MVAT circular on Grant of Refunds and specifies Fresh Guidelines for Disbursement of Refunds
No.VAT/Refund/ACST VAT 1
Trade Cir – 22T of 2010,
Sub: Grant of Refunds
Fresh Guidelines for Disbursement of Refunds
After the introduction of VAT, a large number of refund applications are being filed, as compared to the BST period. The department is undergoing transition due to which business processes have undergone many changes. As a result, a number of circulars were issued from time to time to lay down the procedure for the granting of refund, modifying the procedure etc. As a further step towards e-governance, the refund applications are now taken electronically and Mahavikas module for refunds is now operational. The entire processing of refunds has now .shifted on electronic platform. Also, due to electronic returns and electronic audit forms 704 it becomes faster to carry out the cross checking of transactions electronically. Due to electronic cross checking, visits of inspector for manual cross checking to the dealer’s place of business could be avoided. Further, section 51 of MVAT Act is amended to provide for grant of part refunds. Of late, some irregularities are noticed in granting of refunds at Palghar. Due to all these changes, it becomes necessary to review the process of grant of refunds so as to speed up the process of disbursement of refunds after proper scrutiny. Also, due to the existence of number of circulars, it sometime becomes difficult for dealers as well as departmental officers to keep a track of the circulars. In view of this, a review of all the Trade Circulars on refund, pertaining to VAT issued after 1st April 2005 is taken and in suppression of all earlier Trade Circulars relating to grant of refunds this circular is now issued.
This circular is divided into following parts:
|Part A||General Information|
|Part B||Refunds against Bank Guarantee|
|Part C||Fast Track Refund Scheme|
|Part D||Refunds under the Exporter Refunds Scheme|
|Part E||Part Refund Scheme for Annual Refunds (for periods from 1/4/08 onwards)|
|Part F||Refund After Refund Audit|
1. Applicability of this circular
The instructions/guidelines, relating to granting of refunds, contained in this circular shall be applicable for ail refund applications received after the date of issue of this circular. If in any case, refund has already been granted to the dealer, but the refund audit is pending, then the instructions relating to the Refund Audit in part F of this circular would be applicable. It goes without saying that in case either the refund has been granted or the audit has been completed before the issue of this circular, the circular instructions prevailing during the relevant time would be applicable.
2. Refunds for PSI Dealers
(a) PSI dealers, holding the Entitlement Certificate are not eligible to claim the Input Tax Credit but may claim refunds in the returns during the year. In these cases, CQB is required to be calculated and hence refund in these cases shall be granted only after completion of the assessment, except in Fast Track Scheme.
(b) The refund shall be granted only in respect of the refund claim which is. due, e.g. in case of a PSI dealer who holds the entitlement certificate for part of an industrial undertaking through investment in an expansion unit and whose production from the old and expansion unit is identifiable, (i.e. production facilities are separate), then in such cases, the refund will be granted only in respect of purchases corresponding to the production of the expansion unit in the total production. Cases in which the investment in expansion unit may or may not result in identifiable (separate) production capacity and / or may result in strengthening/upgrading the existing technology, product quality or quantity, purchases entitled for refund shall be worked out in proportion to the new (PSI) investment in the total investment. This principle shall also be applicable to applications made by PSI unit under the scheme for the refunds against Bank Guarantee, Fast track Refunds Scheme or the Special Refunds Scheme for Exporters, explained in the subsequent paras.
3. Procedure regarding refund application:
A notification has been issued on 21st August 2009 providing for filing of refund application in Form 501 electronically. In yew of this notification, all applications for refund in Form 501 shall be uploaded electronically on the department’s web site www.mahavat.gov.in. The dealer should make application in form 501 as per his periodicity of returns for the relevant financial year.
Detailed instructions regarding e filing of Form 501, along with the Ar.nexure are provided on the department’s web site.
4. Different schemes for the grant of refund
Refund applications received after the issue of this circular would be disposed in either of the following manners only. Other than below mentioned schemes, if any other scheme for grant of refund in any of earlier circulars was stipulated (Including the Voluntary Refund Scheme), then the same shall stand discontinued with immediate effect.
(a) Grant of Refund before Refund Audit: A refund may be granted before the refund audit under the Schemes:
i. Refunds against Bank Guarantee (See Part B)
ii Fast Track Refund Scheme. (See Part C)
(b) Grant of Refund after partial Refund Audit:
i. Special Refunds Scheme For Exporters (See Part D)
ii. Part Refunds scheme for Annual Refunds (For the periods 2008-09 and onward). (See Part E)
(c) Refund after Refund Audit. (See part F)
Different schemes for grant of refund are explained in the subsequent parts B, C, D and E of this circular. It may be noted that refunds prior to completion of detailed refund audit, under various schemes stipulated in this circular, will be granted till the due date of filing of audit report in form 704. Further refunds after the date of filing of form 704 shall be granted only after completion of detailed refund audit for the period to which form 704 pertains, e.g. If the dealer is enrolled from 1/4/09, then he will continue to get refunds till all the periods from 1/4/09 to the due date of filing audit Report in form 704 for the year 2009-10, say 31/01/2011. Further refund as per various schemes for the period from 1/2/11 onwards will be granted only after completion of detailed refund audit for the period from 1/4/09 to 31/03/10.
Refunds against Bank Guarantee
Under this scheme, the dealer can claim refund before the refund audit. Henceforth, procedure for the grant of refund against Bank Guarantee shall be as follows:
a) Legal provisions: As per provisions of section 51(3)(b) of the MVAT Act, 2002, bank guarantee can be obtained from a dealer, before granting the refund. In case, the applicant dealer furnishes the bank guarantee, then the refund shall be granted within one month of the furnishing of the bank guarantee [Section 51(5)].
b) Application for refunds against Bank Guarantee should be made only when the dealer is entitled to make an application under section 51(3)(a) of MVAT Act.
c) Bank: Bank Guarantee should be from any branch of a bank notified as a Government Treasury (MVAT Rule 61). The term, “Government Treasury” is defined under MVAT Rule 2(1) (f). The said definition contains the list of the banks and branches, from which bank guarantee can be submitted. A non-resident dealer may furnish a bank guarantee from any branch, situated outside Maharashtra of a bank, which is notified as a Government Treasury in Maharashtra under MVAT Rules.
d) Bank guarantee period: Bank guarantee can be obtained for a maximum period of 36 months.
e) Bank Guarantee amount: Following parameters will be applied to the dealers willing to submit Bank Guarantee for refund
|Sr||Category of dealer||Result of previous audit||Amount
|1||Diplomatic Authorities, Consulate Generals and International organisations||Not relevant||100%||Nil|
|2||Government organisations and PSU’s||Audit of immediately previous period
completed without resulting into discrepancies more than 5% of the claim.
|3||All other dealers||Not relevant unless specified by the department.||100%||100 %|
f) Bank Guarantee format: The format of Bank Guarantee is provided in Annexure 1 of this circular.
g) Grant of refund: Once the Bank Guarantee is accepted, then the refund shall be granted within 20 days without any audit. The dealer can claim refunds by furnishing Bank Guarantees till the due date of furnishing of audit report 704. The subsequent refunds against Bank Guarantee shall be granted only after completing the refund audit of the financial year to which form 704 pertains. If in the refund audit major discrepancies are found, then the dealer cannot claim future refunds by submitting bank guarantees.
h) Refund audit of BG cases: The Refund Audit of the Bank Guarantee cases shall be done on priority as soon as the last date for the audit Report in Form 704 is over. It will be in the interest of the claimant dealers to furnish the required information to the refund authorities urgently. The dealers may please note that while conducting refund audit, if major discrepancies are found, then action will be taken against the dealer, as per the provisions of the MVAT Act, 2002 along with encashment of the Bank Guarantee. In such cases, dealers will not be allowed to avail of refund by giving Bank Guarantee.
i) Release of Bank Guarantee: If after the “Refund Audit”, no discrepancies are found, then the BG submitted by the dealer could be released or rolled over for the further period, at the option of the dealer. In case the refund audit does not get completed then the bank guarantee may have to be re rolled or a fresh BG may have to be submitted till the completion of the refund audit. In any case, future refunds will not be given under B.G. till the refund audit is complete.
Fast Track Refund Scheme
Background of the Scheme:
Some dealers have continuous and large claims of refunds. These dealers are generally big manufacturers and major exporters having extensive distribution network all over India . Since the normal refund audit process takes a longer time to complete, huge amounts of working capital of these dealers get blocked in refunds. Representations had been received from such dealers, requesting to provide a scheme for quicker grant of refunds. Considering the representations received a scheme of fast track refund was declared in 2008. The scheme was modified subsequently considering the feedback received. Under this scheme, the refunds are granted without prior refund audit and without bank guarantee and hence the scope of the scheme is restricted to the specified dealers who fulfill certain conditions.
2. Salient features of this Scheme are as follows:
a) This scheme is optional for the dealers.
b) This scheme is applicable to all the refund claims after 01/04/2009
c) The scheme is restricted for the specified dealers who fulfill certain criterion.
d) Normally, only manufacturers are eligible under this scheme. However, Commissioner may enroll any other dealer other than a manufacturer under this Scheme.
e) Under the scheme, the entire refund as claimed in form 501 by the dealer is granted within 10 days from making an application for refund.
f) The refund is granted without any audit and without Bank Guarantee.
g) The refund audit is conducted immediately after the period of Form 704 is over.
h) Dealer continues to get a refund till the due date of filing of Form 704 for the previous year. Further grant of refund will be only after completion of refund audit for the period to which form 704 relates. Therefore, it will be in the interest of dealers to complete refund audit at the earliest. It may be noted that if during the refund audit major discrepancies are found then the dealers enrollment under the scheme will be cancelled.
i) The dealers enrolled under this scheme are expected to undertake the responsibility of verifying the tax payments by their vendors and if the vendors have not paid the tax, then the dealer shall make the said payment.
j) Since the scheme is open for specified dealers with repute and standing, it is expected that these dealers should adhere to the law. If any dealer is found to be not compliant then the enrollment under the scheme shall be cancelled immediately.
k) The dealers, who were enrolled earlier need not enroll again, provided they fulfill the conditions, as laid down in this circular.
3. Eligibility conditions for enrolling for the Scheme:
(a) Application for refunds against this scheme should be made only when the dealer is entitled to make an application under section 51(3)(a) of MVAT Act.
(b) Net worth: This scheme is applicable to the dealers, whose net worth of the business is more than Rs. 25 crore for the latest year for which the accounts have been finalized and audited. The formula for calculating the net worth is shown in Annexure 3.
(c) Refund period: This scheme shall be applicable for all the refund claims in respect of periods starting from 1st April 2009.
(d) Refund amount: This scheme is applicable only if the refund claim amount is more than Rs. 5 crore for previous year. In case of dealers, who do not have a previous year or whose refund claim was less than Rs. 5 crore in previous year can also apply under this Scheme as soon as the refund claim during the year exceeds Rs. 5 Crore.
(e) Nature of business: Normally, only manufacturers are eligible under this scheme. In case, any dealer other than a manufacturer desires to enroll for the Scheme, the application shall be forwarded to the Commissioner by the concerned Joint Commissioner of Sales Tax with his recommendations.
(f) Certain commodity dealers, not eligible: The dealers, who are dealing in Iron and Steel, Dyes and Chemicals or edible oil by way of sales are not eligible to avail the benefit of this scheme.
(g) Refund Audit of previous year: At least one Refund Audit in respect of ,any of the previous years should have been conducted and the differential demand, if any in respect of that year should not have exceeded 1% of the claim.
(h) Refund claim above 20%: Refund claim should not exceed by an amount of more than 20% of the claim for the immediately preceding year, unless specifically permitted by the commissioner.
(i) Returns filing of previous period: The claimant dealer should have filed all the returns and Form 704 due for the previous periods.
(j) Responsibility of ITC verification and payment: The claimant dealer should undertake the responsibility of the verification of his ITC claim to check that his vendors have deposited the taxes in respect of his purchases from them. In case the vendors have not deposited the payment, the claimant dealer shall make the payment.
(k) A dealer in whose case some major discrepancies have been noticed in the earlier periods of last 5 years will not be entitled to be enrolled under this scheme.
4. Applicability of the scheme to the newly registered dealers:
a) The benefit of this scheme can be taken even in the first year of registration, containing the effective date of registration.
b) Newly registered dealer shall he eligible for this scheme, as and when it achieves the net worth of Rs. 25 Crore.
c) In case of newly registered dealers, the net worth for the latest year for which accounts have been closed and adjusted may not be available. In such cases, net worth shall be calculated for each period of refund in the year of registration and shall be certified by Chartered Accountant/Cost Accountant. The basis for calculating the net worth shall, of course, be the standard accounting practice in India .
d) The condition regarding refund audit of the previous year shall not be applicable to the newly registered dealers for refund claim of first year.
5. Enrollment of the dealer
The dealers who fulfill above conditions can make the application as per annexure 2, for enrollment under this scheme to the Joint Commissioner in charge of the dealers’ refund case. Upon receipt of application, the concerned JC shall scrutinize the application and if found that the dealer fulfills all the conditions then he shall enroll the dealer for the grant of refund as per this scheme. If any dealer or the Joint Commissioner has any doubt regarding the interpretation of eligibility conditions, then the same should be referred to the Commissioner of Sales Tax for clarification.
6. Grant Of Refunds: Once the dealer is enrolled under this scheme then his claim of refund should be processed immediately. The dealer shall be granted the entire refund as per his claim in form 501 within 10 days from making an application for refund without audit of books of accounts or submission of bank guarantee. The dealer will continue to get his refund as per his claim til! the due date of form 704 for the previous year. At the time of submitting form 70^ for the previous year, the dealer shall declare and make payment of his liability in respect of the previous year to which form 704 relates to the extent of,
a) Un-received CST declarations for all the earlier periods from 1-4-2005. A statement of the CST declarations received/not received till the due date of Form 704 for the previous year shall be furnished.
b) Nonpayment of taxes by the vendors to the extent of his purchases from him.
Unless the dealer discharges his liability as above and his refund audit is completed, his further claims under this scheme shall not be processed. If it is noticed that the dealer had furnished any incorrect statement including regarding CST declarations, then the enrolment shall be cancelled and sever action will be taken against the dealer as per provisions of MVAT Act.
7. Refund Audit
The refund audit of the refund granted shall be carried out as soon as the Audit Report in Form 704 is received. At the time of audit, the dealer can produce the CST declarations which were not in his possession earlier and have paid the tax on it. After the completion of refund audit, the intimation as per sec 63(7) of MVAT Act will be sent to the dealer. If the dealer agrees to the intimation so received, then he shall revise his returns. If dealer does not agree with the findings in the intimation then the officer shall pass the assessment order. Since the subsequent refunds under the Fast Track Refund Scheme shall only be given after the Refund Audit is complete and the revised return is filed, it is necessary to complete the refund audit expeditiously. In order to do so, the dealer should furnish the necessary information / documents to the refund audit officer. If the dealer has opted for assessment, then he is not eligible under the Fast Track Refund Scheme for further refunds.
Special Refunds Scheme for Exporters
Background: In most of the cases of exporters, the claim of ITC does not get adjusted against the tax liability but results in refund. For this reason, the funds of these exporters get blocked affecting their cash flow. In some cases, it could also affect the competitiveness of their products in the international market.
In view of the above, a Special Refunds Scheme is being introduced for the disbursement of quick refunds to exporters.
2. Salient features of the Scheme:
i. This Scheme is restricted only to exporters. Exporter would mean an exporter, who himself exports the goods outside the territory of India u/s 5(1) or who effects deemed exports u/s 5(3) of the CST Act, 1956.
ii. Dealer shall be eligible for refund under this scheme, if his total turnover in the year preceding the refund year consists of at least 50 % as the export sales.
iii. Application for the refund claim needs be made as per the returns periodicity and the dealer need not wait till the end of the year for claiming the refund.
iv. Cross check of the purchases effected by the claimant dealers would be done using the Mahavikas utility.
v. Full Refund Audits in these cases shall be done after the Audit Report in Form 704 is filed. Part Refunds will be granted based on partial refund audits as explained in part E of this circular.
vi. This scheme is applicable for the refund claims for the period from 2009-10 onwards.
vii. Dealer eligible under the Scheme would be entitled to 95% of the refund amount, as arrived at after partial Refund Audit done in the manner specified in the latterpara in this circular.
viii. Refund shall be granted within 45 days from the date of the application for refund.
3. Eligibility Conditions for enrollment under this scheme:
a) The claimant dealer should have been registered under the MVAT Act, 2002 for more than 3 years before the date of his application for enrolment and should have filed all his returns.
b) The exporter should have actually effected sales u/s 5(1) or u/s 5(3) of the CST Act from Maharashtra during the period for which refund under this scheme is claimed.
c) Claimant dealer should have been liable to file the Audit Reports in Form 704 and should have actually filed Audit Reports due for the two years prior to the refund claim.
d) Dealer shall apply for enrolment under the Scheme in the format provided in Annexure 4 to the Joint Commissioner of Sales Tax (Refund) in Mumbai or the Joint Commissioner of Sales Tax (VAT) Adm in Moffussil, as the case may be.
e) Certain commodity dealers like those dealing by way of sales in iron and steel, dyes and chemicals and edible oil are not eligible under this Scheme.
f) Dealer should be liable to file and should continue to file the Audit Report for the subsequent periods also in order to continue to be eligible for refund under this scheme.
g) In respect of his exports of year earlier to his year of enrolment, the dealer should produce the proof of remittance, in respect of export.
h) If the Business Audit or Investigation has been carried out in the last 5 years prior to enrolment and if it has resulted in major discrepancy, then dealer shall not be eligible for refund under this scheme.
4. Calculation and grant of part refunds:
i. Dealer shall furnish a list of the CST declarations received and not received by him for the refund period along with e-501 application,
ii. Refund authority shall check the return filing status of the vendors of the claimant dealer through Mahavikas utility. Eligible ITC shall be accordingly worked out.
iii. Tax liability for the CST declarations not received by the claimant dealer would be worked out.
iv. Refund amount after adjusting for the reductions, if any as above shall be arrived at and 95 % of the amount, so arrived at, shall be granted to the dealer. Refunds in this manner shall be granted to the dealer for all the periods applied for till the due date for the Audit Report in Form 704.
v. Details of calculation shall be informed to the dealer along with Form 502. In this communication, the dealer shall be provided with the list of suppliers, who have not filed the returns or have not disclosed the turnover of sales effected to the claimant dealer.
vi. The refunds in this manner will be granted till the date of filing of audit report in form 704. The further refunds after the date of filing of form 704 shall be granted only after completion of detailed refund audit for the period to which form 704 pertains. If the dealer has opted for assessment (except on the point of un received CST declarations) then he is not eligible for further refunds under this scheme.
5. Balance Refunds:
i. Balance refund, including 5% refund retained while granting part refunds shall be granted to the dealer after completing the refund audit. Dealers need not make a fresh application for claiming this balance refund.
6. Refund Audits:
The refund audit of the refund granted shall be carried out as soon as the Audit Report in Form 704 is received. At the time of audit, the dealer can produce the CST declarations which were not in his possession earlier and have paid the tax on it. Copies of the challans of the vendors, in respect of whom the ITC had not been allowed due to non filing of returns may also be produced. After completion of the refund audit, the intimation as per sec 63(7) of MVAT Act will be sent to the dealer. If the dealer agrees to the intimation so received, then he shall revise his returns. If dealer does not agree with the findings in the intimation then the officer shall pass the assessment order. Subsequent refunds under this Scheme shall only be given after the Refund Audit for the year to which form 704 relates and no major discrepancies are found in refund audit and dealer files the revised return , if required. In case during any of these Audits, if discrepancy between the refund claimed by the dealer and actually allowed to the dealer is more than 5% , then the dealer shall not be eligible for any further refunds under this scheme.
Since the subsequent refunds under this Scheme shall be given only after the completion of Refund Audit, it is necessary to complete the refund audit expeditiously. In order to do so, the dealer should furnish the necessary information / documents to the refund audit officer immediately when it is called for.
Part Refunds Scheme for Annual Refunds
(for periods from 1/4/08 onwards)
One of the major reasons for pendency of refund application is the time required for crosschecking of the transactions. Now, department has started collecting the audit reports in form 704 electronically. Most of the audit reports for the year 2008-09 have since been received electronically. The audit reports contain dealer wise annexure of sales and purchases thereby eliminating the need of physical crosschecking to a large extent. It is now possible to crosscheck the transactions electronically which will help in expediting the disbursement of refunds.
In view of the above, the system of refund processing for the refund claims pertaining to financial year 08/09 and onward has been modified. This scheme is applicable for the dealers whose refund claims cover the full year period and. for which period the 704 audit form have been received. For the refunds pertaining to period 1/4/08 onwards, pending detailed refund audit, part refund will be granted after conducting partial refund audit.
2. Procedure for partial refund audit: The partial refund audit will be conducted in the following manner:
(a) Conduct Desk Audit:
Upon receipt of application. Desk Audit shall be conducted by Refund Processing officer. Desk Audit shall be conducted in the following manner:
i. Face checking of the refund application,
ii. Consolidation of the returns,
iii. reconciliation of list of invoice wise purchases, list of CST declarations received and not received with consolidated return figures
iv. Verification of the return filing status of the suppliers through MAHAVIKAS.
v. Face checking of the Audit Report in Form 704.
(b) Partial Refund Audit:
(i) The yearly summary of the purchase data in annexure A of refund application in form 501 submitted by the claimant dealer shall be compared with sales data of e-704 of supplier. The VAT paid on purchases i.e. input tax credit (ITC) will be matched with VAT collected on sales during this comparison. To the extent of ITC matched, the claim of dealers ITC will be allowed.
(ii)After calculation of ITC claim as above, the dealer’s liability towards un-received CST declarations (as stated in refund application in form 501) shall be reduced from his eligible refund.
3. Grant of Part Refund: Out of total claim of refund as per dealers application in form 501, the part refund will be calculated taking in to account the reductions specified in (i) and (ii) above. 90% of the amount so arrived at shall be granted as part refund by issuing refund payment order in form 502.
The result of partial refund audit shall be communicated to the dealer along with the list of suppliers in whose case the ITC is reduced. It is expected that part refund in every case shall be granted within 45 days from the date of making application in Form 501. The part refund as above shall be granted on the basis of cross verification data available in Mahavikas. Dealers will not be called for any verification before granting of part refund.
4. Grant of balance refund: After three months of grant of part refund as above, the dealers case shall be taken up for detailed refund audit. The detailed refund audit shall be conducted as per the procedure explained in part F of this circular. At the time of refund audit, dealer can produce the balance CST declarations and the details of payment of taxes by his vendors on whose purchases his ITC was disallowed at the time of granting part refund.
Refund After Refund Audit
In all cases, other than refunds against Bank guarantee, Fast Track Refunds Scheme and Special Scheme for Exporters, refund Audit shall be conducted before the grant of refund. However for the period 2008-09 and onward for Annual refund claims, part refunds may be issued after the 704 forms have been received for that period and after conducting partial refund audit, as explained earlier in part E.
Refund Audits in such cases shall be conducted after three months of giving of partial refunds.
2. General Procedure for Refund Audit
Refund Audit will be conducted before grant of refund. However, for the period 2008-09 and onwards, part refund may be granted after partial refund audit for the Annual Refund claims.
3. Procedure for Refund Audit
Refund Audit would be done in two stages. First stage would be Desk Audit and the second stage would be Field visit.
A. Desk Audit
During Desk Audit, the Refund Audit officer shall do:
a) Face checking of the refund application,
b) Consolidation of the returns,
c) reconciliation of list of invoice wise purchases , list of CST declarations received and not received with consolidated return figures
d) Verification of the return filing status of the suppliers through MAHAVIKAS,
e) Face checking of the Audit Report in Form 704.
B. Field Audit
1. The respective Refund Processing Officer shall take the appointment of the dealer for audit by issuing a notice u/s 22. An enclosure shall be attached, requesting the dealer to keep ready specific details regarding sales and purchases and their summary etc.
2. While initiating the audit, a brief interview with the authorized person regarding nature of business, business process, commodity dealt, inputs, intermediates and outputs and their ratios etc. shall be conducted.
3. Inspection of the business premises / factory / warehouse, etc. to ascertain the equipment / capital goods in use, inputs and the outputs of the dealer shall be done.
4. Responsibilities of the dealer for Audit: Detailed instructions as issued in Trade Circular 25T of 2008 regarding the duties and responsibilities of the dealer during audit will be applicable to refund audit also. Some of these instructions are reproduced here under:
a) Keep ready documents (or upload the same, if required), in support of various claims such as goods return, discounts, labour charges, branch transfers, high sea sales etc.
b) Furnish the list of CST declarations, received and not received by him in the enclosed formats (Annexure-6). Information of C forms should be quarter wise and of Form F should be month wise.
c) Furnish the CST declarations, as per the norms provided
d) In case of exports and deemed exports against Form H, list of such transactions with one set of export documents for each importer or buyer containing export invoice, bill of lading etc. should be furnished to the Auditor.
e) In case of applications before 1-12-2009, if the purchase list has not been submitted along with Form 501 in electronic format, then a separate invoice wise list of purchases in respect of which ITC has been claimed should be furnished to the Auditor. Applications from 1-12-2009 would be e applications; hence the purchases list would be obviously in an electronic format.
5. Cross checking of transactions:
a) Cross checking of transactions for period after 01/04/2008
Since the electronic forms 704 are available for the periods after 01/04/2008, the cross checking of the transactions shall be done electronically m the following manner.
The refund claimant dealer uploads the transaction wise details along with e- 501 application in annexure A. The yearly summary of the purchase data in annexure A of refund application will be matched with section 1 of annexure J of form e-704 filed by suppliers. The VAT paid on purchases i.e. input tax credit (ITC) will be matched with VAT collected on sales during this comparison. To the extent of ITC matched, the claim of dealers ITC would be allowed. If any discrepancies ape noticed at this stage, the same shall be inform to the dealer.
Thus, in order to grant refunds expeditiously, it is necessary that the dealers should file section 1 of annexure J of form 704 correctly. The section 1 of annexure J of form 704 is about dealer wise Vat sales with TIN.
b) Cross checking of transactions for period prior to 01/04/2008
Since the electronic forms 704 were not available for the periods prior to 01/04/2008, the cross checking of the transactions shall be done in the following manner.
The physical cross checks of top 10 vendors or the vendors covering at least 50 % of ITC, whichever is more, shall be done by the cross checks section or may be carried by the Refund Audit Officer through his own staff. Cross checks shall be issued only in the case of those suppliers, whose return filing record has been confirmed and have filed their returns for the period under audit. For those who have not filed returns, the ITC will be reduced. . To the extent of ITC matched, the claim of dealers ITC would be allowed. If any discrepancies are noticed at this stage, the same shall be inform to the dealer.
It shall be endeavor of the department that the cross checks are completed within 30 days, if the cross check pertains to the same division and within 60 days if it pertains to other division.
6. Conclusion of Audit Proceedings
Refund Audit may result in confirmation of the refund claim or may result in variation of the refund claim. In any case, after the refund audit, intimation shall be sent to the dealer in Form 604. If the dealer agrees to the intimation then he shall file the revised returns, else the refund audit officer shall initiate the assessment proceedings.
The Audit Officer shall submit the case for authorization to his supervisory officer.
After the approval, the refund audit officer shall pass the Refund Sanction Order in Form 502.
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. You are requested to bring the contents of this circular to the notice of all the members of your association.
Commissioner of Sales Tax
Maharashtra State, Mumbai.
Download Annexure 1 to 6 Attached herewith