Background of the Circular:- CENVAT Credit Rules, 2004 (‘CCR) permit availment of credit of excise duty on inputs and service tax on input services used for manufacture of dutiable goods or providing output services. In order to zero-rate the exports, Rule 5 of CCR provides that such accumulated credit can be refunded to the exporter subject to conditions provided in Notification No. 5/2006-CE (NT) dated 14.03.2006 (subject notification’).

Exporters of services have represented that they are facing difficulties in getting refunds in terms of the subject notification. The refund sanctioning authorities have pointed out various legal / procedural impediments leading to delays in grant of refund to exporters of services.

CBEC has issued the present circular clarifying the correct position to be adopted in order to overcome the specified legal / procedural impediments.

Clarifications provided

  • It has been clarified that there cannot be different yardsticks for establishing the nexus for taking of credit and for allowing refund of credit. In this regard, the circular states that the yardstick to be applied is whether or not the absence of any input/input service adversely impacts the quality and efficiency of the provision of service exported. In case it does have an adverse impact, the same should be considered as eligible input or input service.
  • The assessees would be required to file the following depending on the value of the refund claim per quarter:

1. If refund claim is less than Rs. 5 Lakhs in a quarter – A declaration containing the prescribed details

2. If refund claim exceeds Rs. 5 Lakhs in a quarter – A certificate containing prescribed details from the Statutory Auditor or a Chartered Accountant who audits the accounts for Income Tax purposes.

The departmental officers are directed to make a basic scrutiny of the documents based on the declaration to sanction the undisputed amount of refund and the balance claim may be decided after following the dispute settlement process.

  • The present Circular also clarifies that credit may be allowed for the past period where no exports have taken place, since no bar is provided in the subject notification. It has also been specifically clarified that in case of service providers exporting 100% of the services, such disputes should not arise and refund of credit, irrespective of when it has been taken, should be granted, if otherwise in order.
  • Further, with respect to the problem relating to incomplete invoices furnished by the exporters, it has been clarified that a liberal view may be taken in light of various judicial pronouncements.
  • The present Circular, apart from clarifying the aforesaid aspects, also states that the concerned refund sanctioning authorities should decide all claims of exporters within 30 days of their receipt as has been prescribed in notification No. 17/2009-ST. The authorities have been instructed to implement the said Circular with immediate effect and dispose off all the pending claims accordingly.


1.       Circular No. 120/01/2010 – ST dated January 19th 2010.

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October 2020