Refunds – Circular Raj

Refunds under MVAT Act, 2002 has become a hot issue in VAT regime since it is a matter of highest concern for the dealers. Newly amended section 51 prescribes the procedure as well as norms for granting refund. The Commissioner of Sales Tax has been conferred certain discretionary powers under this section such as calling for additional information or bank guarantee, amount and period of such bank guarantee etc.

From the spate of circulars issued determining various parameters for granting refunds, it gives an impression that the Commissioner of Sales Tax has been granted unfettered rights and discretions in the matter. Recent Circular No. 4T of 2007 dt. 12-1-2007 is a classic example. It refers to earlier four Circulars viz. 33T of 2005, 2T of 2006, 8T of 2006 and 18T of 2006 on various dates prescribing norms for refunds. Each circular prescribes a ‘cut-off’ date before which the returns including revised/ fresh return along with application in Form 501 must have been filed. The circular is normally received after such ‘cut-off’ date which leaves no room for the dealer to plan out his action for getting refund.

It is pertinent to note here that sub-section (7) of section 51 stipulates that "no refund under this section shall be granted unless an application as provided is made and no application under this section shall be entertained unless it is made within three years from the end of the year containing the period to which the return relates".

Thus it is clear that refund application can be made within three years although period for filing revised return for any period is eight months from the end of the year.

Now turning back to the circulars, each of them gives an impression that refund claims filed after the cut off date will not be entertained. The Commissioner of Sales Tax ought to clearly mention that all refund claims filed after the date will be definitely entertained subject to the time limit prescribed under the law. This can obliviate the apprehension in the minds of the dealers as regards rejection of such refund claims.

Secondly, in spite of continuous demand from the dealers, it is not made clear by the head of the dept. as to what additional information will be called for or procedure, line of action for refund audit. These issues need to be clarified in absence of which the authorities tend to delay the refunds under the pretext of refund audit or irrelevant and impractical additional information.

Third issue arising out of the above circular is adjustment of CST dues against the refunds. The dealer has to submit a statement of declarations received/not received along with Form 501. The moot question is from where does the Commissioner of Sales Tax get this power to adjust CST dues? Entire section 51 is silent on the issue of liability arising out of non-receipt of declarations. Even looking to the practical side, the dealer is helpless so far as obtaining declarations from dealers of the other States is concerned. In spite of rigorous efforts on his part, he is unable to obtain them. If this guideline of adjustment is followed, in majority of the cases, entire refund will get wiped off. Although State of Maharashtra is more systematic and organised in the area of issuance of declarations under CST Act, other States are not so well prepared. Therefore, there are genuine difficulties in obtaining the declarations. This clause has the potential to frustrate the purpose of section 51 in toto.
The Commissioner of Sales Tax needs to
revisit this issue in a more pragmatic manner.

Correction in TIN Certificates

At last, the TIN Certificates have been mailed/delivered to the dealers. In majority of the cases some or the other corrections are required to be made in the certificates. The Commissioner of Sales Tax has issued Circular No. 13T of 2007 dt. 7-2-2007 prescribing procedure for such corrections. It appears that dealer has to carry original TIN certificate along with photocopy of TIN application in Form 108 and deposit with the designated registration officer. Acknowledgements issued to the dealers are precious and have to be preserved carefully. Clause 1(d) also states that the said officer will open dealers application for TIN in ‘Mahavikas’ to confirm the corrections. Then what was the need to ask the dealer to furnish photocopy of such voluminous application?