Processing of Refund Claims of 4% Additional Duty of Customs levied under Section 3(5) of the Customs Tariff Act, 1975 in pursuance of Notification No.102/2007- Customs dated 14.9.2007 as amended and various circulars issued by the Board from time to time — Documentary and procedural requirements to be fulfilled by the claimants to ensure expeditious disposal of claims - Customs - PUBLIC NOTICE NO. 39/2011

GOVERNMENT OF INDIA MINISTRY OF FINANCE, DEPARTMENT OF REVENUE OFFICE OF THE COMMISSIONER OF CUSTOMS (SEA PORT EXPORTS) CUSTOM HOUSE, NO 60, RAJAJI SALAI, CHENNAI-600 001. File No.S.Misc.28/2011/-(Refunds-Sea) Dated: 14-6-2011 PUBLIC NOTICE NO. 39/2011 Subject: Processing of Refund Claims of 4% Additional Duty of Customs levied under Section 3(5) of the Customs Tariff Act, 1975 in pursuance of Notification No.102/2007- Customs dated 14.9.2007 as amended and various circulars issued by the Board from time to time - Documentary and procedural requirements to be fulfilled by the claimants to ensure expeditious disposal of claims - reg. Attention of all importers, exporters and trading public etc. is invited to the issue of granting of refund of 4% Additional Duty of customs levied under section 3(5) of the Customs Tariff Act, 1975 (hereinafter referred to as 4% AD). Government of India has issued Notifications Nose 102/2007 dt, 14.9.2007 93/2008 dt. 01.08.2008 mandating various conditions to be fulfilled by the claimants to be eligible for the refund of 4% AD. Further, the Central Board of Excise and Customs (CBEC) has issued many circulars (N s 6/2008 dt. 28-4-2008, 16/2008 dt. 13-10-2008, 6/2009 cit. 9-2-2009, 15/2010 dt. 29-6-2010, 18/2010 dt. 8-7-2010, 23/2010 cit. 29-7-2010 27/2010 dt. 13-8-2010) on the subject and has clarified various doubts raised by the field formations. The circulars also elaborate on the mandatory procedural requirements to be complied with by the claimants before the sanction of refund of 4% AD. Even after such streamlining of the procedure regarding granting of refund of 4% AD, it is observed in many cases that the claimants are not complying with all procedural requirements prescribed and also not submitting requisite documents containing necessary particulars in time leading to delay in processing of refund claims. Keeping this in view, the present public notice is being issued for the information and benefit of claimants summarizing important provisions and clarifications issued by the Board (as on date) vide the said circulars for streamlining the processing of claims for refund of 4% AD (A) Filing of Refund Claims for 4% AD and issue of Simple Receipt: (i) The claimant shall file the application form for refund of 4% AD in the prescribed Custom Series Form 102 in duplicate along with all documents required as per the checklist (Annexure-I) with the pages numbered serially starting from the bottom. The checklist Shall also indicate the page numbers of the documents submitted. (ii) On receipt of the refund claim, a simple receipt in a prescribed format (with SR No.) will be issued immediately which would evidence date of filing for the purpose of reckoning Of time limit for filing Of the claim. At this stage the claims will not be straight away admitted. They will be taken up for initial/preliminary scrutiny as to their completeness. (iii) Only a single claim against a particular Bill of Entry will be permitted to be filed within the maximum time period of one year. Filing of refund claim for a part quantity in a bill of entry will not be allowed except when this is necessary at the end of the one year period. However, where certain quantity of goods were lost or short-landed or damaged resulting in sale of part quantity and the importer submits a refund claim for the quantity that was sold along with the declaration that for the remaining quantity they would not claim refund, the claims will be entertained even for part quantity. In other words, ordinarily, there would be a single consolidated refund claim in respect of each importer in a month irrespective of the number of Bills of Entry (B/Es) processed by the Commissionerate.(Refer Board Circulars No. 6/2008 dt. 28-4-2008 16/2008 dt. 13-10-2008). (iv) Claimants are requested to file their refund applications well in advance, i.e., at least few days before the last date of filing. Filing refund applications in the last minute shall be strictly avoided so that the section officers get reasonable time to verify the documents before admitting the claim. (B) Preliminary / Initial Scrutiny of the Claims and issue of Acknowledgement or Deficiency Memo: (i) For those claims which are found Lo be complete in all respects, an acknowledgement in the prescribed form(with S-24 No.) will be issued. Claims short of any documents/ claims with any deficiencies with regard to requisite particulars will be returned to the claimants with a deficiency memo (D.M). (ii) The applicants have to re-submit the application after making good the deficiencies within 10(ten) days of receipt of the D.M. It is to be noted that in case of deficient applications, date of initial receipt (of deficient application) will be treated as the date of filing for the purpose of reckoning the time limit for filing refund application. However{ the claim will be admitted and will be taken up for final scrutiny only after it is resubmitted after making good the deficiencies. (Refer Customs Refund Application (Form) Regulations, 1995). (C) Representation on behalf of the Claimant by authorized persons: (i) The person signing the refund application shall mention his name, designation and office seal, if any on the application. (ii) However the claimant may represent himself through authorized representative for the purpose of appearance for personal hearing / receiving of cheque in accordance with the provisions of Section 146A of the Customs Act, 1962. (D) Sale through consignment agent/stockist: (i) In case of sale of imported goods by importer through consignment agent/stockist, refund of 4% AD will be granted subject to the condition that the Consignment agent/ stockist has been authorised to sell the imported goods in terms of the agreement entered into between the importer and consignment agent/stockist and that each of the sale invoices issued by the consignment agent/stockist indicates that the sale is made by him on behalf of the importer in the capacity of consignment agent/stockist. (ii) Further, in such cases, it is also required that the applicant submits a certificate from a Chartered Accountant appointed by the importer, who either certifies the importees financial records under the Companies Act, 1956 or any ST/VAT Act of the State Government or the Income Tax Act, 1961, to the effect that appropriate ST/VAT has been paid by consignment agent/stockist on behalf of importer and that the importer, in turn, has paid or reimbursed the ST/VAT to his consignment agent/stockist along with the correlation of ST/VAT payment with 4% C VD paid on imported goods. (Refer Board Circular No. 16/2008 dt. 13-10-2008) (E) Refund Claim in the case of Provisional Assessment: In cases where the assessment is provisional, for the purpose of sanction of refund of 4% AD, it was clarified that the date of payment of duty would be, the dale of payment of CVD fit the time of import of goods and not the date of finalization of provisional assessment. The Importers, therefore, would be eligible to get the refund, if the claim is filed within one year from the date of actual payment of 4% C VD i.e., the date of payment of duty at the time of clearance of imported goods. (Refer Board Circular No. 23/2010 dt. 29-07-2010) (F) Refund Claim filed by Accredited Clients registered under the ACP scheme: In respect of Accredited Clients registered with Customs in terms of Circular No.42/2Q05- Customs dated 24.11.2005 (ACP clients), the list of documents to be submitted along with the Refund Application is given in para 4.1 of the said Board Circular No. Also, the procedure for pre-audit for claims of ACP clients has been done away with. (G) Refund of 4% AD paid through Scrips issued by DGFT under various schemes viz. DEPB/VKGUY/FPS/FMS etc.: (i) In case of 4% AD having been paid through Scrips of Duty Entitlement Passbook Scheme (DEPB), Vishesh Krishi and Gram Udyog Yojana (VKGUY), Focus Product Scheme (FPS) and Focus Market Scheme (FMS), the amount eligible for refund will be re-credited on the relevant DEPB / VKGUY / FPS / FMS scrip. (Refer Circulars No. 6/2008 dt, 28-4-2008 6/2009 at. 9-2-2009). DGFT has since issued Public Notice No. 38/2009-14 and Policy Circular No. 22/2009-2014, both dated 3-2-2010 in this regard. (ii) In view of difficulties associated with change in FDI System to allow re-credit of DEPB / VKGUY / FPS / FMS Scrips in case of 4% AD refund and also the view of DGFT that modification in software at the end of DGFT (for the purpose of re-credit of 4% CVD through Electronic Message System and its transmission to [he Customs) is not feasible at present, the Board has provided that the registration of re-credited duty scrips issued by DGFT on the basis of consolidated certificate furnished by Customs should be allowed on manual basis. The facility of manual filing of Bill of Entry for utilizing the amount of re-credited CVD refund for payment of duty is also allowed. This facility has been extended up to 30.06.2011 and it was also clarified that only those B s/E will be allowed manual processing wherein the duty involved is equal to or less than the balance amount in the re- credited scrip. It was also advised that re-credit amount of C VD refund should be used for payment of BCD and C VD only and not for 4% C VD so as to avoid cascading of subsequent re-credit of 4% C VD in the relevant scrips. Further, the Board has observed that in the interest of ensuring expeditious grant of refund of 4% C VD in cash, the importers may be advised to make the initial payment of 4% C VD in cash. (Refer Circular No 27/2010 dt, 13-8-2010 11/2011 dt.24.02.11) (H) Importance/Nature of Certification by Chartered Accountants: (i) Importance and significance of Chartered Accountant s certificate for the purpose of granting 4% AD refund cannot be over-emphasized. The trades consisting of importers maintain their financial records in a non uniform way and each importer maintains his accounts in his own unique way best known to his own Chartered Accountant. The Departmental Officers who scrutinize the refund claims cannot be said to be experts in financial accounting and book keeping. Voluminous accounts are presented to them in support of each refund claim and the Officers of the Department are bound to process these claims within a stipulated time period. In this context, the certificate given by the Chartered Accountant becomes very important. (ii) The Chartered Accountant is duty bound to scrutinize each and every paper relating to the refund claim and certify categorically the correctness and veracity of the same besides the mathematical accuracy of the numbers involved. Therefore, the Chartered Accountant s certification provides the professional interface between the importer s accounts and the Departmental Officers scrutiny. Therefore, it is felt that all qualified Chartered Accountant should provide the Chartered Accountant s certificate after minutely scrutinizing all the accounts and shall ensure that his professional competence and integrity is fully upheld while giving the certificate. (iii) The Departmental Officers should be able to rely on these certificates with a great degree of belief and therefore, the reliability factor of this certificate should be very high. It is in this context that the Board also has directed that the refund claims are to be processed expeditiously based on the Chartered Accountant s certificate. The Chartered Accountant giving the certificate shall be either the Statutory Auditor under the Companies Act, 1956 or the VAT Auditor or the Income Tax Act, 1961 (CBEC Circular No. 16/2008 dt. 13.10.2008 refers). The Chartered Accountant giving the certificate shall also mention his registration number as given by the Institute of Chartered Accountants of India. (iv) Hence it is necessary that such certificates issued by the C.As should be categorical with regard to verification of claimant s records, Books of Accounts etc. for ruling out unjust enrichment and for co-relating sales with VAT/CST payment in detail as the standards of scrutiny and certification necessary in such cases is beyond all reasonable doubts and not on selective basis. (v) Since the Department desires to expeditiously process the refund claims, the Chartered Accountant s certificate plays a crucial role and unless it is backed by highest standards of scrutiny by the Chartered Accountant, his certification would become suspect and delay the process of grant of refund. The Departmental Officers shall definitely do checking of invoices and other documents for its veracity but it is incumbent on the part of Chartered Accountant to do 100% verification before submission of the claims. (vi) Vague and unsubstantiated certificates will not only be summarily ejected but also a suitable report will be sent to the Institute of Chartered Accountants of India for taking necessary action with regard to unprofessional conduct. Hence, vague terms such as responsibility of the management, verification done on a test check basis, not aware of any reason to disbelieve, seems to have not passed on the benefit, records produced before us etc. shall not be used in such certificates as the same does not give the impression that the Chartered Accountant has conducted a thorough scrutiny of the records and the accounts in order to certify the aspects covered in their certificates. (vii) Further, the certificate regarding crossing of the bar of unjust enrichment shall contain an explanation justifying as to how the incidence of 4% AD has not been passed on to the buyer, as required under para 6.2 of the CBEC Circular No. 6/2008 dt. 28.4.2008. (viii) It has been noticed by the Board (Board Circular No. 15/2010 cit. 29-6-2010 refers) that in certain cases, refund claims have been filed with the department by some unscrupulous importers wherein forged documents were submitted for availing the 4% AD refund and the Chartered Accountants have certified without due verification in respect of the fact of actual sale of the imported goods, correlation of VAT paid with imported goods, crossing of the bar of unjust enrichment (envisaged in the notification No.102/2007-Cusfoms dated 14.09.2007.) If it is found by the departmental officers that documents submitted were forged or falsified and the C.A certificates have been issued without causing detailed scrutiny of the records, stern action will be initiated against the offenders including the C.A who has issued such certificates under the relevant provisions of the Customs Act, 1962 and other laws. Further in such cases the matter would also be referred to the Institute of Chartered Accountants of India for necessary action. (I) Miscellaneous points to be noted by the claimants while filing claim for refund of 4%AD: In all documents, certificates and the refund application etc., the additional (sought to be refunded) shall be referred to as 4% additional duty levied under section 3 (5) the Customs Tariff Act, 1975 . The acronym SAD (which is commonly used by many to refer to 4% Additional Duty levied under section 3(5) of Customs Tariff Act 1975) may be avoided in all references as the abbreviation SAD may refer to anything including the Special Additional Duty which is leviable under Section 3A of Customs Tariff Act, 1975. This Public Notice is not to be regarded as an exhaustive listing of all provisions of the Board Circulars. Only those provisions important from the Trade point of view have been summarized for information and ease of compliance by the importers with a view to ensure systematic and expeditious disposal of 4% AD refund claims. In case of any doubt/clarification, relevant provisions of Board Circulars shall be referred to with regard to the procedure to be followed. It is hoped that the claimants will take note of above and comply . with the requirements for speedy disposal of the refund claims. (S.KANNAN) COMMISSIONER OF CUSTOMS (SEA PORT-FXPORTS)