Sales Tax Review

January  2007

Important Trade Circulars

No.VAT/MIA-10/07/Adm-5/3

Gentlemen /Sir /Madam,

1. Introductory:

This office had earlier issued the above-referred Trade Circulars laying down procedure for grant of refund for the financial year 2005-06 and for part of the year 2006-07.  The above circulars were applicable for the returns filed up to 31/07/2006.

 

The automation of the refund branch is still a few months away.  It will, therefore, take some time before a regular procedure for grant of refund can be established.  The present instructions for the grant of refunds are being issued accordingly.

2. Applicability of this circular:

1. Grant of refund under this circular is admissible to only those dealers who have filed the return for any earlier period on or before 31^st December 2006 and the application in Form 501 on or before 31.01.2007.  The Return claiming the refund should have been filed with the respective return branch and the Form 501 is to be submitted to the concerned refund granting authority.
    

2. The  P.S.I. dealers can claim the refund under this circular also for the quarter ending  31^st December 2006 if the return(s) along with form 501 is filed on or before 31^st Jan. 2007.
    

3. The dealers covered by section 8(3) of the MVAT Act ,2002 can also claim the refund under this circular for any subsequent period during 2006-07 as per the conditions of this circular only.  

3. Application for Refunds

The application for the refund is to be made in Form 501 appended to the Maharashtra Value Added Tax Rules, 2005 [hereinafter referred to as ‘the Rules’].  For dealers situated in Mumbai, the application is to be made to the Officer-in-charge of VAT Refunds [Joint Commissioner, Refunds], Vikrikar Bhavan, Mazgaon, Mumbai-400 010.  For dealers situated outside Mumbai, the application should, at present, be made to the Officer-in-charge of VAT refunds in the jurisdictional Sales Tax Office.  The Annexure to the Form 501 provides for details regarding the purchases made and details regarding the suppliers.  This information should, as far as possible, be provided in both hard copy as well as a soft copy format, which may be submitted along with the application in Form 501.  Any refund under this circular will, of course, be subject to the dealer making an application in Form 501.

4. Additional Information

Section 51 of the Act authorises the departmental authorities to ask for additional information [other than that provided in Form 501] before grant of refund under section 51. The departmental authorities may, at their option, depending upon the individual case, decide to either conduct a refund audit or call for additional information or grant a refund without calling for any additional information or the refund granting authority, with approval of the concerned Jt. Commissioner of Sales Tax, may ask for the bank guarantee for grant of refund.

5. Grant of Refund:

Refund under this circular shall be granted only to those dealers whose returns are correct, complete and self-consistent and application for refund in Form 501 is made to the concerned refund granting authority on or before the date stipulated under Para 2 of this circular for the respective categories of dealers. The refund under this circular is to be granted to the extent indicated below:-

1. The refund of dealers covered by section 8(3) of MVAT Act shall be granted to the extent of 90% of their claim of refund as per the returns.  The said refund will be granted on top priority.   A prior refund Audit is not the condition for grant of this refund.  The balance 10% of the refund shall be granted after the refund Audit in due course of time.
   
   The refund of dealers covered by sec. 8(3) of the MVAT Act for any subsequent return filed for period during 2006-07, after the date of issue of this circular will also be granted to the extent of 90% of their claim of refund if the correct, complete and self consistent return along with the application in Form 501 is filed with the respective refund branch. A prior refund Audit will not be the condition for grant of this refund.  The balance 10% of the refund is to be granted after the completion of refund Audit.
    

2. The dealer in whose case the refund for a single period of return is less than Rs. 25,000/- will be granted 100% of the refund pertaining to the period of return without pre-condition of prior refund Audit. 
    

3. There could be cases wherein the refund cannot be granted only because all or some of the declarations under the Central Sales Tax Act, for any period are not received.  In all such cases, after adjusting the CST payable as per sec. 8(5) of CST Act, 1956 in respect of all such unreceived declarations, 90 % refunds will be granted without the pre-condition of Refund Audit. Needless to state that, the dealers will have to submit a statement of declarations received and not received along with the Form 501.
    

4. In case of a P.S.I. dealer who holds the entitlement certificate for part of an industrial undertaking through investments in an expansion unit and whose productions from the old and expansion investments are identifiable, (i.e. production facilities are separate), then in such cases, the refund will be granted only in respect of purchases proportionate to the production of the expansion unit in the total production. Cases in which the investment in  expansion unit does not result in identifiable (separate) production capacity but strengthens/ upgrades the existing technology, product quality or  quantity, purchases entitled to refund shall be worked out in proportion to the new (PSI) investment in the total investment. 
   
   The refund will be granted to the extent of 90% of the eligible refund without a precondition of prior refund audit. The balance 10 % of the refund will be granted in due course after the completion of refund audit.
    

5. In case of P.S. I. units other than those covered by preceding subpara (d) and exporters, who have been granted a refund for any earlier period after completing the refund Audit and the audit has not shown any discrepancy or with a discrepancy up to 5 % or less than Rs. 25000, whichever is less, 100% of the refund claim of the balance period will be granted without prior refund audit.
    

6. In all cases other than the above mentioned cases, the refund shall be granted to the extent of Rs. 50000 for the year or 60% of the refund claim as per the return, whichever is higher, without prerequisite of Bank Guarantee or the precondition of prior refund audit. (Refund audit to be conducted in due course). The dealer who desires to claim the balance 40% of the refund prior to refund audit can do so by furnishing the Bank guarantee of the like amount.    

6. In all such cases wherein the refunds are granted without prior refund audit, the audit will be completed expeditiously.
    

7. This circular cannot be made use of for legal interpretation of provisions of law, as it is clarificatory in nature.  If any member of the trade has any doubt, he may refer the matter to this office for further clarification.
    

8. You are requested to bring the contents of this circular to the notice of all the members of your association.

Yours faithfully,

(B. C. KHATUA)

Commissioner of sales Tax,

Maharashtra State, Mumbai.