Special Drive for clearance of pending 4% SAD refund claims – Board's Instructions
THE SAD story of 4% SAD refund claims is turning out to be a long winding soap opera. Notification No. 102/2007-Cus dated 14.09.2007 was issued by the Government with the noble intention of allowing refund of 4% SAD if the importers have paid appropriate sales tax or value added tax subject to the documentary evidences prescribed in the said notification [paragraph 2(e) of the notification].
However high and noble the intention of the Government may be, the officers in the field (to a certain extent those in the Board as well for the confusing Circulars they issued in this regard) may not necessarily have such noble intentions to allow refunds at face value. This is primarily because of the trust deficit. The psyche of the departmental officer is to view trade and industry with suspicion and this is also contributed to a large extent by nefarious and dubious activities of some from the trade and industry.
When the refund claims stagnated in the field, Board issued several Circulars viz., Circular Nos. 6/2008-Cus dated 28.04.2008, 16/2008-Cus dated 13.10.2008 etc with guidelines and instructions to the field formations to speedily process and dispose of the SAD refund claims. Unfortunately, Board has time and again failed to realize that its clarifications, directives and instructions to the field formations are only of academic interest to the officers working in the field and they are honoured more in the breach. But the Board, like the legendary Robert I The Bruce, King of Scotland (his inspiration from a spider's repeated attempts to spin a web when he hid in a cave, ultimately led him to a famous victory over the rampaging English forces), is probably in no mood to give up its efforts in bringing the field formations around.
Board believed that in view of its clarifications issued through earlier Circulars, there would not be any difficulty in timely disposal of refund claims (how naïve it was). However, on review of the status of pending refund claims at major Customs Houses as on 31.03.2010, it was noticed that more than 80% of pending claims relate to 4% CVD cases. In view of this, the Board has launched a special drive for clearing the pending SAD refund claims and came out with the following instructions to further simplify the procedure for claiming 4% CVD refunds.
In respect of Accredited Clients registered with Customs in terms of Circular No.42/2005-Customs dated 24.11.2005 (ACP clients), the amount of 4% CVD refund shall be sanctioned in full, on preliminary scrutiny of the 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. The procedure for pre-audit for ACP clients shall be done away with and detailed scrutiny should be done only at the stage of post-audit. The refund claims shall be sanctioned within the maximum time period of 30 days in all such cases.
Submission of sale invoices shall be required only in electronic form (CD or other media) in respect of 4% CVD refund cases and submission of paper documents is accordingly dispensed with. Further, in order to enable timely payment of refund in case of 4% CVD, a system of optional facility of directly crediting the applicant's bank account, through RTGS (Real Time Gross Settlement) or NEFT (National Electronics Funds Transfer) System is being prescribed. This facility is already functioning in Mumbai Customs Zone-II and has been found useful for the trade.
Hence, Board has decided to extend this facility on optional basis to all other Customs formations also. Necessary authorisation for payment of refund amount directly to Bank Account may be taken in such cases from the importer/ authorised signatory of the importer in the form annexed to this Circular (as Annexure-I).
Some field formations have also raised certain doubts whether the audited Balance Sheet and Profit and Loss Account have to be examined in respect of the current financial year for scrutiny of unjust enrichment aspect. It is stated that a large number of refund claims relating to the current year were held up for want of such verification. Board examined this issue and it has been decided that the field formations shall accept a 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. Further, the importer shall also make a self-declaration along with the refund claim to the effect that he has not passed on the incidence of 4% CVD to any other person. Hence, there is no need for insisting on production of audited Balance Sheet and Profit and Loss Account in these cases.
The Board has notified the list of documents required to be filed by the applicant along with the refund claim (illustrative list as mentioned in Annexure II of the Circular is given below). Board clarifies that “Hence, other than these aforesaid documents, no other document would be required in the normal course of granting 4% CVD refund”. [there is no NORMAL course of refund in the Department]
Illustrative list of documents to be filed by applicant along with Application for refund claim in prescribed form (Customs Series Form No.102 as given in Part 5 of Customs Manual) (Will the Board clarify as to Part 5 of which Customs Manual the Board is referring to here?)
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 (this last one is the trump card often used by the field officers to trouble and harass the claimants. It is very mysterious as to why Board ends up giving this kind of leeway to the field formations and thereafter lament that the field officers are not sanctioning refunds in time. Probably, Board should stop generalizing in this fashion and be specific regarding documentation required for sanctioning refund claims. Compare this list with the documentation prescribed in paragraph 2(e) of the Notification and netizens may see for themselves that the real fault for the delay in sanction of refund claims lies not with the field formations but with the Board).
Board desires that the 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.
Probably, Board is oblivious to the fact that some Commissioners and Chief Commissioners warn their subordinate officers that they have to worry about their career first rather than follow Board's instructions and go on a refund spree.
To tighten the noose around errant field officers, Board should have considered inclusion of applicability of provisions of Section 27 and 27A of the Customs Act, 1962 to these refund claims by suitably amending the said notification, so that any unwarranted delay in refund claims would have forced the field officer to shell out interest (which would obviously be recovered from his pocket at a later stage).
Also see our reports on this refund saga in 18.09.2007, 29.04.2008, 07.07.2008, 14.10.2008, 30.06.2010.
Please also see the story Indian Customs: The SAD Refund Circus! contributed by a hapless netizen
(please give hyperlink to http://www.taxindiaonline.com/RC2/print_story.php?&newsid=9890)
CIRCULAR NO. , Dated: July 8, 2010