Sales Tax Review

March  2007

Important Trade Circulars

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

Gentlemen/Sir/Madam,        

1. Introductory:

This office had recently issued the above referred Trade Circulars laying down  the procedure for grant of refund in respect of the financial year 2005-06 and for part of the financial year 2006-07 in respect of returns filed  on or before 31.12.2006.

2. The Trade Circular No.4-T of 2007 dt.12.01.2007 states the following categories of dealers to be eligible to claim the refund,

1. In Para No.5(a) of that Trade Circular, it is mentioned that  the refund of a dealer covered by Section 8(3) of the MVAT Act, 2002, shall be granted to the extent of 90% of their claim for the refund as per the return(s) without  precondition of  refund audit.  It is further stated in the circular that these dealers can claim the refund for any subsequent return(s) filed for the period during 2006-07 even after the issue of the said circular. 

2. The PSI dealers can claim the refund for the quarter ending 31.12.2006 ( apart from earlier periods), if the return(s) along with the form-501 are filed on or before 31.01.2007. 

3. In all cases other than mentioned at (a) and (b) above, the dealers who have filed the return(s) up to 31.12.2006 were considered eligible for the grant of refund.

3. The procedure for grant of refund to different categories of dealers is stipulated in the said Trade circular dt. 12/01/2007. The same is again reproduced here for ready reference:

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.   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.
   
   The refund of dealers covered by sec. 8(3) of the MVAT Act for any  return filed in respect of any 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.  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 for a particular period only because all or some of the declarations under the Central Sales Tax Act, for that period are not received.  In all such cases, after adjusting the CST payable as per CST Act, 1956 in respect of all such unreceived declarations, 90 % of the 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 production from the old and expansion investments are identifiable, then in such cases, the refund will be granted only in respect of purchases proportionate to the production from expansion  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  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 sub-para (d),and exporters, who have been granted a refund for any earlier period after completing the refund Audit and the audit has  shown discrepancy of less than 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.

4. In continuation of the above Trade Circulars, it is now decided to relax certain conditions for grant of refund during the current financial year :

1. All  dealers who have filed the returns for any earlier period up to 28/02/2007 can also claim the refund as per the conditions mentioned in the circular 4T of 2007. The dealers will have to file the form No. 501 to the respective refund granting authority on or before 12/03/2007.
    

2. The dealers covered by sec 8(3) of the MVAT Act and sec. 5 (1) of the CST Act, can claim  refund for any return filed upto 28/02/2007. The form No. 501 is to be filed to the respective refund granting authority on or before 12/03/2007.
    

3. In para 5 (c) of the Trade Circular 4T of 2007, it is provided that the refund will be granted after adjusting the CST liability due to non receipt of CST declarations. It is now decided that, the dealers who wish to claim the refund in respect of unreceived declarations under the CST Act, can do so by furnishing a Bank Guarantee equal to the amount of 15% of the refund claim covered by the respective form no. 501, valid for 21 months with a further claim period of 3 months. After furnishing the requisite Bank guarantee, the refund granting authority will grant the refund to the extent of 90% of the refund claim. The balance 10 % of the refund claim will be granted in due course after completing the refund audit. Needless to state, the disbursement of refund claim against the Bank Guarantee of 15% is not applicable in respect of those refunds which are withhold/ unclaimed for reasons other than for the non-production of CST declarations.

1. It is again clarified that the refund which is not eligible as per the para 3(d) of this circular cannot be claimed by furnishing any Bank Guarantee.

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

6. The refund granting authority while granting the refund should clearly mention in refund sanctioning order in form No. 502 the following details.
    

   		Rs.
   1.	Amount of refund claimed as per form No. 501 :	_____________________
   2.	If Refund Audit is completed:	____________________
   	(a) Amount disallowed :     (-)	_____________________
   	(b) Amount approved   :	_____________________
   3.	Refund granted earlier, if any:	_____________________
   4.	Refund to be granted:	_____________________
   5.	Refund actually granted under this order:	_____________________
   6.	Balance refund due /withhold, if any:	_____________________

7. The refund claimants must submit alongwith form 501 the details of his bank account (the names of the bank, branch and account number) alongwith a cancelled blank cheque.  Those who have already submitted the form 501, should submit these details alongwith the cancelled blank cheque on their letterhead.
    

8. 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.
    

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

 (B. C. KHATUA)
Commissioner of sales Tax,
Maharashtra State, Mumbai.