By S SivaKumar, LL. B, FCA, FCS, ACSI, MBA, Advocate and R VaidyaNathan, M.Com., M. Phil, Consultant
SERVICES exporters should welcome the beneficial Notification No. 14/2016-CE(NT) dated March 1, 2016, which reads as under :
14/2016-Central Excise (N.T), Dated: March 1, 2016
In exercise of the powers conferred by rule 5 of the CENVAT Credit Rules, 2004, the Central Board of Excise and Customs hereby makes the following amendment in the notification of the Government of India in the Ministry of Finance (Department of Revenue) No.27/2012-C.E.(N.T.) dated 18th June, 2012, published in the Gazette of India, Extraordinary, Part II, Section 3, Sub-section (i) vide number G.S.R. 461(E), dated the 18th June, 2012, namely:-
In the said notification, in Paragraph 3, for clause (b), the following shall be substituted, namely:-
“(b) The application in the Form A along with the documents specified therein and enclosures relating to the quarter for which refund is being claimed shall be filed as under:
(i) in case of manufacturer, before the expiry of the period specified in section 11B of the Central Excise Act, 1944 (1 of 1944);
(ii) in case of service provider, before the expiry of one year from the date of –
(a) receipt of payment in convertible foreign exchange, where provision of service had been completed prior to receipt of such payment; or
(b) issue of invoice, where payment for the service had been received in advance prior to the date of issue of the invoice.”.
[F. No. 334/8/2016/TRU]
Note – The principal notification No. 27/2012 Central Excise (N.T) dated the 18th June, 2012 was published in the Gazette of India, Extraordinary, Part II, Section 3, Sub-section (i), vide number G.S.R 461(E) dated the 18th June, 2012.
This substitution has come into effect from March 1, 2016 and has a huge beneficial impact on the services exporters, who were being subjected to a lot of harassment under the old Clause 3(b) of the said Circular which read as follows:
“(b) The application in the Form A along with the documents specified therein and enclosures relating to the quarter for which refund is being claimed shall be filed by the claimant, before the expiry of the period specified in section 11B of the Central Excise Act, 1944 (1 of 1944)”.
Based on the decision of the Hon’ble High Court of Madras in the GTN Engineering case – 2012-TIOL-369-HC-MAD-CX, which was rendered in the context of a refund claim filed by a goods exporter, the Department vehemently applied the decision to services exporters also, despite that, in the mPortal decision – 2011-TIOL-928-HC-KAR-ST, the Hon’ble High Court of Karnataka took the view that, the limitation prescribed under Section 11Bof the Central Excise Act, 1944 is not applicable to refund of accumulated cenvat credit (perhaps, in the context of services exporters). Many benches of the CESTAT, including the Bangalore Bench, preferred to follow the GTN decision, rather than the mPortal decision despite that the latter came from the jurisdictional High Court. Some CESTAT Benches, however took the stand (and the right one, in our view) that Section 11B cannot be applied to services exporters and this view is also supported by the fact that the wordings used in Section 11B cannot be applied in the context of services exports. The Bangalore CESTAT in the Apotex Research decision – 2014-TIOL-1836-CESTAT-BANG, while following the GTN decision also took the view that, in so far as the refund claims filed by services exporters are concerned, the limitation should be one year from the date of realization of the export invoices, a view that has been taken in some subsequent CESTAT decisions.
Be that as it may… the Government would seem to have settled these issues by amending the famous Notification No. 27/2012-CE (NT), as aforesaid. A reading of the new notification suggests that the Government seems to indicate that, Section 11B, per se , is not applicable to refund claims filed by services exporters under Rule 5 of the Cenvat Credit Rules, 2004, inasmuch as, reference to Section 11B is conspicuously absent in sub-clause (ii) of Clause(b) of Paragraph (3) of the newly substituted Paragraph in Notification No. 27/2012-CE(NT).
Be that as it may…can a view be also taken that, since the Government has specified a time limit for filing of refund claims by services exporters under Rule 5 of the Cenvat Credit Rules, 2004 for the first time, such a restriction, which can be considered as against the services exporters, cannot be made applicable for the period prior to March 1, 2016? In our opinion, such a view is indeed defendable in the appellate forums and services exporters whose refund claims have been rejected on the basis of the one-year limitation period prescribed under Section 11B of the Central Excise Act, 1944 can still have hopes of getting their refunds, vis-à-vis this new development.
Taking this discussion forward… it seems that there is a dichotomy in the words used in the clause (b) of Paragraph (3) of the said Notification, inasmuch as, in the first part of the clause, the words ‘for the quarter for which refund is being claimed’ are used, while in sub-clause (ii) of clause(b) of Paragraph (3), there is a mention of the date of receipt of payment vis-à-vis the date of provision of services and/or the date of the invoice.
One way to harmoniously solve this issue would be to take a stand that the new limitation formula should be applied from the end of the relevant quarter and not vis-à-vis each export invoices. This view also find support, in terms of the Board Circular No. 112/6/2009-ST dated 12-3-2009 issued in the context of Notification No. 41/2007-S.T. dated October 6, 2007, which has, clarified interalia , that the limitation period as it then existed, from start from the end of the quarter. Currently, as is known, the Department is taking the view that the one-year limitation is to be worked out, vis-à-vis the beginning of the relevant quarter wherein, the limitation period would be an effective 9 months only.
There is yet another confusion/anomaly vis-à-vis the substituted sub-clause (ii)(b),…there is no mention of the services being provided in the said sub-clause. Consequently, it would appear that, an exporter, who issues an invoice for an advance payment received would be eligible for filing a refund claim, even without providing the services as such.
It would look like the Government has scored a self-goal with this Notification, as the services exporters can take a litigating view, as aforesaid, in terms of export transactions prior to March 1, 2016. For advocates and consultants like us, there would be more opportunities for sure.
Knowingly or unknowingly, the Government would seem to have a done a huge favour to services exporters, by issuing this Notification.