Delays in Refunds/ Rebates - Exporter of Services
The basic principle in exports is that the taxes should not be exported. It is presumed that the Commerce Ministry as well as the Finance Ministry are in agreement on this aspect at least. In 2004 the Cenvat Credit Rules were amended to include the input services credit which could be used for payment of duty of excise or service tax and if the same was not possible by way of refund. However the provisions were drafted in a manner whereby only the manufacturer could avail the benefit. In April 2006 the provision was amended to resolve this problem.
In 2005 Export of Services was introduced in which Rule 5 provided for rebate of service tax paid on taxable services exported or the duty paid or service tax paid on the inputs and input services used for providing the output services was put in place. Two notifications (11/2005-ST & 12/ 2005-ST) were issued one allowing the rebate on the input services used for providing the taxable services exported and the other the service tax paid on exported services.
We also understand that there is some executive instruction that the interest on delayed refund would be recovered from the salaries of the officers or at least there would be some notation in their career records.
Considering the above it was expected that refunds and rebates would be sanctioned at a regular pace without undue delay. The fact of the situation ( in Bangalore) is as under:
- It took 18 months for the clarity on whom the claim of refund/ rebate has to be made. Now it appears to have been resolved.
- After that the accumulated files being quite a lot a division was to be created to sanction the refund. This added to the delay.
- The Web site/ Commissioner’s promise of tracking the refunds/ rebates with pre determined numbers has been given a go bye. Now refunds can be sanctioned at the whims and fancies of the departmental officer.
- The practice of rejecting the refund with scant respect of established legal maxims, evidence on record is rampant.
- Delays in adjudication and confusion in the mind of the adjudicating officers as to the alternative provisions is apparent. Rather than be questioned later, earlier way of dismissing the notice resorted to as a regular practice.
- At the appellate levels a little of improvement has been felt at present. However remand is used as a practice which means the exporter is again before the officer who is not interested in taking a stand.
- In cases where the Appellate orders clearly direct the lower authority to sanction the refund. Now a new irrelevant ground would be found to allow the refund seeker to go again to the Appellate Commissioner.
- After this stage, the refunding officers we understand follows another internal executive instruction which states that only pertaining to certain categories of input services refund should be sanctioned such as telephone, internet etc!!!.
- No refund in full. In most cases only 3-5 services out of 100 are being sanctioned!!! These are supposed to be inputs services, which in the view of the officers is the valid input credit. For the rest again go in appeal. If this is not injustice what is?
- Even this refund is given selectively to refund seekers who are able to satisfy certain criterion. It is no doubt that India has been ranked lower than Pakistan and Sri Lanka for ease of doing business. If these type of policies continue can we aim to be super power.
The tax compliant exporter of services especially from the IT & ITES sector has been running from pillar to post and other than some encouraging words from the Senior Officers sees no light at the end of the tunnel even after 2 years of making the applications. This is the sector which put India on the world map, a sector which has made us all dream of being a super power.
Possible Alternatives/ Suggestion:
- A time limit be fixed for the claim to be settled and tracked to avoid nefarious practices.
- A provisional release of 80% of the claim maybe made on the application being made and found to be prima facie eligible. Criterion to be clear and unambiguous.
- Alternatively a drawback rate for services to various sectors could be worked out and paid automatically on the export.
- Exempting the ST chargeable to 100% EOU ( STPI units service exporters- more than 90% exports) on services in line with the CT-3 procedure for 100% EOU for procurement of materials.
- Exemption to supplier of services to 100% EOU in line with SEZ.
It is suggested that a report be obtained as to the first date of making the application, how it has moved, where it is presently, how many frivolous reasons for rejection were provided. The ones where the same has been sanctioned compared with the ones where the same was not. This exercise would confirm the above. It is hoped that the Department itself would spruce up its act and give some firm commitments in this regard. It is fervently hoped that the few conscientious officers who are there today in the helm of affairs would look into this matter and set right this grave injustice.
CAclubindia
