PROBLEMS FACED BY EXPORTERS IN AVAILING REFUND OF EXCESS CREDIT

Rule 5 of CENVAT Credit Rules, 2004 provides that accumulated credit on input services in case of exports can be refunded to the exporter subject to stipulated conditions. But, exporters of services (mainly the call centres or the BPOs) are facing difficulties in getting  refund under the said notification. Reasons for rejection and corresponding clarification:

• REASON: Use of different phrases in rules and notification
• CLARIFICATION: There cannot be different yardsticks for establishing the nexus for taking of credit and for refund of credit. Even if different phrases are used under different rules of CENVAT Credit Rules, they have to be construed in a harmonious manner. The following test can be used to see whether sufficient nexus exists. In case the absence of such input/input service adversely impacts the quality and efficiency of the provision of service exported, it should be considered as eligible input or input service.
• REASON: One-to-one co-relation between inputs and outputs and scrutiny of voluminous record
• CLARIFICATION: In Budget 2009, the scheme was simplified by making a provision of self-certification [Notification No. 17/2009-ST] where under an exporter or his Chartered Accountant is required to certify the invoices about the co-relation and the nexus between the inputs/input services and the exports. The exporters are also advised to provide a duly certified list of invoices. For details about procedure and limits & person authorized to sign the declaration, refer full circular.
• REASON: Quarterly refund claims
• CLARIFICATION: There should not be any objection in allowing refund of credit of the past period in subsequent quarters. It is possible that during certain quarters, there may not be any exports and therefore the exporter does not file any claim. However, he receives inputs/input services during this period.
• REASON: Incomplete invoices
• CLARIFICATION: In case of incomplete invoices,  the department should take a liberal view in view of various judicial pronouncements by Courts. In the case of refund under Rule 5, (i) so far as the nature of the service which has been received by the exporter can be ascertained; (ii) tax paid therein is clearly mentioned; and (iii) other details as required under rule 4(a) are mentioned, the refund should be allowed if the input service has a nexus with the service/goods exported as discussed earlier. In any case, the suggested Chartered Accountant’s certificate should clearly bring out the nature of the service and this will assist the officer in taking a decision.