Refunds - Unjust Enrichment - CBEC Issues Draft Circular
CBEC proclaims that the principle of unjust enrichment is not applicable in following cases:
1. duty paid on exports;
2. duty paid on inputs / input services used in the manufacture of exported goods / for provision of exported services;
3. unspent balance lying in PLA.
In order to bring uniformity in the application of the principle of unjust enrichment,Board has indicated the accounting and documentation requirements which are to be adhered to, in the various refund scenarios which are likely to be encountered.
Balance Sheet of the applicant for the financial year in which the duty amount claimed as refund has been paid or credit note has been issued, should indicate the refund amount as "Duty Receivable" under the heading "Current Assets".
(It does not matter whether the differential duty/tax amount is reflected in the "Duty Receivable" account, invoice wise or a consolidated journal entry is passed at the end of the financial year. The consolidated entry, however, must reflect the invoices in respect of which the differential amount is being transferred to "Duty Receivable" Account.)
Balance Sheet of the subsequent financial year(s) after the financial year in which duty/tax was reflected as "duty receivable"' till the financial year preceding the financial year in which refund is proposed to be sanctioned, should continue to show the amount as "Duty Receivable" under the heading "Current Assets".
The certificates indicated as part of the documentary requirements would be self-certified by the applicants in all cases where the duty amount being claimed as refund amount is Rs. 25 lakhs or less. In cases, however, where the duty amount being claimed as refund is more than Rs. 25 lakhs, the certificates would be required to be certified by a Chartered Accountant / Cost & Management Accountant.
Board would like to clarify that the provisions of Section 11B of CEA are not applicable in case of refund of pre-deposit amount and, therefore, the principle of unjust enrichment is not applicable in such cases.
Board wants feedback to be sent to commr.st-cbec@nic.in or sreeparvathy.sl@gov.in or mittal.drgaurav@gov.in by 6th September 2016.