Jamnagar branch of Western India Regional Council of ICAI

1. Jamnagar branch of Western India Regional Council of ICAI Refund Provisions and Issues with reference to Service Tax By CA Bharat Shemlani 11th October, 2008

2. 11th October, 2008 bharat@bmshemlani.biz 2 Export of Services Export services are defined by ESR, 2005 giving three different criteria. 1. Immovable property criteria 2. Performance based criteria 3. Location of service recipient criteria.

3. 11th October, 2008 bharat@bmshemlani.biz 3 Rebates/Refunds Notification No. 11/2005 ST dt. 19-4-2005 provides for rebate of whole of service tax and cess paid on all taxable services exported to the countries other than Nepal and Bhutan For availing the rebate of tax on export of services; The services must have been exported as per rule 3. The payment for such service must have been received in India in Convertible Foreign Exchange. The service tax and cess on the said service should have been paid on the taxable services exported. The amount of rebate should be in excess of Rs. 500/.

4. 11th October, 2008 bharat@bmshemlani.biz 4 Rebates/Refunds Duties/taxes eligible for rebate Service tax and cess for the purpose of claiming such rebate would be the service tax leviable under section 66 of the FA, 1994 and primary education cess and secondary and higher education cess on taxable services. Any additional tax or interest paid with regard to such taxable service exported will not be covered.

5. 11th October, 2008 bharat@bmshemlani.biz 5 Rebates/Refunds Presentation of an application An application for claim of rebate is required to be made in the prescribed form ASTR-1 to the Assistant Commissioner or Deputy Commissioner of Central Excise in whose jurisdiction the service provider is assessed. The application can be made by the Service Provider or his authorized agent who is entrusted upon to do such an act on his behalf.

6. 11th October, 2008 bharat@bmshemlani.biz 6 Rebates/Refunds Time limit for making the application There is no time limit prescribed for filing of such an application for rebate of service tax and cess. If the claim made by the service provider is not processed within 15 days of the same having been applied, the Sanctioning Authority in-charge is required to provide reasons thereof in writing while passing his orders.

7. 11th October, 2008 bharat@bmshemlani.biz 7 Rebates/Refunds List of documents to be attached with the application includes; • Documentary evidence of payment received against taxable service for which the rebate is being claimed. —A foreign inward remittance certificate (FIRC) from the authorized dealer through whom the payment is received would meet with the requirement. • Documentary evidence for payment of service tax and cess on the services exported —Either a copy of the TR 6/GAR 7 challan or copy of CENVAT Credit Register wherein service tax liability is debited or CENVAT Credit is utilized for payment of service tax

8. 11th October, 2008 bharat@bmshemlani.biz 8 Rebates/Refunds A declaration from the service provider that the services provided are export of service in terms of the rules along with a documentary evidence for export of such taxable service. — There is no specific format provided by the rules to make such a declaration. To provide details with respect to each of the condition required to be fulfilled for the service to be considered as export of service in terms of the rules. For e.g.. If a person is claiming refund for the services provided in respect of an immovable property situated outside India a declaration providing following details would meet with the requirements. Details of location of the property in relation to which the services are rendered, details of the recipient of service, nature of services provided, modus operandi of the service rendered to establish that the service was delivered and used outside India, details of remittance received to establish the receipt of foreign exchange.

9. 11th October, 2008 bharat@bmshemlani.biz 9 Rebates/Refunds Documentary evidence for such an export of service could be (a) Copy of the agreement/contract for services between the service provider and service recipient. For example, if an assignment is given to the architects in India to design a Mall in a country outside India. A copy of their agreement narrating the terms and conditions for providing the service (b) Documentary evidence for the visit of the architect if any to the country where the property is situated, copy of the plans delivered to the service recipient, acknowledgement/confirmation from the foreign party about receipt of service from India, proof of the plans implemented by the recipient if any

10. 11th October, 2008 bharat@bmshemlani.biz 10 Rebates/Refunds Rebate of Duty paid on Excisable Inputs or Service tax and cess paid on Input Services utilized for the purpose of providing taxable services exported Notification No. 12/2005 ST dt. 19-4-2005 provides for rebate of Whole of the duty paid on excisable inputs or the whole of service tax and cess paid on all taxable input services used in providing the services exported to the countries other than Nepal and Bhutan.

11. 11th October, 2008 bharat@bmshemlani.biz 11 Rebates/Refunds For availing the rebate of duty on excisable inputs and service tax and cess on input services The taxable service for which these inputs and input services were used must have been exported as per rule 3, The payment for such service must have been received in India in Convertible Foreign Exchange The payment of duty has been paid on such excisable inputs The service tax and cess on the input services have been paid The amount of rebate admissible is in excess of Rs. 500/- No CENVAT Credit has been availed for the duty paid on inputs and service tax and cess paid on the input services for which the rebate is claimed.

12. 11th October, 2008 bharat@bmshemlani.biz 12 Rebates/Refunds Duties/taxes eligible for rebate Service tax leviable under section 66 of the FA, 1994 and primary education cess and secondary and higher education cess. Duty for the purpose of this notification means duties of excise leviable under the following enactments. (a) The Central Excise Act, 1944 (b) The Additional Duties of Excise (c) National Calamity Contingent duty (d) Special Excise Duty collected under a Finance Act (e) Additional Duty of Excise as levied under section 157 of the FA, 2003 (f) Primary Education Cess and Secondary and Higher education Cess on excisable goods The Additional Duty of Excise leviable under section 85 of the Finance Act, 2005. The additional duty leviable u/s 3 of Customs TA equivalent to excise duty is not covered above for rebate.

13. 11th October, 2008 bharat@bmshemlani.biz 13 Rebates/Refunds Filing of declaration prior to the date of Export of Taxable Service For availing the benefit of the rebate on duty paid on excisable input and on service tax and cess paid on input services, the service provider has to file a declaration with the Jurisdictional Assistant Commissioner or Deputy Commissioner of Central Excise. Describing the taxable service intended to be exported Details of description, quantity, value, rate of duty and the amount of duty payable on inputs actually required to be used in providing the service to be exported Description and value of the amount of service tax and cess payable on input services actually required to be used in providing the service to be exported.

14. 11th October, 2008 bharat@bmshemlani.biz 14 Rebates/Refunds Verification of declaration by the Concerned Authority The Assistant Commissioner/Deputy Commissioner of Central Excise shall verify the declaration filed by the Service provider and accept the same after satisfying himself that there is no likelihood of evasion of taxes in the intended export of services. For the purpose of verification he may call for any relevant information or samples of inputs or any other details before accepting the declaration.

15. 11th October, 2008 bharat@bmshemlani.biz 15 Rebates/Refunds Procurement of inputs and input services from Registered Factories/Dealers/Service providers Service provider must procure the excisable inputs from the registered factory or a dealer for the purpose of CCR, 2004 and also make sure that the excisable Invoices issued under CER, 2002 for all such purchases are procured for supporting the claim of rebate of duty. An Invoice or a bill or a challan issued under the STR, 1994 for the input services procured for providing the services intended to export be also procured in support of the claim for rebate in excess of Rs. 500/.

16. 11th October, 2008 bharat@bmshemlani.biz 16 Rebates/Refunds Presentation of claim for rebate An application for claim of rebate is required to be made in the prescribed form ASTR-2 to the Assistant Commissioner or Deputy Commissioner of Central Excise in whose jurisdiction the service provider is assessed. The application can be made by the Service Provider or his authorized agent who is entrusted upon to do such an act on his behalf.

17. 11th October, 2008 bharat@bmshemlani.biz 17 Rebates/Refunds Time limit for making an application No time limit for filing of such claim is prescribed by the notification as also stated earlier for claim of rebate on service tax and cess on export of service. Similarly, if the claim made by the service provider is not processed within 15 days of the same having been applied the Sanctioning Authority in charge is required to provide reasons thereof in writing while passing his orders. The form for application is required to be accompanied by • Invoices for input issued under CER, 2002 utilized for providing exported services • Invoices, bills or challans under the STR, 2004 for input services consumed for providing exported service

18. 11th October, 2008 bharat@bmshemlani.biz 18 Rebates/Refunds A declaration from the service provider that the services provided are export of service in terms of the rules along with a documentary evidence for export of such taxable service. — There is no specific format provided by the rules to make such a declaration. To provide details with respect to each of the condition required to be fulfilled for the service to be considered as export of service in terms of the rules. It would also be advisable to attach the copy of the permission granted by the Jurisdictional Assistant or Deputy Commissioner on verification of declaration prior to export of service. This would facilitate the processing of the claim for rebate to be done expeditiously. On verification of the claim filed and after satisfying himself about the correctness thereof, the Assistant or Deputy Commissioner shall sanction the rebate either in whole or in part.

19. 11th October, 2008 bharat@bmshemlani.biz 19 Rebates/Refunds Recovery of rebate granted along with interest thereon In case where after granting of the rebate on export services, excisable inputs or input services, as the case may be, by the concerned authorities it is found that the service tax or cess for which rebate has been claimed is not paid OR the taxable service has not been exported as per the ESR, 2005, the amount of rebate shall be recoverable with interest as if no service tax or cess was paid on such taxable service.

20. 11th October, 2008 bharat@bmshemlani.biz 20 Rebates/Refunds Insertion of section 93A for rebate of service tax paid on input service With effect from 18-4-2006, section 93A provides for a grant of rebate of service tax paid on taxable services used as input services for manufacturing or processing of such goods or for providing any taxable services which are exported to the extent and manner as my be prescribed. The proviso to section 93A lays a further condition that where any rebate has been allowed on any goods or services under this section and the sale proceeds in respect of such goods or consideration in respect of such services are not received by or on behalf of the exporter within the time allowed by the Reserve Bank of India, such rebate shall be deemed never to have been allowed and the Central Government may recover or adjust the amount of such rebate in such manner as may be prescribed. No Notification is prescribed till date.

21. 11th October, 2008 bharat@bmshemlani.biz 21 Rebates/Refunds Amendment to CENVAT Credit Rules vide N. No. 4/2006-CE (NT) dated 14-03-2006 Rule 5 of the CCR, 2004 provides for refund of CENVAT credit in respect of input or input services used in manufacture of final product cleared for export or used in providing output service which has been exported without payment of service tax in cases where for any reason such credit could not be utilized for payment of duty on final products for home consumption or for export or payment of service tax on output service.

22. 11th October, 2008 bharat@bmshemlani.biz 22 Rebates/Refunds The detailed procedure to claim refund of CENVAT credit is provided in N No. 5/2006-CE(NT) dated 14.03.2006. The conditions for grant of refund are as follows. • The final product or the output service is exported in accordance with the procedure laid down in the CER, 2002 or ESR, 2005. • The goods are cleared for export under bond or letter of undertaking. In case of services, the services are exported without payment of duty. • The claims for such refunds are submitted not more than once for any quarter in a calendar year. However, where the average export clearance of final products or the output services in value terms is fifty per cent more of the total clearances of final products or output services in the preceding quarter or in case of the claim filed by Export Oriented Unit, the claim for refund may be submitted for each calendar month.

23. 11th October, 2008 bharat@bmshemlani.biz 23 Rebates/Refunds An application for refund in Form A to the Deputy Commissioner or the Assistant Commissioner of Central Excise as the case may be in whose jurisdiction; — The factory from which the final products are exported is situated — The registered premises of the service provider from which the output service are exported is situated • Annexure to the application in Form A — In case of goods exported Shipping bill or Bill of export duly certified by the officer of custom to that effect that the goods have in fact been exported. — In case of services Copy of the Invoice for services exported. Certificate from bank certifying the realization of export proceeds.

24. 11th October, 2008 bharat@bmshemlani.biz 24 Rebates/Refunds The refund is allowed only in the circumstances where a manufacturer or provider is not in a position to utilize the credit or input service against the tax/duty liability against the goods exported during the period/month ( this means that the amount of input credit is in excess of duty/tax payable on export). The refund of unutilized credit of input service will be restricted to the extent of the ratio of export turnover to total turnover. The application for refund is filed within the time specified in section 11B of the CEA, 1944, i.e. within one year.

25. 11th October, 2008 bharat@bmshemlani.biz 25 Rebates/Refunds Refund of service tax paid on the specified services used for export of goods N No.40/2007-dtd. 17.09.2007 and N No.41/2007-ST  dt. 6.10.2007 provides for an exemption by way of refund of service tax paid on the specified services received and used for export of goods. Eighteen services have been specified by now under various notifications which are attributable to exports even if they are not used as input services and tax paid thereon shall be refunded to exporters [N No(s).43/2007-ST, dated 29.11.07, 41/2007-ST, dated 06.10.07, 42/2007-ST, dated 29.11.07, 03/2008-ST, dated 19.02.08 & 17/2008-ST, dated 01.04.08]. Refund of service tax paid on services coming under specified clauses only.

26. 11th October, 2008 bharat@bmshemlani.biz 26 Rebates/Refunds For availing the refund of service tax on services received and used for export of goods. The specified services should have been received and used by the exporter for export of the said goods The exporter claiming the exemption should have actually paid the service tax on the specified services;  No CENVAT credit of service tax paid on the specified services used for export of said goods should have been taken under the CCR, 2004;  The said goods have been exported without availing drawback of service tax paid on the specified services under the Customs, Central Excise Duties and Service Tax Drawback Rules, 1995;  The exemption or refund of service tax paid on the specified services used for export of said goods shall not be claimed except under this notification. 

27. 11th October, 2008 bharat@bmshemlani.biz 27 Rebates/Refunds Tax eligible for refund Service tax and cess eligible for refund by the exporter of the goods shall be the amount of tax paid by the service provider, who is liable to pay service tax on the services received and used by the exporter of goods as applicable on the specified services. In case where the service provider has claimed any exemption from payment of service tax for such services provided no refund shall be granted in absence of any payment of tax. Service Tax paid by the exporter under the reverse mechanism provisions where the exporter of the goods has himself paid the service tax on the specified services as a recipient of the services.

28. 11th October, 2008 bharat@bmshemlani.biz 28 Rebates/Refunds Jurisdiction for filing of the Claim for refund The exporter shall claim the exemption by filing a claim for refund of service tax paid on specified services before the Assistant Commissioner of Central Excise or the Deputy Commissioner of Central Excise / Service Tax having jurisdiction over The factory of manufacture or warehouse - in case of the manufacturer exporter or The registered office or the head office - in case of the exporter other than a manufacturer exporter. Generally, a merchant exporter is not required to register with the department, and therefore, the condition of filing a refund claim at the location of head office/registered office has been stipulated in the notification. It has been clarified by the Board’s Circular no 101 /4 /2008-ST dt. 12.05.2008 that where a premises or an office of a merchant exporter is registered with the department under service tax law, the merchant exporter can, at his option, file refund claim with the jurisdictional office, he is registered with. In case, the head office/registered office is located within the jurisdiction of exclusive Service Tax Commissionerates at Ahmedabad, Bangalore, Chennai, Delhi, Kolkata, and Mumbai, the claim should be filed before the jurisdictional Assistant Commissioner / Deputy Commissioner of Service Tax (who, as per the provisions is also an AC/DC of Central Excise). In all other cases, the refund claim should be filed with the Assistant Commissioner/Deputy Commissioner of Central Excise and Service Tax, having jurisdiction over Head office or Registered Office for the purposes of service tax.

29. 11th October, 2008 bharat@bmshemlani.biz 29 Rebates/Refunds Declaration to be filed by the exporter who is not registered as a manufacturer or service recipient. Where the exporter is not registered as an assessee under the CEA, 1944 or the rules made thereunder, or the said FA, 1994 or the rules made thereunder, a declaration in the prescribed form is required to be filed prior to filing a claim for refund of service tax under N no. 41/2007-ST dt. 6.10.2007 with the respective jurisdictional Assistant Commissioner of Central Excise or the Deputy Commissioner of Central Excise, as the case may be. The said jurisdictional Commissioner shall, after due verification, allot a service tax code (STC) number to the exporter within seven days from the date of receipt of the said Form after which a claim for refund can be made by such exporter

30. 11th October, 2008 bharat@bmshemlani.biz 30 Rebates/Refunds Time limit for making claim of the refund The claim for refund shall be filed on a quarterly basis, within sixty days from the end of the relevant quarter during which the said goods have been exported. For the said purpose, the date of export shall be deemed to be the date on which the proper officer of Customs makes an order permitting clearance and loading of the said goods for exportation under section 51 of the Customs Act, 1962 ; 

31. 11th October, 2008 bharat@bmshemlani.biz 31 Rebates/Refunds List of documents to be attached with the claim for refund include Documentary evidence for export of the said goods viz: Shipping bill etc. Evidence for payment of service tax on the specified services for which claim for refund of service tax paid is filed viz; the invoice copy, debit note or any other document by which the service provider has charged service tax. wherever applicable, a copy of the written agreement entered into by the exporter with the buyer of the said goods, as the case may be;  The notification also provides list of specific documents required by way of conditions for claiming refund under the said provisions. A schedule providing the details of the Specified Services along with the condition is provided in separate word file.

32. 11th October, 2008 bharat@bmshemlani.biz 32 Rebates/Refunds List of documents to be attached with the claim for refund include The Assistant Commissioner of Central Excise or the Deputy Commissioner of Central Excise, as the case may be, shall, after satisfying himself that the said services have been actually used for export of said goods grant the refund of the service tax paid on the specified services used for export of said goods. As per the Board’s instructions no. F. No. 341/15/2007-TRU dt 17th April, 2008 The refund claims are directed to finalized within a maximum period of 30 days from the date of filing of refund claim

33. 11th October, 2008 bharat@bmshemlani.biz 33 Rebates/Refunds Recovery of Refund granted Where any refund of service tax paid on specified services used for export of said goods has been paid to an exporter but the sale proceeds in respect of the said goods have not been realized by or on behalf of the exporter in India within the period allowed under the Foreign Exchange Management Act, 1999, including any extension of such period, such service tax refunded shall be recoverable under the provisions of the said Finance Act and the rules made thereunder, as if it is a recovery of service tax erroneously refunded. 

34. 11th October, 2008 bharat@bmshemlani.biz 34 Rebates/Refunds What is time limit within which refund/rebate should be granted? Whether any interest is payable for delayed payment of refund? Whether Show Cause Notice to be issued for rejection of part or full refund claim?

35. 11th October, 2008 bharat@bmshemlani.biz 35

36. Jamnagar branch of Western India Regional Council of ICAI Refund Provisions and Issues with reference to Service Tax By CA Bharat Shemlani 11th October, 2008