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Meaning of refund
Section 11B of the Central Excise Act, 1944 provides the legal authority for claim and grant of refund of any Central Excise duty. The term refund includes rebate of excise duty paid on excisable goods exported out of India as well as of excise duty paid on material used in the manufacture of goods exported out of India.
Circumstances in which refund can be claimed.
A claim for refund of Central Excise duty arises in the following circumstances:
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money paid by mistake, clerical or arithmetical error or without authority of law, provided the same has not been collected from the buyer of the goods, as representing duty of excise;
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on return of the duty paid goods to the factory of manufacture for being remade, refined, reconditioned or subjected to any other similar process- the refund is subject to observance of conditions mentioned in Rules 173L or 97 of the Central Excise Rules, 1944;
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on finalisation of the provisional assessment refund of excise duty, if the assessee is found to have paid duty in excess;
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duty paid on non excisable goods or exempted goods or excess duty paid on account of misclassification or incorrect valuation of the goods;
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consequential refunds arising out of the orders in appeal issued by Commissioner (Appeals) or the CEGAT;
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in pursuance of any notification under section 11C of the Central Excise Act, 1944 providing exemption to any goods for a particular period if the duty has been paid contrary to a general practice;
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refund of Central Excise duty paid on sugar received for refining under Rule 100;
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refund of purchase price of unused or damaged Central Excise stamps in terms of Rule 99;
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rebate of duty paid on the excisable goods exported under Rule 12(1)(a);
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rebate of duty paid on material used in manufacture of goods exported under Rule 12(1)(b);
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refund of Modvat credit availed on inputs used in the manufacture of exported goods (under bond) as per provisions of Rule 57F(13) of the Central Excise Rules, 1944; and
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refund of unutilised advance deposits lying in balance in the current account.
Persons eligible for refund
Though section 11B of the Central Excise Act, 1944 authorises any person to apply for refund but the fact that the applicant is to furnish evidence of payment of excise duty in respect of which the refund is claimed restricts the scope of the term 'any person' used in the provision. Accordingly, in effect, a refund can be claimed only by the manufacturer. It is only in the case of exports under claim for rebate that an exception has been made to this principle. In that case, a merchant exporter is also entitled to claim rebate even though the duty has been paid by the manufacturer of the goods.
Procedure for claiming refund
An application for refund of duty is to be made in duplicate to the Assistant Commissioner of Central Excise having jurisdiction over the factory of the manufacturer, in the proper form. The application is to be accompanied by the documents evidencing payment of excise duty by the assessee and evidence showing that the incidence of duty has not been passed on to the customers.
The refund application is scrutinised and if it is found that the whole or any part of duty paid by the applicant is refundable is not hit by the provisions of unjust enrichment which means that the incidence of duty has not been passed on to the customer, an order is made in favour of the applicant. But if the refund is hit by the provisions of unjust enrichment, the amount so determined is credited to consumer welfare fund. Apart from the requirements laid down in section 11B certain procedural requirements have also been prescribed in the relevant provisions such as Rule 173L and notification no. 85/87 -CE dated 1.3.97 as amended issued under Rule 57F(13).
Refund-limitation and relevant date.
Under the provisions of section 11B, a claim for refund is maintainable only if it is filed within the period of 6 months from the relevant date. A claim filed after the stipulated period is barred by limitation. The relevant dates in respect of refunds arising out of various circumstances is defined under the section. The circumstances of refund and the corresponding relevant date are tabulated below:
| S.No. |
Circumstances of refund |
Relevant date |
| 1. |
Export rebate on final products or on the e materials used in their manufacture -
i) Export by Sea or air
ii) Export by land
iii) Export by post |
Date of shipment
Date on which goods pass the frontier
Date of despatch by post office |
| 2. |
Goods returned for being remade etc.
(Rule 173L) |
Date of entry into the factory |
| 3. |
Where refund is claimed by a person other the than the manufacturer |
Date of purchase of goods by such
Person |
| 4. |
Refund on the basis of an ad-hoc exemption order under section 5A(2) |
Date of issue of the order |
| 5. |
Any other case |
Date of payment of duty |
The time limit of 6 months is however, not applicable where the duty is paid under protest in terms of Rule 233B of the Central Excise Rules, 1944.
Unjust enrichment.
Where the burden of duty has been transferred by the manufacturer to the buyer, the refund of duty to the manufacturer would lead to his unjust enrichment. The law does not permit such unjust enrichments. In such cases the refundable amount is credited to the consumer welfare fund. The burden of proof that the incidence of duty has not been passed on to the customer is on the manufacturer. However, in case of rebate of duty in the cases of exports, refund of unspent deposits lying in the PLA and the refund of credit of duty in terms of Rule 57F(13), the doctrine of unjust enrichment does not apply.
Rebate of Central Excise duty on the exported goods.
Under Rule 12, rebate of Central Excise duty is admissible to the exporters of the goods in respect of
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duty paid on excisable goods; and
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duty paid on material used in the manufacture of goods.
The exporter is required to furnish proof of export of goods on AR-4. The rebate of duty paid on the material used in the manufacture of goods exported is not admissible if the export has availed drawback under the Customs and Central Excise Duties (Drawback) Rules, 1995.
Recovery of duty erroneously refunded.
Where a refund of duty has been erroneously given, the refunded amount can be demanded by service of notice within 6 months from the date of such refund order. In case the refund has been taken on account of any fraud/collusion or any misstatement or suppression of fact or contravention of any Rule with an intent to evade duty, the notice can be issued up to a period of 5 years instead of 6 months.
Interest payable in cases of delay in sanctioning refund.
The authorities are obliged to sanction refund within 3 months from the date of receipt of all the requisite information or documents, failing which interest is payable to the claimant at the rate of 15% per annum. |
