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Corporate News *  Service tax penalty can’t survive when assessee acted on dept.’s own view of non-taxability: Delhi High Court. *  GST section 74 extended limitation questionable when form 26AS mismatch was already known: Karnataka High Court grants interim relief. *  CGST demand prima facie impermissible after state GST settlement under section 128A: Bombay High Court. *  Supreme Court asks GSTAT to sympathetically consider delay as taxpayers pursued remedy before wrong forum. *  Supreme Court stays Tripura High Court ruling protecting genuine buyers from ITC denial over supplier’s GST default. *  Diary entries alone can’t prove clandestine removal of goods: CESTAT quashes excise penalty on steel trader. *  Customs could investigate preferential tariff claims even before sec. 28DA: Delhi High Court. *  Customs dept. relied on fake AI generated case laws: supreme court quashes Rs. 425.28 crore penalty. *  No GST exemption in affiliation and annual registration charges for admission or conduct Of examinations: GSTAT. *  Mere invoices, cheque payments insufficient to establish genuine movement of goods: GSTAT restores Rs. 43.44 lakh ITC demand. *  Consolidated GST show cause notice covering multiple financial years is not without jurisdiction: Delhi High Court. *  Construction of independent houses on separate plots not taxable as ‘Residential Complex’ without common facilities: CESTAT. *  GST penalty exceeding statutory maximum unsustainable; Allahabad High Court quashes ? 50,000/- penalty after taxpayer filed return and paid late fee. *  GST order against standard chartered bank passed without hearing set aside by Bombay High Court. *  Retracted statements can’t be relied upon without cross-examination: CESTAT quashes gold confiscation. *  Burden to prove misclassification lies on customs department: CESTAT. *  CESTAT quashes Rs. 98 lakh excise demand on clearance of used refractory brick scrap. *  Service tax demand on irrigation works quashed: Karnataka High Court rules sale of goods component not taxable as service. *  GSTAT restores tax and penalty for transporting iron scrap without E-way bill citing intent to evade tax. *  Madras High Court stays GST recovery from directors without opportunity to show cause under section 89. *  Madras high court stays GST recovery notice against directors; finds prima facie case on applicability of section 79(1)(c). *  Procedural lapses can’t justify harsh punishment without serious customs breach: CESTAT quashes customs broker licence revocation. *  Service tax payable on land leasing and sports complex charges: CESTAT. *  Settled customs dispute can’t be reopened through Article 226 challenge to interest liability: Delhi High Court. *  Mere facilitation of customs clearance can’t establish knowledge of smuggling: Madras High Court. *  GST registration cancellation stayed: Allahabad High Court questions 99% ITC utilisation cap under rule 86B. *  Composition scheme lapses automatically on crossing Rs. 1.5 crore turnover: GSTAT. *  Gujarat High Court quashes GST cancellation orders after officer relied on non-existent AI-generated case laws. *  Importers liable for customs duty benefits availed through manipulated scrips: Delhi High Court. *  Procedural E-way bill lapse alone can’t justify penalty where genuine transaction and absence of tax evasion are established: GSTAT.
Subject News *  Documentary evidence dominates probe, further custody unwarranted: mumbai court grants bail in Rs. 22.44 crore customs duty evasion case. *  Business premises can’t remain sealed for non-participation in GST search: Allahabad High Court. *  GST pre-deposit must be refunded proportionately when taxpayer partly succeeds in appeal: Bombay High Court. *  Supreme Court grants 30 days to file GST appeal; keeps pre-deposit issue open due to deposit in parallel CGST proceedings. *  GST demand can’t exceed amount proposed in SCN: Allahabad High Court quashes Rs. 20.47 Crore order. *  Hundreds-of-crores GST demand and heavy 10% pre-deposit no ground to bypass statutory appeal: Punjab & Haryana High Court. *  Delhi High Court refuses to entertain challenge to gold confiscation due to statutory appeal remedy and unexplained delay. *  Procedural error in customs broker licence inquiry can be rectified through remand: Delhi High Court. *  GSTR-2A mismatch alone can’t justify ITC denial without invoice-wise verification; personal hearing mandatory: GSTAT. *  GST order passed without uploading personal hearing notices violates sec. 75(4): Allahabad High Court. *  TAX EVASION - Sec. 74 GST SCN quashed for not spelling out fraud, wilful misstatement or suppression: Allahabad High Court. *  STPI’s SOFTEX certification and NoC charges taxable as business support services: CESTAT. *  Suspicion can’t replace proof: CESTAT quashes penalty in alleged gold-smuggling operation. *   Limitation runs from communication of order: Madras High Court upholds rejection of delayed GST Appeals. *  Rajasthan High Court quashes GST demand over unsigned show cause notice. *  ITC recovery upheld where supplier failed to deposit GST: Rajasthan High Court. *  Customs commissioner’s empowered to make port trust liable for duty on pilfered goods: Supreme Court. *  Rectification proceedings can’t be used to challenge an uncontested GST assessment through a writ petition: Andhra Pradesh HC. *  GST proceedings against deceased proprietor unsustainable without notice to legal heir: GSTAT. *  Mere availment of ineligible self-assessed ITC doesn’t amount to suppression without evidence of fraud or wilful misstatement: GSTAT. *  Disposal of mining overburden by entity authorised by mining lease holder constitutes taxable service: CESTAT. *  Toll plaza data not mandatory for ITC refund: GSTAT. *  Disputed GST fraud allegations require investigation: Punjab and Haryana High Court makes interim bail absolute in alleged fraud and GST fraud case. *  Non-manufacturer contractor liable to deposit excess excise duty collected from buyer: CESTAT. *  GST order can’t reject taxpayer’s reply as “not satisfactory” without reasons: Madhya Pradesh High Court. *  Uncorroborated statements can’t establish alleged diversion of duty-free goods: CESTAT. *  Erection services were not liable to service tax prior to 10th september 2004: CESTAT. *  Sec. 74 GST notice must spell out statutory ingredients for invoking extended tax demand proceedings: Allahabad High Court. *  No jurisdictional bar under section 6(2)(b) in parallel CGST SGST proceedings: Delhi High Court refuses to bypass GST appeal remedy. *  Madras High Court remits GST demand for fresh adjudication after taxpayer claims it was unaware of SCN following business closure.  

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Publish Date: 17 Mar, 2012
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Amendment in Refund scheme under Rule 5 of Cenvat Credit Rules, 2004

Amendment in Refund scheme under Rule 5 of Cenvat Credit Rules, 2004

Prepared By: -
Preeti parihar
Ankit Palgauta

Rule 5 of Cenvat Credit Rules, 2004, prior to Budget, 2012, allowed the refund of duty/service tax paid on any input or input service which is used –
 
-                     in the manufacture of final products which is exported; or
-                     in the intermediate product cleared for export; or
-                     in providing output service which is exported.
 
The refund of input duty and input service tax is allowed only if the manufacturer/exporter is unable to utilize that credit –
 
-                     in paying the central excise duty on goods cleared in home country; or
-                     in paying the Service tax on output service,
 
Also, the refund is not allowed if the exporter avails the drawback or claims the rebate of duty or service tax.
 
But there was condition that there should be correlation between the input and input services used for manufacture of final product. Thus, the exporter has to tell the inputs used in manufacture of final product and duty on the same. It is very cumbersome procedure.
 
Amended Rule 5 of Cenvat Credit Rules, 2004-
 
Budget, 2012 has amended the said rule 5 of Cenvat Credit Rules, 2004. The amended rule 5 says that the refund of Cenvat Credit will be allowed to –
 
(i)                 A manufacturer who clears a final product or an intermediate product for export without payment of duty under bond or letter of undertaking, or
(ii)               A service provider who exports an output service without payment of service tax.

The new rule says that the refund shall be allowed on the basis of following formula:-
 
Refund amount = (Export turnover of goods+ Export turnover of services) x Net CENVAT credit
                                                                Total turnover
Where,-
 
(A)  Refund amount means the maximum refund that is admissible;
(B)   Net CENVAT credit = Total CENVAT credit availed on inputs and input services – Reversal under rule 3(5C);
(C)  Export turnover of goods = Total value of final products + intermediate products exported under bond or letter of undertaking;
(D)  Export turnover of services‖ means the value of the export service calculated as follows:-
Export turnover of services = payments received for export services + export services whose provision has been completed for which payment was received in previous period – advances received but service not provided.
(E)   Total turnover =  Value of all clearances including exempted goods, dutiable goods and excisable goods exported + value of export services + value of domestic services + As such removal of inputs.
 
Also, the refund may be claimed under this rule prior to commencement of the CENVAT Credit (Third Amendment) Rules, 2012 and within one year from such commencement.
 
Further, the condition of non availment of drawback or rebate has been kept intact.
 
Net Effect of amendment-
 
This amendment has simplified the procedure of claiming the refund under Rule 5 of the Cenvat Credit Rules, 2004. Under old Rule, the refund was allowed only if the manufacturer-exporter/service-exporter was unable to utilize the credit. This condition is now removed. However, there would be negligible effect of the same as no prudent man will file the refund of the credit which he can utilize in paying the excise duty or service tax. Further, the Cenvat credit attributable to export goods/export services was to be calculated while filing the refund claim. This was bit cumbersome. We have come across the situations when the assessee has refused to file the refund due to such a cumbersome procedures. The exporter should know that particular batch of raw material is used in particular batch of finished goods. Further this particular batch of raw material was purchased from particular invoice of the supplier. This created many problems. Further, the co-relation of input service was impossible. But the department always insisted on the same.
 
Now a simple formula is prescribed and credit is allowed proportionately on the basis of quantum of goods/services exported. This amendment is going to receive a warm well come from the exporters.

 

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