The Hindu Business Line : 1-year limit may be set for duty refund claims

The current refund dispensation for traders has no time limit spelt out, resulting in differing viewpoints between customs authorities and trading community.

K.R. Srivats

New Delhi, April 9 The Finance Ministry plans to specify a one-year time limit for making refund claims on the special additional duty of customs (SAD) paid on goods imported by traders and subsequently sold within the country.

This would imply that the refund claim would have to be made by traders within 12 months of the date of import. The current refund dispensation for traders, which was introduced in September 2007, had not spelt out any time limit, resulting in differing viewpoints between customs authorities and trading community.

While a section of customs authorities felt that the six months limitation period (as provided in the customs law) would apply for the refund claim, traders contend that the scheme introduced by CBEC was open-ended as it did not spell out any limit. In the absence of clarity, not a single SAD refund claim has been processed so far since September 2007, the trading community said.

Official sources said that the Central Board of Excise and Customs (CBEC) would in a week’s time come up with a draft circular that would specify a one-year time limit for making the refund claim. Moreover, the norm of ‘unjust enrichment’ would also be factored into the refund scheme.

On the issue of providing comfort to customs authorities that VAT has been paid on sales undertaken within the country, the CBEC may not want to examine every invoice and is likely to provide for certification by a chartered accountant or cost accountant for this purpose.

Currently, an importer has to demonstrate to the customs authorities that VAT has been paid on sale of import consignments. Legally, every invoice has to be correlated with the VAT payment.

Prior to September 2007, a scheme was already in place whereby manufacturers could adjust the SAD paid by them on imported goods against their excise duty liability. However, SAD levied in lieu of sales tax was a cost for traders.

In September 2007, the Government had as a goodwill measure announced a scheme that enabled traders to claim refund of SAD on goods imported by them and subsequently sold in India after paying applicable sales tax/VAT rates.

For obtaining refund of SAD levied in lieu of sales tax, traders had to meet certain conditions including providing evidence on sale of imported consignment and payment of value added tax (VAT) on the sale within the country. Moreover, the first and second stage dealer has to indicate on the invoice that no credit of SAD would be admissible.

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