Refund of Terminal excise duty – DGFT relents after 8 months of confusion
As is well known, clearances to certain deemed exports like projects financed by International agencies, are eligible for export benefits and when excise duty exemption is not available, they are given a refund of the terminal excise duty. (What is terminal about excise duty?) All suppliers to these projects were happily paying excise duty in the hope of claiming refund from DGFT. But DGFT spoiled the party by clarifying in the circular No. 6/ 26.10.2004 that refund is available only in those cases where no CVD was payable on import. This circular was mischievous and patently wrong and self contradictory. If no CVD was payable, it means that no excise duty was also payable; then what refund-terminal or otherwise the DGFT was going to give?
The situation was comical. A manufacturer supplying to these projects pays excise duty on his raw materials purchased locally and claims refund from DGFT. But DGFT would grant refund only if these goods were exempted from CVD had they been imported!. So in effect NO REFUND. The circular caused enough damage and worried manufacturers were running from pillar to post as they had priced their products assuming a refund from DGFT. Finally better counsel prevailed and DGFT now clarifies that refund will be given without correlating with CVD. Great DGFT! Making a mistake is not bad but the courage to correct it is admirable. And what more DGFT has decided to suo moto re-open the cases where refund had been rejected. This is how the Government should work and this should be a model for other agencies especially the Revenue Department. AND LEST THIS CIRCULAR CAUSE FURTHER CONFUSION WITH Revenue, DGFT has further clarified that the exemption available through Central Excise notifications will continue.
DGFT Circular. No.. 10 (RE-2005)/2004-2009, Dated: June 24, 2005