Sales Tax Refund Rules, 2002
In exercise of the powers conferred by section 50 of the Sales Tax Act, 1990, read with the first and second provisos to sub-section (1) and sub-section (2) of section 10 thereof, the Central Board of Revenue is pleased to make the following rules, namely:-
1. Short title, application and commencement : — (1) These rules may be called the Sales Tax Refund Rules, 2002
(2) These shall apply to –
(a) registered manufacturer-cum-exporters and commercial exporters who zero rate all or part of their supplies under section 4 of the Act;
(b) registered persons who claim refund of such excess amount of input tax as is not fully adjusted against the tax payable during a period of one year following the tax period in which the credit first arose;
(c) investors claiming refund under the second proviso to sub-section (1) of section 10 of the Act; and
(d) registered persons claiming refund of tax other than input tax under section 66 of the Act.
(3) These shall come into force at once.
2. Definitions : — (1) In these Rules, unless the subject or context otherwise requires,-
(a) “Act” means the Sales Tax Act 1990;
(b) “claimant” means a registered person being a manufacturer-cum-exporter or a commercial exporter or an investor or any other registered person entitled to claim refund under the Act, who files a sales tax return claiming refund under these rules;
(c) “Commercial Exporter” means a person who, having no manufacturing facility of his own, opts for voluntary registration under section 18 of the Act for exclusively making zero-rated supplies of same state goods or deposits the amount of sales tax on his purchases from sales tax registered persons by filing sales tax returns on behalf of the suppliers and claims refund of input tax thereof;
(d) “officer-in-charge” means Deputy Collector of sales tax or any other officer of sales tax who holds full or partial charge of the Refund Division;
(e) “investor” means a person entitled to claim refund of sales tax on plant and machinery under second proviso to sub-section (1) of section 10 of the Act;
(f) “same-state-goods” means goods purchased by a commercial exporter against tax invoice for export as such;
(g) “supportive documents” means documents specified in rule 9 or otherwise prescribed by the Board through a general order, whether on electronic media or otherwise;
(h) “Processing Officer” means an auditor or a Senior Auditor, Deputy Superintendent or Superintendent authorized to process and scrutinize a refund claim; and
(i) “value-added goods” means such export products as are meant for direct consumption without further processing.
(2) All other words and expressions used but not defined in these rules shall have the same meanings as are assigned to them in the Act.
3. Establishment of Refund Division : — (1) There shall be established a Refund Division in each Collectorate of Sales Tax to receive, process and settle the refund claims filed under the Act.
(2) A Deputy Collector or any other officer as may be nominated by the Collector of Sales Tax, shall be the head of Refund Division:
Provided that Collector of Sales Tax may distribute work of the Refund Division amongst more than one Deputy Collectors or senior Assistant Collectors in such manner as he may deem fit.
4. Filing of refund claim : — (1) Monthly sales tax return filed by a claimant shall be treated as refund claim once all the supportive documents, in the manner specified in these rules or otherwise prescribed by the Board, have been received.
(2) The claimant shall forward to the officer-in-charge a legible photocopy of the bank-receipted return referred to in sub-rule (1), duly accompanied by the requisite supportive documents in the manner prescribed by the Board for processing and settling the refund claim:
Provided that in case of a refund claim where such supportive documents have not been so received, the officer-in-charge may require the claimant through telephone, facsimile, e-mail or by post to furnish the same within such time as may be specified by him.
5. Scrutiny of refund claim : — (1) On receipt of a refund claim, the processing officer shall assign a file or claim number and carry out necessary examination and scrutiny in order to ascertain the bona fides or otherwise of the refund claim under the law. He shall check the accuracy of declarations and calculations, etc; on the sales tax return involving the amount of refund claimed and satisfy himself that the amount so claimed as refund is properly supported by the documents as specified in these rules or otherwise prescribed by the Board to prove the genuineness and admissibility of the refundable amount. The processing officer shall also satisfy himself that the refund claimed is as per input output ratio, if any, duly approved by the Board or by a person authorized by the Board in this behalf.
(2) After having satisfied himself about the genuineness and admissibility of the refund claim, the processing officer shall submit a written comprehensive refund examination report within seven days of receipt of supportive documents to the concerned senior auditor or superintendent who shall give his conclusive recommendations thereon and pass it on to the officer-in-charge within three days of receipt of the case from the processing officer. The officer-in-charge shall satisfy himself about the genuineness and admissibility of the claim on the basis of the said report, recommendations and supportive documents.
(3) In case the claimant is the manufacturer-cum-exporter who is also making local supplies, in excess of 30% of his total supplies, the processing officer shall also satisfy himself that value of locally supplied goods fulfils the conditions of value of supply in terms of the provisions of clause (46) read with clause (19) of section 2 of the Act.
(4) Where the officer-in-charge is of opinion that any further inquiry or audit is required to establish the genuineness and admissibility of the claim or otherwise, he may make or cause to be made such inquiry or audit after approval from the Additional Collector under intimation to the refund claimant.
(5) An officer not below the rank of Senior Auditor deputed to conduct inquiry or audit of the refund claim in terms of sub-rule (4) may examine such business records and commercial documents of the claimant or of any person concerned with the refund claim in any manner as is necessary to satisfy himself about the genuineness and admissibility of the claim.
Provided that no pre-audit shall be conducted in respect of Computerized and Gold category exporters if all the supportive documents have been received and in-house computerized scrutiny does not indicate any incorrect declaration or submission of fabricated or fake documents.
6. Sanction and payment of refund claim : — (1) If, on the basis of supportive documents, refund examination report, recommendations, inquiry or audit report as the case may be, the officer-in-charge is fully satisfied about the genuineness and admissibility of the claim, he shall, subject to the provisions of sub-section (3) of section 10 of the Act, sanction the claim and send the original copy of the sanction order to the treasury officer for issuance of a cheque to the claimant:
Provided that if the claimant is liable to pay any duty or tax, additional duty or additional tax or penalty or any other amount short paid or admitted to be payable under any law administered by the Board, payment of the refundable amount shall be made only after adjustment of that unpaid outstanding amount of duty or tax or, as the case may be, additional duty or additional tax and penalty or any other amount short paid or admitted to be payable.
(2) The treasury officer, before issuing cross cheque to the claimant, shall personally ensure that cheque of only such amount is issued to the claimant as is specified and sanctioned in the sanction order or worked out after deduction of amount as per proviso to sub-rule (1):
Provided that refund cheque shall be cross cheque to be deposited in the declared bank account of the registered person-cum-claimant and shall be issued to the claimant only through courier service on claimant expense, or through urgent mail service with due acknowledgement:
Provided further that the treasury officer shall maintain all the records and registers, etc; prescribed under the treasury or financial laws for the purpose of keeping account of payment of Federal revenue refunds and feed the particulars of each refund cheque in the computer besides mentioning the same in the relevant file for record purposes.
(3) The duplicate copy of the sanction order shall be retained in the Refund Division in the relevant file.
7. Extent of payment of refund claim : — (1) Refund to a commercial exporter shall be sanctioned and paid within one month of the submission of supportive documents to the extent of input tax shown in Sales Tax invoices issued by registered local manufacturers or suppliers of the goods actually exported.
(2) In case of manufacturer-cum-exporter, refund shall be sanctioned in the following manner, namely:-
(a) refund on zero rated supplies in the tax period shall be sanctioned and paid within a maximum period of fifteen days of furnishing of the supportive documents; and
(b) refund of input tax incurred on stocks in balance, to be used in connection with zero-rated supplies, shall be sanctioned and paid to the extent of amount of input tax involved on zero-rated supplies made during the last four months in all cases, eight months in respect of value-added products including textile and leather made-ups and one year in respect of stocks of cotton and hides and skins, and shall be paid in the following manner, namely:-
(i) 50% of such claim shall be sanctioned and paid within a maximum period of fifteen days of deposit of the supportive documents:
Provided that admissible refund to “Computerized”, “Gold” and “Silver” category claimants under clause (a) and sub-clause (ii) of clause (b) of sub-rule (2) shall be sanctioned and paid within five working days, seven working days and ten working days respectively after the receipt of supportive documents complete in all respects; and
(ii) the remaining fifty percent shall be sanctioned and paid after,-
(a) verification of deposit of tax paid on goods, in respect of which refund of input tax has been claimed; and
(b) after scrutiny of relevant records or accounts and verification of stocks of the claimant if not already done in terms of sub-rule (4) of rule 5:
Provided that in case action under clause (ii) is not completed within forty days of the receipt of supportive documents, because of no fault of claimant or supplier of goods on which refund is claimed the remaining fifty per cent refund shall be paid if otherwise admissible on the basis of supportive documents:
Provided further that manufacturer-cum-exporters who zero-rate their supplies and also make domestic supplies duly reflected in their monthly return, may, ipso facto, deduct the amount of tax payable on their domestic supplies from the amount of refund due on their zero-rated supplies and claim refund only for the balance amount, if any;
Provided also that refund to the manufacturer-cum-exporters who zero-rate or intend to zero-rate hundred per cent of their supplies and fall under category ‘Others’, shall be sanctioned and paid in such manner that they will get refund within fifteen days of filing of the supportive documents on goods already exported at the time of claiming refund and fifty per cent on goods yet to be exported and balance after all the remaining goods have been actually exported and after verification of deposit of input tax and audit of records and accounts and verification of stocks as aforesaid.
(3) The time-limit given in this rule shall not apply to cases subjected to further inquiry or audit under sub-rules (3) to (5) of rule 5:
Provided that the officer-in-charge shall inform the claimant about the subjection of his refund claim to inquiry or audit, as the case may be.
(4) The refund claims of registered manufacturers, importers, wholesalers or retailers shall be sanctioned and paid in the manner prescribed in clauses (i) and (ii) of sub-rule (2) and the first proviso to sub-section (1) and sub-section (4) of section 10 of the Act.
8. Action on inadmissible refunds. (1) In case any refund claim or part thereof is found not genuine and not admissible under the law, a notice shall be served on the claimant requiring him to show cause in writing, within fourteen days, as to why the claim or as the case may be, part thereof should not be rejected and as to why the claimant should not be proceeded against under the relevant provisions of law.
Provided that in cases where the amount of refund liable to rejection does not exceed five million rupees, the officer-in-charge shall bring to the knowledge of Additional Collector having jurisdiction in writing on the relevant file the reasons for issuing the notice.
Provided further that the cases involving amounts of refund liable to rejection exceeding five million rupees, the approval of the Collector shall be obtained before issuance of notice.
(2) After affording a reasonable opportunity of hearing to the claimant, the officer-in-charge shall issue the show cause notice to such claimant and pass an adjudication order specifying reasons therein:
Provided that in case the claimant does not respond to the show cause notice or does not appear himself, or through his authorized representative, to defend his position on three dates of hearing, the officer-in-charge may decide the case ex parte on the basis of facts and evidence available on record.
9. Supportive documents. (1) A manufacturer-cum-exporter shall submit refund claim in computer diskette in the format prescribed along with following documents, namely: –
(a) Input tax invoices or as the case may be, bills of entry;
(b) tax invoices of intermediary processes, if applicable;
(c) output tax invoices in case of domestic supplies;
(d) zero-rated invoices in case of export;
(e) bills of export (quadruplicate copy) indicating Mate Receipt number with date or airway bill or railway receipt or postal receipt besides the examination report recorded by customs officers.
(f) bill of lading and airway bill or as the case may be, railway receipt or postal receipt indicating transportation of goods out of
(g) a statement showing value and input tax on stocks in balance and the position of stocks of major inputs and outputs carried over from the previous tax period, additions in such stocks, stocks consumed or supplied during such period and stocks in balance, if any.
(2) A commercial exporter shall submit bank credit advice duly issued by the concerned bank in addition to documents specified in clauses (a),(b), (c), (d), (e), (f) and (g) of sub-rule (1).
(3) An investor shall furnish the following documents, namely:-
(a) Bills of entry or tax invoices indicating import or purchase of plant and machinery;
(b) plot allotment order or ownership documents of the premises where such plant and machinery has been installed; or
(c) rent deed in case the plant and machinery has been installed in the rented premises;
(d) electricity and gas consumer numbers as applicable;
(e) list of items to be produced alongwith production capacity of each machine; and
(f) installation certificate issued by the designated officer of Sales Tax Collectorate.
(4) In case of refund claimed under section 66 of the Act, the following documents shall be submitted, namely:-
(a) bill of entry or input tax invoices and tax invoices of intermediary processes (if applicable) as the case may be;
(b) output tax invoices in case goods have been supplied domestically;
(c) zero-rated invoices in case goods have been exported;
(d) export documents mentioned in sub-rule (1); and
(e) inventory statement, if required by the officer-in-charge.
(5) The claimant shall submit the supportive documents in original along with one set of photo copies and the original supportive documents shall be returned to the claimant after tallying with the photocopies by the officer-in-charge or any officer authorized by the Collector in this behalf, who shall endorse his proper verification on each photocopy:
Provided that the original quadruplicate copy of the bill of export and bills of entry along with sales tax invoices shall be returned to the claimant after recording the following endorsement under the full signatures and official stamp of the said officer, namely:-
(6) The officer-in-charge may, for reasons to be recorded in writing and after taking permission from the Collector, call for any other document or information not specified in sub-rules (1), (2), (3), (4) and (5) in support of the refund claim or for the purpose of satisfying himself about the genuineness and admissibility of the claim.
10. Refund claim of an investor : — (1) An investor shall, in addition to the documents specified in sub-rule (3) of rule 9, submit an undertaking on a non-judicial stamped paper that he will commence production and supply of taxable goods within twelve months and has not so far claimed refund or adjustment of tax paid on purchase or import of plant and machinery.
(2) If the investor fails to commence production and supply of taxable goods within the period specified in sub-rule (1) or within such extended period as may be allowed by the Collector, the amount of sales tax refunded to him shall be recovered from him along with additional tax and penalty as provided in the Act.
11. Refund under section 66.— A registered person who claims refund of tax other than input tax under section 66 of the Act, in addition to the documents specified in sub-rule (3) of rule 9, shall file an application of refund indicating –
(a) his name, his address and registration number;
(b) date of application;
(c) amount of sales tax refund claimed; and
(d) reasons for seeking refund.
The refund shall be sanctioned after audit that no adjustment of input tax has been allowed and goods have duly been accounted for as per provisions of section 22 of the Act.
12. Profiling of exporters for the purpose of refund. (1) Each Collectorate shall develop profile of exporters categorizing them as “Computerized,” “Gold”, “Silver” or ‘Others’ on the basis of the criteria specified in this rule.
Explanation: For the purpose of this rule, the expression “exporter” means manufacturer-cum-exporter and commercial exporter.
(2) The exporters fulfilling the following conditions shall be classified as “Computerized Category” for the purpose of payment of refunds, namely:-
(a) Maintains the accounts and the records in the computer program duly approved by the Central Board of Revenue or by the Collector having jurisdiction;
(b) supplies the information in detail regarding all the purchases and supplies either through the internet or computer disc, as may be required by the Board or the Collector of Sales Tax having jurisdiction;
(c) submits the annual accounts showing imports, local purchases, sales and exports and the taxes paid as well as payable, duly audited and certified by the Chartered Accountant Firm notified by the Board;
(d) makes all the payments of fifty thousand rupees and above through cross cheques;
(e) manufactures goods in accordance with the input output ratio, if any, notified by the CBR or any other persons authorized by it; and
(f) has not been found any type of evasion or fraud of any tax including Sales Tax.
(3) The criteria for qualifying for the “Gold” category shall be that the exporter fulfils the basic conditions at (A) and any one condition at (B) below:
(A) (i) that audit conducted by the sales tax department or by chartered accountant confirms no evasion of sales tax or filing of wrong refund claim with minimum 90% claim acceptance as per last audit; and
(ii) that no case of commercial fraud is proven against him; and
(B) (i) that the exporter is a company listed on the stock exchange; or
(ii) the exporter has exported goods valued at minimum fifteen million US dollars per annum on average during last three years as per certificate issued by the banks; or
(iii) the exporter has manufactured and exported value-added goods valued at a minimum of one million US dollars per annum on average during the last three years as per certificate issued by the banks, and such value-added exports constitute at least 80% of his total exports; or
(iv) the exporter has been adjudged as one of the best exporters under the Export Promotion Bureau’s programme for incentivisation of exporters.
(4) The exporters shall be classified as category “Silver”, with the same conditions as for ‘Gold’ category, except that the minimum limit for export of all goods will be seven and half million US dollars and, for export of value-added goods, half million US dollars, during thelast twelve months as per certificate issued by the banks.
(5) The following class of exporters shall be treated as category “Other”, namely: –
(a) persons not falling under categories of “Computerized”, “Gold” and “Silver”;
(b) persons disqualified from either of the categories “Computerized” or “Gold” or “Silver” and down-graded by Collector Sales Tax, to category “Other” directly if their claim acceptance levels under audit are less than ninety per cent or forged or untrue documents are found to have been submitted after profiling in either of the said categories;
(c) once an exporter is down-graded, he shall not be up-graded for at least eighteen months and may only be considered by the Collector for upgrading, if he is satisfied that during the eighteen months of down-grading period, the exporter has met the requirements of respective category for continuous period of eighteen months; and
(d) persons involved in a prosecution case of tax fraud under the Act or any other enactment shall be rated in category “Other” even if they fulfill rating criteria for “Computerized”, “Gold” or “Silver”.
(6) If a person in a lower category improves, whether on the basis of audit or on the basis of other prescribed criteria, his category rating shall be upgraded accordingly on the basis of a review by the Collector on six monthly basis on the recommendations of a Review Committee comprising representatives of the Export Promotion Bureau, Collectorate of Sales Tax, Chamber of Commerce and Industry, and exporter’s respective association, if any, of which the exporter is a member.
(7) The Review Committee shall select a Secretary whose name, address and fax number, if any, shall be notified for the information of all exporters.
(8) The Review Committee shall meet every month to review–
(a) the cases rated or categorized six months earlier;
(b) reference from any organization for down-grading category of any exporter; and
(c) reference from any exporter for up-gradation of his category.
13. Miscellaneous. (1) All such refund claims that have not been subjected to pre-sanction inquiry or audit shall invariably be audited on quarterly basis subsequent to payment.
(2) In cases where it has been found during post-payment audit that refund has been paid in excess of the claimant’s entitlement, excess paid amount shall be recovered along with additional tax and penalty besides any other penal action that may be taken under the Act.
(3) The refund claims of a registered person found indulged in tax fraud shall not be finalized before thorough pre-audit.
(4) The refund claims shall be processed and finalized on ‘first come first served’ basis.
14. Saving. The admissible refund claims received with supportive documents up to the date of promulgation of these rules shall be sanctioned and paid in accordance with the provisions of the Sales Tax Refund Rules, 2000:
Provided that refund claims filed by commercial exporters for exports made till 31st December, 2002, shall also be sanctioned under the Sales Tax Refund Rules, 2000, after production of Bank Credit Advice (BCA) showing receipt of sales proceeds in foreign exchange from the country to which the goods have been exported.
15. Repeal : — The Sales Tax Refund Rules, 2000 are hereby repealed.