1. Background :
5.4 Is there a time limit for filing a claim of
refund ?
5.4.1 The refund claim is required to be filed on quarterly basis within 6 months from the end of the relevant calendar quarter during which the goods are exported. The earlier time limit was 60 days. However, from 18-11-2008 the time limit is amended to 6 months vide Notification No. 32/2008-ST.
5.4.2 Although the Notification does not clarify or provide definition of ‘quarter’, the Service Tax Rules, 1994 provide for quarter as a calendar quarter, like January to March, July to September, etc.
5.4.3 The exports will be regarded to have been made on the date on which the Customs appraising officer has permitted clearance and loading of the goods in accordance with S. 51 of the Customs Act, 1962. The officer issues an order known as ‘let export order ‘.
(Note: One should not consider the actual date of export or the date of sailing of vessel as the ‘date of export’. The date of ‘let export order’ is the date of export. Therefore, while claiming refund, the relevant quarter may be decided considering the date of the ‘let export order’.
6. Documents required to be enclosed with the claim of refund:
6.1 Documents substantiating export of goods and other relevant details:
Documents such as ARE-1 duly endorsed by the Customs authorities, copy of shipping bill, non-negotiable copy of bill of lading along with the copy of the export invoice, invoice of the provider of service, etc. should be submitted.
For each specified service, specific documentation is prescribed by the Government. Table at the end may be referred to for the same.
6.2 Documents evidencing payment of service tax to input service providers:
Invoice copies of service providers of specified services, along with proof of payment of the amount mentioned in invoices such as copies of bank statements or copy of challan in GAR-7 and/or receipt of the service provider, etc. should be enclosed with the claim of the refund.
- In practice, it is observed that exports are effected through availing the services of custom house agents or freight forwarders – intermediaries. Therefore the specified service providers are paid by these agents or intermediaries. CHAs/intermediaries should be instructed to provide certificate of payment to specified service providers. Further, it should be ensured to follow practice of providing reference of shipping bill number on the invoice issued by service providers. In case of port services and transportation services of rail and road, the notification does not provide requirement of bills to be in the name of exporters. However, the proof of specified service used for export goods would have to be provided. Therefore photo-copies of invoices of specified service providers bearing shipping bill reference should be obtained to the extent possible in order to avoid rejection of the claim for want of proof.
- Copy of agreement entered into by the exporter with the buyer wherever applicable i.e., in cases when refund is conditional upon mention of requirement of the specified service in the written agreement.
6.3 Category of service of the service provider:
Since refund is eligible only in case of specified services, the exporter may ensure to obtain invoice with category of service written on it or obtain proof of payment like copy of GAR-7 challan or copy of registration certificate of the service provider.
7. Recoverability of Refund:
If the exporter has not been able to realise sale proceeds for exported goods within stipulated period under FEMA 1999 including any extension of the period, service tax refunded shall be recoverable, treating the recovery as service tax erroneously refunded. Under FEMA (Export of Goods and Services) Regulations 2000, export sale proceeds have to be realised within six months from the date of exports. However, in case of certified status holder exporters, 100% EOUs, and units under STPs BTP schemes, etc. realisation and repatriation is permissible up to twelve months. Under certain circumstances this limit is further extended by RBI.Therefore, if proceeds are not realised within this time limit, then only recovery provisions would be invoked.
8. Some issues:
8.1 X, a merchant exporter has not filed claim of refund for the quarter ended December 2008. The stipulated time limit under Notification No. 41/ 2008-SThas been amended vide Notification No. 32/2008-ST from 60 days to six months. If X files his refund claim by the end of January 2009,he would be within the time limit of 6 months. However, if the Department contends that the amendment is prospective and corresponding to quarter ended September 2008,the time limit of 60 days under earlier dispensation of Notification only would apply. What remedy is left for X under the law?
8.1A The time limit of 60 days was revised to 6 months from 60 days vide Notification 32/2008-ST, dated 18-11-2008.The amendment was made prior to the expiry of 60 days from the end of September 2008 i.e., before November 30, 2008. Therefore, the case can be argued both ways. If the claim is rejected by the Department, the case of the exporter is fairly arguable on the following grounds:
- The time limit has been revised, considering genuine hardship faced by the exporters as regards non-receipt of documents before 60 days, pendency remaining for payment of invoicing of input service provider on account of dispute, cash flow problem, etc. The beneficial amendment therefore may be interpreted liberally and not strictly.
- Procedural lapses are often condoned if substantive compliance is made. Reliance can be made in the case of IN RE Barot Exports, 2006 (2003)ELT 321 (GOI), where it was held that substantive benefit be given by condoning non mandatory procedural provisions. Similarly,in the case of Cotfab Exports, 2006 (20S)ELT107 (GOI), it was held that procedural infractions of Notification/Circulars be condoned if exports have taken place.
8.2 ABC Exports Ltd. filed its refund claim within the prescribed time limit of 60 days for Y.E. September 30, 2008.However, the documents enclosedwith the claim evidencing export of goods and payment of service tax were found inadequate by the Department. Whether the Department can rejectthe refund claim on the ground of inadequate evidence?
8.2A The Department generally would issue a show-cause notice and point out deficiencies in the claim lodged therein. Following the principle of natural justice, the Department is required to issue a show-cause notice and provide opportunity to the claimant to present his reasons for not attaching the required documents with the claim. If other compliances are found bona fide, the claim could be entertained with/without modifications in the amount claimed if deficiency is made good by filing documents not attached with the claim. If no opportunity is granted, the claimant has a remedy under the law to file an appeal.
To overcome this difficulty of not being able to provide all relevant enclosures within 60 days, the time limit has been extended to six months, which is reasonable for any exporter to make available the required documents. However, the point is that if the entire claim of refund and export is genuine, depending on the facts of each case, the refund claim if rejected could be fought out.
8.3 Classification of service:
AB Exporters Ltd. filed a claim of refund under Notification No. 41/2007-ST for its exported goods in respect of service tax paid on port services, trans-port of goods by rail, etc. However, the steamer agent of the shipping line and/or freight forwarders have charged service tax under the nomenclature of Terminal Handling Charges (THC). Their service providers have paid service tax for this service under ‘business support service’ which is not specified in Notification No. 41/2007-ST. Is there a solution for this difficulty?
8.3A This is the difficulty faced by the entire fraternity of exporters, as most of the exporters ship their goods through a freight forwarder or a custom house agent acting as a freight forwarder who books cargo space for the shipper. Although THC consists of port levies, CONCOR charges and laC road transportation service, the services are obtained through intermediaries. Therefore, the intermediary’s service cannot be classified under the respective taxing entry specified in the Notification. The exporter i.e., user of the service on its own accord cannot change the classification. This principle was followed in the case of CCE v. Courtlaulds Packaging (I) Ltd., 2007) 217 ELT 399 (Tri.-Mum). However, the difficulty faced by AB Exporters Ltd. does not appear to get addressed for now, as in practice, most of the goods are exported through intermediaries and therefore the benefit intended to be provided may remain on paper only.
