REFUND OF TAX - SERVICE TAX

[Dr. Sanjiv Agarwal]

Refund of Service Tax- Statutory  Provisions  

Section 11B of the Central Excise Act, 1944 deals with refund of tax. The refund applications in prescribed Form 'R' in triplicate are required to be filed within one year from the relevant date up to the enactment of the Finance Act, 2000 i.e., 12th May, 2000 (earlier six months). Explanation to Section 11B defines the relevant date to mean the date of payment of duty except under specific circumstances. Section 101 of the Finance Act, 2000 has substituted 'six months' under Section 11B with the words one year. Refund applications can therefore, be filed with the Department within a period of one year from the relevant date. If the tax ordered to be refunded is not refunded to the assessee within or period of three months of the refund application, the Department shall be liable to pay simple interest @ 6 percent per annum. Any person or assessee aggrieved by denial of refund or short refund can appeal under section 85 to the Commissioner of Central Excise (Appeals) within a period of three months from the date of receipt of order.

The claim for refund may also arise due to rectification of mistake under
Section 74, upon finalization of provisional assessment resulting in a refund under rule 6(6) or excess payment of service tax by assessee entitling him to claim refund or under rule 6(3) in case of self adjustment.

Form R of Central Excise Rules, 1944 is used for claiming refund under rule 173S of Central Excise Rules, 1944. It should be submitted to the Assistant or Deputy Commissioner of Central Excise, as the case may be. The assessee should prove that the incidence of duty has not been passed on to the buyer or any other person. This restriction of 'unjust enrichment' is applicable to Service Tax also. Assessees should comply with the following requirements -

(a)   Claim for refund must be in prescribed Form R of Central Excise Rules in duplicate.

(b)   It should be signed and pre-receipted with a revenue stamp.

(c)   It should be filed within the limitation period of one year from the date of payment of tax.

(d)   Proof should be submitted that refund will not result in unjust enrichment.

(e)   Appeal can be preferred against order denying the refund.

The refund claim should be backed by adequate documentary evidence(s) of payment of Service Tax, excess payment, refund due etc.

The claim should be filed along with all requisite papers and documents and if the same is incomplete, it may not be taken as filed properly. The refund can be granted only if the incidence of tax has not been passed on to any other person because being an indirect tax, it is assumed that the assessee who has paid the tax on a service has passed it on to the recipient of service. The onus of proof that the burden of tax was not passed to any other person lies on the claimant of such refund. All the refunds are issued by cheques are delivered to the claimant or his representative either personally against a proper acknowledgement or dispatched by registered post acknowledgement due.

 

Procedure for Claiming Refund

(i)    Application in the prescribed form (Form R) is to be filed in triplicate with the jurisdictional Asst./Deputy Commissioner of Central Excise/Service Tax.

(ii)    The application should be filed within one year from the relevant date as prescribed in Section 11B of the Central Excise Act, 1944 which has been made applicable to Service Tax refund matters also.

(iii)   Application should be accompanied by documentary evidence to the effect that the amount claimed as refund is the amount actually paid by him in excess of the Service Tax due and the incidence of such tax claimed as refund has not been passed on to any other person.

 

Refund Rules in Service Tax

. Rule 6(3):

Where an assessee has paid service tax to the Central Government in respect of taxable service not provided by him, for any reason, the

assessee may adjust the excess service tax so paid by him calculated on a pro rata basis against the service tax liability for the subsequent period, if the assessee has refunded the value of taxable service and the service tax thereon to the person from whom it was received.

 

 Rule 6(4A):

Where an assessee has paid excess service tax for a month or quarter, the assessee may adjust such excess in the subsequent month or quarter subject to the following conditions:

(a) It is not due to interpretation of law, classification, valuation and

            applicability of exemption notification.

(b) An assessee registered under rule 4(2) on account of delayed receipt may adjust without monetary limit.

(c) Other than the above, maximum of Rs one lakh can be adjusted in a month or quarter.

(d) The details for such adjustment shall be intimated to the jurisdic­tional  Central Excise  

     office within 15 days.

 Rule 6 (1):

Service tax is payable on value of taxable services received. If no payments are received, there is no need to pay service tax

 

Central Excise Rules on Refund

.      Rule 173S (Application for Refund of Duty)

(1)   Any person claiming refund of any duty of excise shall make an application in duplicate, for refund of such duty in the proper form to the Assistant Commissioner of Central Excise having jurisdiction over the factory of manufacture.

(2)   An application for refund shall be made in accordance with the provisions of section 11B of Act.

.      Form for Refund

        Form R is required to be used for claiming refund of service tax
.   Refund can be obtained for or need for refund may arise due to:

(i)    Excess payment of service tax by assessee.

(ii)    As a result of adjustment or assessment.

(iii)   Rectification of mistake.

(iv)   Service tax paid in case of export of services.

(v)   Refund of Cenvat credit in case of exports.

(vi)   Refunds arising out of appellate decisions.

.      Refund cannot be claimed/shall be denied in following situations:

(i)    Refund of excess Cenvat credit lying unutilized.

(ii)    Unjust enrichment.

.      When to claim refund:

        Refund should be claimed within the stipulated period of one year from the relevant date (date of payment of tax).

        The time limit cannot be condoned.

.      Time taken in processing of refund:

        Ordinarily three months from the date of receipt of refund applications.

.      Delay in refund carries interest @6% per annum.

.      Penalty for obtaining erroneous refund amount not less than but which shall not exceed twice the amount of service tax so erroneously refund (Section 78).

.      Appeal against denial of refund (Section 85):

        Allowed within a period of 3 months from the date of receipt of order.