view of the aforesaid procedure, it may not be possible to move the Supreme Court for out of turn hearing of stay applications in every case in a routine way. The department has to justify the urgency and serious implications if the adverse order is not stayed. It may also not be always possible to get an application listed for early hearing. The Commissioners should, therefore, while ensuring submission of proposals for SLP/Stay on top priority basis also take steps simultaneously so that non-implementation of the High Court's Order without obtaining stay from the Supreme Court does not create complications. In such cases, therefore the following action is advised (i) Where a High Court has stipulated any time limit for implementation of its order, the Customs House/Central Excise Commissionerate apart from taking steps for filing SLP/Stay Petition before the deadline, as mentioned in para (a) above, should simultaneously file an application before the High Court intimating steps taken for filing SLP/Stay Petition before the Apex Court, and request be made for extension of time limit for implementation of the order till the department's Stay Application is heard or disposed of by the Hon'ble Supreme Court. If the High Court rejects the application, a copy of the application filed and the order of the High Court should be immediately faxed to the Board, so that even this could be produced to Supreme Court Registry, while seeking out of turn/urgent hearing for stay. (ii) Where no time limit is stipulated by the High Court for implementing its order, but the petitioner files a contempt petition/notice in the High Court, the same should be immediately faxed to the Board, for similar action as mentioned in (i) above for pressing for urgent hearing of our stay. It would be possible for the Board's office to file SLP/Stay Petition with relevant documents showing justification for urgency petition before the Registrar of the Supreme Court (for inclusion of department's application for out of turn hearing in the 'list of cases for urgent of monitoring'), and to get interim stay in time from the Supreme Court when we have a good case, only if Commissioners and the Legal Cells keep very strict personal watch for taking time bound speedy action suggested above. No unilateral decision should be taken by the Commissioners to release the goods/order refund in a case where it is decided in consultation with our Counsels in the field, and Law Ministry, to file SLP/Stay Application before the Apex Court against the order of the High Court and till this is pending decision before the Apex Court. The decision in such cases where there is any urgency stay of Apex Court is not forthcoming, should be taken only in consultation with the Board. 5.2 Cases where Civil Appeal (CA) is proposed against adverse decision of the CEGAT involving high refund and or release of seized/confiscated goods. The guidelines applicable to SLPs mentioned above should be followed mutatis mutandis even in such cases involving Civil Appeals/Stay Petitions. The relevant papers relating to Civil Appeals should be sent latest within 2 weeks of the receipt of CEGAT Order and active liaison should be kept with the concerned senior officer in the Board and even Central Agency Section till the Department's Stay/CA petitions is heard and decision given by the Apex Court. Where considered advisable, considering the stakes involved conversant officer to be deputed for briefing the Senior Counsels/Law Officer who may be moving for stay petition. 5.3 The cases where refund arises due to order of Commissioner (Appeals) or Commissioner of Central Excise/Customs and decision is taken to contest them before CEGAT. In such cases appeal/stay application should be filed expeditiously well before the expiry of stipulated period of three months (and not waiting for the last date of filing of appeal). However, no refund/rebate claim should be withheld on the ground that an appeal has been filed against the order giving the relief, unless stay order has been obtained. It would be the responsibility of the concerned Commissioner to obtain stay order expeditiously where the orders passed by Commissioner (Appeals) suffer from serious infirmities and it involves grant of heavy refunds. 5.4 Cases where refund arises due to order of a Central Excise Officer/Customs Officer subordinate to Commissioner of Central Excise/Customs and decision is taken to file appeal before Commissioner (Appeals) In such cases also, appeal/stay application should be filed expeditiously within the stipulated period (but without waiting for the last date of filing of appeal). However, no refund/rebate claim should be withheld on the ground that an appeal has been filed against the order giving the relief, unless stay order has been obtained. It would be the responsibility of the concerned Commissioner to move expeditiously and obtain stay order from Commissioner (Appeals), especially where the orders passed by such Central Excise Officer/Customs Officer suffer from serious infirmities and it involves grant of heavy refunds. 5.5 General In all types of cases mentioned above, processing of refund application should simultaneously start separately from the point of view of unjust enrichment provisions and accordingly the assessee/claimant should be asked to evidence to establish his claim that incidence of duties whose refund is claimed has been borne by him and that the same has not been passed on to Where the claimant is unable to furnish this evidence or otherwise is not entitle to refund, passing of appropriate orders on refund requested be c by competent authority irrespective of the outcome of SLP/Civil Appeals/Stay Petitions pending before Supreme Court or other appeals etc. before lower appellate authorities. In all other cases, not involving any dispute, refund applications should be processed on merits speedily and a decision taken within a period of three months from the date of application to avoid any interest liability- where refund is held admissible. 6. Refund of deposits made under Sec. 35 F of CEA 1944 and Section 129 E of Customs Act 1962 6.1 In such cases, Refund applications under Sec 11B (1) of CEA' 44 or under Sec. 27 (1) of Customs Act 1962 need not be insisted upon. A simple letter from the person who has made such deposit, requesting for return of the amount along with an attested xerox copy of order in appeal or CEGAT order consequent to which the deposit made becomes returnable and an attested Xerox copy of the Challan in Form TR6 evidencing the payment of the amount of such deposit, addressed to the concerned Assistant/Deputy Commissioner Central Excise or Customs, as the case may be, will suffice for the purpose. All pending refund applications already made under the relevant provisions of the Indirect Tax Enactments for return of such deposits and which are pending with the authorities will also be treated as simple letters asking for return of the deposits, and will be processed as such. Similarly, bank guarantees executed in lieu of cash deposits shall also be returned. 7. Payment of refund 7.1 Where the claim has been admitted whether in part or in full, and claimant is eligible for refund, the Deputy/Assistant Commissioner of Central Excise should ensure that payment is made to the party within 3 days of the order passed after due audit, if any. 7.2 All claims shall be paid to the applicant by a cheque on the authorised bank with which the sanctioning authority maintains account. 7.3 On receipt of sanctioning claims from the dealing hands, the cheque shall be written out by the cashier (or his assistant) and simultaneously an entry made in the cash book. The Deputy/Assistant Commissioner shall sign the cheque as well as the entry in the cashbook simultaneously. A receipt of the cheque should be obtained from the payee and placed on file. 7.4 After the cheque has been signed, it shall either be delivered to the claimant or his authorised representative personally when the next calls for it or sent to him by Registered Post 'Acknowledgement Due' at Government cost. 8. Pre Audit/Post Audit 8.1 Board has issued revised guidelines for following the procedure for sanction of refund/ rebate claims. (refer Circular No. 809-CX dated 1.3.2005). 8.2 Board has 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/-. 8.3 Board has further 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 Iakhs, Orders-in-Original should be issued by Deputy/Assistant Commissioner. These 0-1-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. 8.4 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 8.3 above. 8.5 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. 9. Monitoring and control for timely disposal of refunds 9.1 The Commissioner of Central Excise should devise appropriate control to ensure that the refund/rebate claims are expeditiously sanctioned within the time limit stipulated above. 10. Time bar Under Section 11B not applicable 10.1 The Hon'ble Supreme Court in Civil Appeal No.2178-79/2001 in e 01 CCE, Shillong v. Woodcrafts Products Ltd. has held in its judgment dated 9-4-2002 [2002 (143) E.L.T. 247 (SC)] that in case of consequential refund, bar under section 11A of Central Excise Act, 1944 will not be applicable r very of refunded amount if the issue is finally decided in favour of the department. 11. Refund of Amount earlier credited to Consumer Welfare Fund 11.1 The drawl of amount originally credited to Consumer Welfare usually takes time due to involvement of various agencies resulting in delay in grant of refund to the assessee and the Department has to pay interest delayed refunds. Accordingly, the matter was taken up with Principal Chief Controller of Accounts (CBEC). Pr. Chief Controller of Accounts (CBEC) has informed the Board that in - with the Chief Controller of Accounts, Ministry of Consumer Welfare and Public Distribution who maintains account of Consumer Welfare Fund, the procedure of processing refund claims relating to Consumer Welfare Fund has been strengthened for timely payment of the claims. A system of monitoring has been set in place to ensure timely payment of refund claim within a month of the application. Pr. Chief Controller of Accounts (CBEC)has also desired that in case, refunds are not effected within 45 days of request made to PAO,Chief Commissioners/Commissioners should take up the matter with a D.O. reference with full details. 12. Refund of Excise Duty to Diplomatic Missions 12.1 Board's instructions on this are, F.No. 45/7/56-CX (M).II dt. 24.7.1957 read with Circular No.1/MOTOR VEHICLES/70 dt.19.2.1970. One of the conditions mentioned in these circulars is that the refund claims from diplomatic missions should be entertained by the Central Excise officers only if they are filed within 3 months from the date of purchase of the motor vehicle. Claims filed beyond three months were not to be admitted without reference to the Ministry of Finance. After the recent amendment o Sec.11B of the Central Excise Act, 1944, in May 2000, the time limit for filing refund claims has been raised from six months to one year from the relevant date. It has been pointed out that this discrepancy between the time limit prescribed in the statute (1 year) and the time limit (3 months) mentioned in Board's instructions of 1957 and 1970, is creating confusion in the field. In the past, refunds on purchases by diplomatic missions were being granted, either as an ex-gratia payment, or on the basis of ad-hoc exemption orders. Being ex-gratia payment, the time limit for claiming refund was scribed through the above executive instructions and in a number of cases relaxations were also granted. Subsequently, from 1998, Ministry declined to re the time limit beyond that statutorily prescribed (then six months). Subsequently, when the provisions of section 5A(2) relating to ad-hoc exemptions were amended in 1999 to limit its coverage to goods for charitable purpose or of strategic or secret nature only, ad-hoc exemptions to diplomatic missions could no longer be given under section 5A(2). It was then decided to issue a general exemption notification to cover such cases. This was done for the first time by notification No. 44/99-C.E., dt 29.12.99. The relevant notification which presently allows exemption to goods supplied to diplomatic missions is notification No.3/2001-CE dt.1.3.2001 (Sl.No.250). This notification grants full exemption to all goods (and not merely motor vehicles) supplied for the official use of foreign diplomatic or consular missions in India. The exemption is subject to condition (45) of the notification which, inter-alia, requires production of a certificate from the Protocol Division of the Ministry of External Affairs and an undertaking from the diplomatic mission that they will produce, within a period of 3 months or such extended period, a certificate that the goods have been put to the specified use. There is also a condition that the said goods cannot be disposed of before the expiry of 3 years from the date of clearance of the goods. It may be noted that earlier, exemption was available (through executive instructions and ad-hoc exemption orders) to goods (including cars) meant both for official as well as personal use of the mission or its staff. The general exemption notification limits this benefit only to goods meant for the official use of the mission/consular office. There seems to be no justification, now, for continuing the old Circulars of 1957 and 1970. Refunds to diplomatic missions would be guided by the normal rules/provisions relating to refunds. In view thereof the Circulars of 1957 and of 1970 have been withdrawn. Refunds would therefore be governed entirely by the conditions mentioned in notifn. No. 3/2001 CE dt 1.3.2001 (sl. No. 250) and the time limit for making the refund claim would be one year from the date of purchase of the goods by the diplomatic mission or consular office, as per the provisions of section 11B(1) of the Central Excise Act, 1944, read with Explanation (B)(e). No extension beyond 1 year from the date of purchase would be permissible as this time limit is statutorily prescribed. Cases need not, therefore, be referred to the Ministry for relaxation or extension of this time limit. Refunds would be entertained by the Commissionerate within whose territorial jurisdiction the mission/consular office is located as per Board's instructions F.No. 156/14/2000-CX 4 dated 11th April, 2001. The missions are, obviously, free to clear the excisable goods straight from the factories, without payment of duty, after satisfying the conditions of the above exemption notification. In that case there would be no case for claiming any refund. It may be pointed out that petrol is also one of the items on which refunds are sanctioned to diplomatic missions. Petrol refunds are governed by a separate set of instructions and, therefore, the procedure indicated in para 8 above will not apply to motor spirit/petrol refunds which would continue to be governed by existing instructions on the same. 13. Exemption to specified goods Refund of duty paid in cash 13.1 Notification No. 56/2002-C.E., dated 14.12.2002 exempts excisable goods, with a few exceptions, when cleared from a unit located in specified areas in the State of Jammu Kashmir U K). Similarly, Notification No.57/2002-dated 14.11.2002 exempts specified goods cleared from a unit, irrespective of its location in the State of J K. Exemption under both the notifications will apply only to new units set up or after 14-6-2002 or to units undertaking substantial expansion on or after this date. The exemptions are available for a period not exceeding 10 years from 14-6-2002 or commencement of commercial production. The exemptions are on the lines of the notifications issued for North Eastern States under Notification No. 32/00-C.E. and 33/99-C.E. both dated 8-7-1999. The above two notifications for the State of J k exempt that portion of the Excise duty, which is paid by the manufactures in cash. For this purpose, a cth1e mechanism has been incorporated in the notifications. The manufacturer is first required to pay the excise duty and thereafter, whatever is paid in cash is to be refunded. It is also intended that the user of any input or capital goods on which such exemption has been availed should get the full Cenvat credit including the portion of duty refunded to the manufacturer of such input or capital goods. For this purpose, Cenvat Credit Rules, 2002 have been amended by Notification No. 39/2002-C.E., N.T. dated 14-11-2002. In this context, it may be pointed that the "Refund" envisages in the notifications is not on account of any excess payment of excise duty by the manufacturers, but is basically designed to give effect to the exemption. In other words, the mechanism has been adopted to operationalise the exemption envisaged in these two notifications. In view of this aspect of the matter, the provisions of Section 11B of the Central Excise Act, 1944 would not apply in the case of these notifications. The notifications provide for expeditious refund of duty paid in cash. It is for this reason that a provision has been made for allowing refund even on provisional basis by the 15th of the next month, in case there is likely to be a delay in verification of the refund claims. Any excess or shortfall in case of refund allowed on provisional basis may be adjusted in the subsequent refund claims. Considering the fact that verification of refund claims basically involves checking of duty paid in case, in most cases it should be possible to allow refund the 15th of the subsequent month. The Board is of the view that pre-audit of refund claims of more than Rs.5 lakhs should not lead to delays. If it is possible to pre-audit, and the finalisation of claim could be completed before the 15 th of the next month, it may be resorted to. Otherwise, the initial provisional refund maybe allowed without pre-audit and while deciding upon its finalisation, pre audit and while deciding upon its finalisation, pre-audit may be done. It may be noted that the notifications apply to goods cleared from a factory. As such, they do not apply to goods cleared from the warehouses. Problems, if any, faced in this regard may please be brought to the notice of the Board. As regards the date of commencement of production, the Department of Industries of the State Government may be consulted who should be in a position to advise on this aspect. The exemption under these notifications applies to new units set up on or after 14-6-2002 or to the existing units undertaking substantial expansion by way of increase in installed capacity by not less than 25% on or after 14-6-2002. Normally, if a unit has been undertaken substantial expansion in capacity, it would utilise the expanded capacity and not keep it idle. There could, however, be a case where a unit discontinues production on newly installed machinery or may later on decrease the capacity of production. Such cases may have to be examined carefully in more detail. These instructions by and large, cover the key issues and concerns involved in the effective implementation of these notifications. If any problem is still faced in the implementation of these notifications, suitable reference to the Board may be made.
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