Refund of cenvat credit – procedure and form amended – major backdoor change – refund linked to export turnover

By Vijay Kumar

Notification No. 11/2002 prescribed the form and procedure for claiming refund of cenvat credit for exporters. That was two years before the Cenvat Credit Rules, 2004 came into existence. So there was no procedure for claiming refund of cenvat credit by service exporters. This is now rectified with Notification No. 11/2002 being superseded with Notification No. 5/2006. But while prescribing the procedure, the Government has smuggled in a major provision to restrict the refund. Hitherto there was no limit on the amount of refund available. Now the Government has introduced a limit.

Now the maximum refund allowed is limited to the extent of the ratio of export turnover to the total turnover for the given period to which the claim relates.

Maximum refund = Total CENVAT credit taken on input services during the given period * export turnover ÷ Total turnover

Illustration: If total credit taken on input services for a quarter = Rs. 100

Export turnover during the quarter = Rs 250

Total Turnover during the quarter = Rs 500

Refund of input service credit under Rule 5 of the CENVAT Credit Rule, during the quarter = 100 x 250/500 i.e. Rs 50

But why this complicated formula? BOK (Board Only knows)

NOTIFICATION NO. 5/2006-Central Excise (N.T.) Dated 14 March, 2006