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DEPARTMENT OF SALES TAX
MANUALOF
PROCEDURE
REFUND & REFUND AUDIT
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REFUND & REFUND AUDIT MANUAL
INDEX
Sr. No. Subject Page No.
From - To1.
2.
3.
4.
5.
6.
7.
8.
9.
10.
11.
12.
13.
14.
15.
Objectives of the branch.
Organisational Structure.
Relevant provisions of Act and Rules.
Relevant Internal and Trade Circulars.
Competent Authorities and Targets.
The process in brief.
Procedure of Branch.
Refund Audit Procedure.
Duties & Responsibilities.
Inspection procedure & frequency.
Responsibility & date for updating the manual.
Record filing system.
Reporting Formats of the Branch.
Various control Registers.
Annexures.
3
4 to 5
6 to 15
16 to 32
33
34
35 to 41
42 to 62
63 to 70
71
71
71
72 to 74
75 to 76
77 to 84
10109
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2. OBJECTIVES OF THE BRANCH:-
Processing refund claims within the prescribed time limits.
To ensure that, the refund claim made in the return is valid
and accurate by audit.
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3. ORGANISATIONAL STRUCTURE:-
A) MUMBAI :-
Design.J.C. D.C. A.C. STO STI Clerk
Other
Total
Sanctionedstrength
1 8 26 21 70 70 67 263
B) MOFFUSIL :-Sanctioned strength as per re-organisation:-
Designation D.C. A.C. STO STI Clerk Total
Thane Division
Thane 2 2 4 7 11 26
Kalyan 1 3 3 7
Thane Rural Division
Thane Rural 1 3 7 16 17 44
Nalasopara 1 2 3 6
Raigad Division
Raigad 2 2 1 8 8 21
Pune Division
Pune 4 6 14 36 32 92
Solapur 2 1 3 9 10 25Osmanabad 1 1 1 3
Barshi 1 1 1 3
KolhapurDivision
Kolhapur 2 2 5 12 12 33
Satara 1 1 2 2 6
Sangli 1 1 2 2 6
Ratnagiri 1 2 3 6
Oras 1 1 2 4
NasikDivision
Nasik 2 2 3 8 10 25
Malegaon 1 1 2 4
Ahemadnagar 1 3 2 6
Dhule Division
Dhule 2 2 3 10 8 25
Jalgaon 1 2 2 5
Nandurbar 1 2 3
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Designation D.C. A.C. STO STI Clerk Total
NagpurDivision
Nagpur 2 2 5 12 12 33
Chandrapur 1 1 1 3
Gondia 1 1 2
Gadchiroli 1 1
Vardha 1 1 2 4
Bhandara 1 2 3
AmravatiDivision
Amravati 2 2 3 9 7 23
Yeotmal 1 1 2 4
Khamgaon 1 1 2 4Akola 1 2 5 8
Vashim 1 1 2
AurangabadDivision
Aurangabad 2 2 3 12 8 27
Beed 1 1 2 4
Jalna 1 1 2 4
Nanded 2 2 3 10 12 29
Parbhani 1 1 2 4
Latur 1 2 3 6Hingoli 1 2 3
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RELEVANT PROVISIONS OF ACT AND RULE:-
3.1 RELEVANT PROVISIONS OF ACT:-
3.1.1 Section-22. Audit
(1) With a view of promoting compliance with the provisions ofthis Act, the
Commissioner may arrange for audit of the business of anyregistered dealer.
For the purpose of this section, the selection of dealers foraudit shall be made
from amongst the dealers,
(a) who have not filed returns by the prescribed dates; or
(b) who have claimed refund of tax; or
(c) where the Commissioner is not, prima-facie, satisfied withthe
correctness of any return filed by a dealer or is not satisfiedwith any claim
made, deduction claimed or turnover disclosed in any returnfiled by the
dealer; or
(d) who are selected by the Commissioner on the basis of theapplication
of any criteria or on a random selection basis; or
(e) where the Commissioner has reason to believe that detailedscrutiny of
the case is necessary.
(2)..
(3) On the appointed day or, as the case may be, at anytimewithin the aforesaid
period, any officer to whom the powers and duties under thissection have been
delegated, by the Commissioner, in writing, may conduct audit ofthe business.
(The above sub-section (3) is deleted by the Maharashtra Act No.XXV of 2007
Dt. 06.08.2007).
(4) ..
(5) (a) During the course of the audit, the officer may requirethe dealer,
(i) to afford him the necessary facility to inspect such booksof accounts or
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other documents as he may require and which may be available atsuch place,
(ii) to afford him the necessary facility to check or verify thecash or stock
which may be found therein. And
(iii)to furnish such information as he may require as to anymatter which may
be useful for or relevant to any proceedings under this Act.
(b) The officer conducting the audit shall on no account removeor cause to he
removed any books of accounts, other documents or any cash orstock.
(6) ...
(7)..
(8) ...
3.1.2 Section-50. Refund of excess payment
(1) Subject to the other provisions of this Act and the rulesmade there under,
the Commissioner shall, by order refund to a person amount oftax, penalty,
interest, deposit and fee except when the fee is paid by way ofcourt fee
stamp , if any, paid by such person in excess of the amount duefrom him. Therefund may be either by deduction of such excess fromthe amount of tax,
penalty, amount forfeited and interest due, if any, in respectof any other
period or in any other case, by cash payment:
(In the above para for the words the commissioner shall refundthe words
the Commissioner shall, by order refund are substituted bythe
Maharashtra Act No. XXXII of 2006 Dt. 05.08.2006)
Provided that, the Commissioner shall first apply such excesstowards the
recovery of any amount due in respect of which a notice undersubsection (4)
of section 32 has been issued, or, as the case may be. anyamount which is due
as per any return or revised return but not paid and shall thenrefund the
balance, if any.
(2) Where any refund is due to any dealer according to thereturn or revised
return furnished by him for any period, then subject to theother provisions of
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this Act including the provisions regarding provisional refundssuch refund
may provisionally be adjusted by him against the tax due andpayable as per
the returns or revised return furnished under section 20 for anysubsequent
period: the word, subsequent shall be deleted with effect from20th June
2006.
Provided that, the amount of tax or penalty, interest or sumforfeited or all of
them due from, and payable by, the dealer on the date of suchadjustment
shall first be deducted from such refund before making theadjustment.
(For the above subsection (2) the following subsection (2) issubstituted by the
Maharashtra Act No. XXXII of 2006 Dt. 05.08.2006)
(2) If a registered dealer has filed any returns, fresh returnsor revised
returns in respect of any period contained in any year and anyamount is
refundable to the said dealer according to the return, freshreturn or revised
return, then subject to rules, the dealer may adjust such refundagainst the
amount due as per any return, fresh return or revised return forany
subsequent period contained in the said year, filed under thisAct or the
Central Sales Tax Act, 1956 or the Maharashtra Tax on the Entryof Goods into
Local Areas Act, 2002.
3.1.3 Section-51. Grant of Refunds
(1) Where a registered dealer has in any return, fresh return orrevised return
shown any amount to be refundable and has not undertaken toadjust such
amount against the amount due as per any subsequent return inaccordance
with section 50, the Commissioner shall, on an application madeby the dealer
and subject to rules, and the other provisions of this Act,grant refund of such
amount to the said dealer.
(2) (a) The registered dealer, may after the end of the year towhich the
return, fresh return or revised return relates, make anapplication in the
prescribed form after filing the said return for grant of refundof the amount
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then he may apply in the prescribed form to the Commissionerafter filing the
return for grant of refund relating to the period covered by areturn, fresh
return or revised return; or
(b) The Commissioner, within one month of the receipt of thesaid
application,
(i)may require the dealer to furnish such bank guarantees forsuch amounts
from such banks, for such periods and to such authorities as maybe
prescribed; and
(ii) may call for such additional information as he may thinknecessary.
(4) The Commissioner shall grant the refund under this sectionwithin three
months of the receipt of application or receipt of additionalinformation
whichever is later. If the additional information is notfurnished, then the
refund shall be granted within six months of the receipt of theapplication.
(5) Notwithstanding anything contained in paragraph (a), thedealer may at
his option furnish a bank guarantee for such amount, from suchbank, for
such periods and to such authorities as may be prescribed and onthe dealer
furnishing such bank guarantee, the Commissioner shall grant therefund due
under sub-section (2) or (3) within one month of the furnishingof the bank
guarantee irrespective of whether the additional information hasbeen
furnished.
(6) (a) If before the grant of refund under this section, anotice for assessment
covering the period to which the return relates is issued or ifany proceedings
under sub-section (3) or sub-section (4) of section 64 areinitiated in respect of
the period to which the return relates, then,
(i) if the dealer has not furnished a bank guarantee then norefund under this
section shall be granted ; and
(ii) if the dealer has furnished a bank guarantee then an amountequal to the
guaranteed amount shall be refunded.
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(b) If it is found as a result of any order passed under thisAct that the refund
granted under this section is in excess of the refund, if any,determined as per
the said order, then the excess amount shall be recovered as ifit is an amount
of tax due from the dealer and the dealer shall be liable to paysimple interest
at the prescribed rate per month or part thereof from the dateof the grant of
refund.
(7) No refund under this section shall be granted unless anapplication as
provided is made and no application under this section shall beentertained
unless it is made within three years from the end of the yearcontaining the
period to which the return relates.
3.1.4 Section- 52. Interest on amount of refund
Where refund of any tax becomes due to a registered dealer, heshall, subject
to rules, if any, be entitled to receive, in addition to therefund, simple interest
at the prescribed rate on the amount of refund for the periodcommencing on
the date next following the last date of the period to which therefund relates
and ending on the date of the order sanctioning the refund orfor a period of
twenty four months, whichever is less. The interest shall becalculated on the
amount of refund due to the registered dealer in respect of thesaid period
after deducting therefrom the amount of penalty, sum forfeitedand interest, if
any, charged in respect of the said period and also the amountof refund, if
any, adjusted towards any recovery under this Act or any earlierlaw or as the
case may be, under the Central Sales Tax Act, 1956. If, as aresult of any orderpassed under this Act, the amount of such refundis enhanced or reduced, as
the case may be, such interest shall be enhanced or reducedaccordingly. If the
interest is reduced, then the amount granted in excess shall berecovered as if
it is an amount payable under this Act.
Provided that, interest under this section shall not be grantedtowards any
refund granted under section 51.
Explanation. For the purposes of this section, where the refundof tax,
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whether in full or in part, includes any amount of refund on anypayment of
tax made after the date prescribed for making the last paymentin respect of
the said period, then the interest, in so far as it relates tothe refund arising
from such payment, shall be calculated from the date of suchpayment to the
date of such order.
3.1.5 Section-53. Interest on delayed refund -
(1) Where an amount required to be refunded by the Commissionerto any
person, by virtue of the provisions contained in section 51 orby virtue of an
order passed under any other provision of this Act, is not sorefunded to him
within ninety days of the end of the respective period providedin section 51
or, as the case may be, of the date of the said order, theCommissioner shall
pay such person simple interest at the prescribed rate on thesaid amount
from the date immediately following the expiry of the period ofninety days
to the date of the refund.
Provided that, where the amount becomes refundable by virtue ofan order of
the Tribunal or the High Court or the Supreme Court, theinterest under the
provisions of this section shall be payable from the dateimmediately
following the expiry of period of ninety days from the date ofreceipt of the
order of the Tribunal, the High Court or the Supreme Court, bythe officer
whose order forms the subject of the proceedings before theTribunal, the
High Court or the Supreme Court, to the date of refund. Theapplicant dealer
or person may supply to the said officer a certified copy ofsuch order and ifthe copy is so furnished, interest shall becomepayable after the expiry of
period of ninety days from the date of such supply.
Explanation. If the delay in granting the refund within theperiod of ninety
days aforesaid is attributable to the said person, whetherwholly or in part,
the period of the delay attributable to him shall be excludedfrom the period
for which interest is payable.
(2) Where any question arises as to the period to be excludedfor the purposes
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of calculation of interest under the provisions of this section,such question
shall be determined by the Commissioner, whose decision shall befinal.
1.1.5 Other Relevant provisions of the Maharashtra Value AddedTax Act,2002
Section 20 Returns and Self-assessment.
Section 21 No notice for Assessment in certain cases.
Section 23 Assessment.
Section 48 Set-off, refund, etc.
Section - 49Refund of tax on declared goods sold in the courseof interstatetrade or commerce.
Section 65 Cross-checking of transactions.
Section 96 Savings
3.2 RELEVANT PROVISIONS OF RULE:-
3.2.1 Rule-60. Grant of Refund.-
(1)Application for refund under section 51 shall be made in form501.
(2)When the Commissioner is satisfied that a refund is due, heshall pass
an order in Form 502, showing the amount of refund due andshall
communicate the same to the dealer.
(3)When an order for refund has been made under any rule,theCommissioner shall, if Applicant desires payment in cash, issueto him a
refund payment order either in form 503 or in form 504. If thedealer
desires adjustment of refund, against tax payable in respect ofany
subsequent period contained in the year to which the refundrelates under
this Act, the Central Sales Tax Act,1956, or the Maharashtra Taxon Entry
of Goods into Local Areas Act, 2003, the Commissioner shallissue a
Refund Adjustment Order in form 506.
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3.2.2 Rule-61. Bank Guarantee.-
The Bank Guarantee shall be obtained from any branch of a banknotified as a
Government Treasury. The maximum period for a Bank Guaranteeshall beof 36 months. It shall be furnished to respective JointCommissioner in charge
of grant of refunds. The Bank Guarantee shall be for suchamounts and such
periods as the Commissioner may by public notice notify fromtime to time.
3.2.3 Rule-62. Order sanctioning interest on delayed
refunds:-
(1) Where upon an application by any person claiming interest onany
delayed refund or otherwise the Commissioner is satisfied thatsuch
interest is due and payable to the applicant or any person undersection
53, the Commissioner shall record an order specifying thereinthe amount
of refund, the payment of which was delayed, the period of delayfor
which interest is payable and the amount of interest payable bythe
Commissioner therefore, and shall communicate the same to theapplicant
or person concerned.
(2) When an order for payment of interest on any delayed refundhas been
made under this rule, the Commissioner shall issue to theapplicant or
person concerned an interest payment order in Form 505.
3.3 Other Relevant provisions of the Maharashtra Value AddedTax
Rule, 2005
Rule 17 Submissions of returns.
Rule 18Special provision for first and last return in certaincases and fordealers under the package scheme of incentives
Rule 19 Separate return.
Rule 20 Complete and self-consistent return.
Rule 21 Form of Notice for assessment.
Rule 23 Form of order of assessment.
Rule 24 Application for cancellation of assessment order.Rule 25Order imposing penalty or interest.
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Rule 51Claim and grant of set-off in respect of purchases heldin stockon the appointed day.
Rule 52Claim and grant of set-off in respect of purchases madein theperiods commencing on or after the appointed day.
Rule 53 Reduction in set-off.
Rule 54 Non-admissibility of set-off.
Rule 55Condition for grant of set-off or refund and adjustmentofdrawback, set-off in certain circ*mstances.
Rule 68 Preservation of books of accounts, registers, etc.
Rule 77Particulars to be specified in a tax invoice, bill orcashmemorandum.
Rule 79 Refund of tax to eligible units.
Rule 88 Rates of interest.
4. Relevant Internal and Trade Circulars:-
4.1 Guidelines issued vide Internal Circular no.
No.:- VAT-2008/JC./ Refund and Refund Audit / B- 4579 Mumbai, Dt:
13.03.2008, Internal Circular No. 6A of 2008.
Sub : Refunds under MVAT Act.
Modifications in Internal Circular 5A of 2008
Ref:- Internal Circular No. 37A of 2007 Dt. 28.12.2007 .
Internal Circular No. 5 A of 2007 Dt. 05.03.2008.
1) INTRODUCTORY :-
This office had earlier issued Internal Circulars No. 37 A of2007 Dt.
28th December, 2007 and 5A of 2008 Dt. 05.03.2008. Thesecirculars were
issued to provide the guidelines for facilitating earlyprocessing of refunds
and to remove the difficulties faced in processing the refundclaims.
The pendancy of the refund has been reviewed and in additionto
earlier instructions, fresh guidelines are given hereunder, toexpedite the
process of granting of refund and completion of refundaudits.
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2) GRANT OF REFUND :-
. All the cases, where the dealer has filed returns for therelevant
period on or before 25th February 2008 would be eligible forgrant
of refund without prior Refund Audit and application in Form501
is filed on or before 19th March 2008, The refund without preaudit,
as per earlier circulars was not allowed in respect of theclaimant
dealers (both manufacturers and traders) of Iron and Steeland
Dyes & Chemicals. However, certain relaxations are herebygiven
to process the refund claims in respect of such dealers, if theyfulfill
any of the following conditions. This relaxation is made onlyfor the
refund processed up to 31.03.2008.
) If the Refund Audit is completed by the Refund AuditBranch
of such dealers for any previous period and no substantial
reduction in refund amount is noticed after the Refund Audit
or
) If such dealers have submitted the Statutory Audit Reportin
Form 704 for previous year.
) If the dealer is a manufacturer.
The departmental authorities are instructed to start the RefundAudit
immediately after 1st April, 2008 of the dealers to whom preaudit
refund is granted. The above mentioned categories will beaudited on
priority.
. The copy of Return claiming the refund should be obtainedfrom
the Return Branch. The dealer may be called to produce thecopies
of the challans, if necessary. The instructions contained inCircular
5 T of 2008 should be scrupulously followed. However, the
claimant dealer if encloses certified copies of the returnsalong
with the application in Form 501, then such certified copiesmay
be considered.
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. A certificate should be obtained from the dealer, certifyingthat,
no dues are outstanding against him and he has not carried
forward this refund in any of the earlier or subsequentreturns.
. The dealer should be asked to submit the necessaryinformation
required to process the refund claim. This communicationshould
invariably be made in writing and the dealer should be made
aware that his claim of refund shall not be processed unlessthe
requisite information is submitted by him.
. In case, the refund granting authority decides to assess thedealer,
then the notice for assessment should be issued within a periodof3 months from the date of submitting Form 501.
. The refund should be granted only in respect of the refundwhich
is due. e.g. in case of a P.S.I. dealer who holds theentitlement
certificate for part of an industrial undertaking through
investment in a expansion unit and whose production from theall
JC old and expansion investments is identifiable, (i.e.production
facilities are separate), then in such cases, the refund willbe
granted only in respect of purchases corresponding to the
production of the expansion unit in the total production. Casesin
which the investment in expansion unit does not result in
identifiable (separate) production capacity but
strengthens/upgrades the existing technology, product qualityor
quantity, purchases entitled for refund shall be worked outinproportion to the new (PSI) investment in the totalinvestment.
. Where the dealer has submitted application in Form 501 and
subsequently revised the corresponding return claimingrefund
for any reasons, then the corresponding application in Form501
would become redundant and such dealer should be asked to
submit fresh application in Form 501 to that effect. In caseswhere,
after submitting the applications in Form 501 and if it isnoticed
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that the returns are not filed as per the periodicity, in suchcase
the dealer should be asked to submit the revised returns asper
the correct periodicity and also the new application in Form 501.
Only those cases wherein the claim of refund remainsunaltered
shall be eligible for pre audit refund as per this circular. Nofresh
annexure will be required if the contents of the earlierannexure
remains unaltered. This action on the part of the dealershould
have been completed on or before 19th March 2008.
. The completed Form 502 should be submitted to R.P.O. sectionfor
issue of Refund Payment Orders. All the actions of granting
refund in the above mentioned cases should be completed onor
before 25th March, 2008.
3). POST GRANT OF REFUND ACTIONS / REFUND AUDIT
After grant of refund all the cases be audited as per
principles laid down hereunder.
I.
Desk Audit :- If the refund claim is less than Rs. 5 lakh perForm 501 ,then only desk audit is to be done (No field visits.).The desk audit is
to be conducted immediately after the grant of refund. Thedesk
audit is to be completed in the following manner.
a) The copies of Form 704 to be obtained from Business Audit
Branch .( If available)
b) The refund granting officer should first ascertain from
MAHAVIKAS the position regarding the filing of returns byall
the suppliers of the refund claiming dealer.
c) While checking, the audit officer must check that theturnover of
sales and the taxes paid by the supplier are enough to coverthe
claim of ITC of the refund claimant in respect of thatsupplier.
d) In cases, where the dealer has effected Interstate Sales, thedetails
of availability of declarations under CST Act should bechecked
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by calling the dealer with details and pass the appropriateorder
accordingly (wherever necessary).
e) Visit is not necessary in these cases unless there arespecial
circ*mstances due to which visit is found necessary. Forthis
approval of JC concerned should be taken.
II. Field Audit :- The Field Audit is to be conducted in all thecases
wherein the refund claim is Rs. 5 lakh or more.
4 ) CROSS CHECKING OF THE TRANSACTIONS :-
While conducting the Desk Audit or the Field Audit, thecross
checks to be done in the following manner-
. The officer should confirm filing of returns by all thesuppliers of the
refund claiming dealer from the MAHAVIKAS and from Return
Branch.
. For the purpose of cross checking, where total ITC claim inrespect
of a supplier is of Rs. 50,000/- and above and where return hasbeen
filed, 10 % of suppliers will be selected by way of RandomSampling
Method (duly approved by the concerned JC) and to be sent forcross
checking to the cross check section .
. Where ITC claims in respect of any supplier is less than Rs.50,000/-
per supplier and where return has been filed , 5 % of supplierswill
be selected by way of Random Sampling Method (duly approvedby
the concerned JC) and be sent for cross checking to the crosscheck
section. During the cross check, if it is found that anytransaction is not
accounted for by a particular supplier in his books of accounts, then
a comprehensive Business Audit of that supplier is to betaken
immediately by the Refund Audit Branch. The Cross Check Cell
should immediately inform this fact to the Refund AuditBranch.
Also, instead of the sample cross check, 100% of the crosschecks of
the claimant dealer is to be issued immediately. The claimantdealer
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should be informed about such result and reasons for issuancesof
100% cross checks in his case. The claimant dealer should alsobe
informed if any of his suppliers is not available on the givenaddress.
. It is pertinent to note here that, the information about suchsuppliers
should be shared with all officers through E-mail. The list ofsuch
dealers should be prepared and monthly updating should be doneby
the Cross Check Section. The information about such suppliersmay
also be published on the official Web Site of the departmentafter
canceling the R.C. of the concerned dealer to make aware thedealers
at large. If it is found during the process of cross check thatthe
supplier is not found at the address given, then list of suchdealers
should be shared with all the officers through Email. The actionto
cancel the TIN Certificate or Registration Certificate shouldbe
initiated in respect of such suppliers, in due course. Thedetails of
such suppliers should be reported to the Registration Branchto
initiate the actions of cancellation of R.C.
. No cross checks to be issued for a single bill containing taxupto
Rs.5,000/-, Rs.4,000/- and Rs.3,000/- for the cases audited byDeputy
Commissioner, Assistant Commissioner and Sales Tax Officer
respectively .
. It is needless to add that in case, any of the supplier hasnot filed the
relevant return, then refund to the extent of ITC claim of thatsupplier
should be reduced by passing appropriate order. In any case, theITC
claim in respect of any supplier should not be granted, unlessit is
verified that the supplier has filed the return for thecorresponding
return period. If it is found after cross checking, that aparticular
supplier is not traceable, then the refund to the extent ofpurchases of
such dealer should be withdrawn by passing an appropriateorder.
All the departmental officers are directed to follow aboveinstructions
scrupulously.
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4.2 Guidelines issued vide Internal Circular bearing no. 37A,dt:
28.12.2007, are reproduced herewith,
Sub: Refunds under MVAT Act.
A) Background: The issue of pending refund claims is reviewed on17th of
December 2007 to expedite early finalisation of refund claims.Considering the
huge pendancy, delay in completing audit, some major decisionsare taken in
the public interest in the meeting related to grant of refundand audit of such
cases.
The decisions taken in the meeting should be followed by all theJoint
Commissioners (Refund and VAT-Adm) with immediate effect.B)GRANT OF REFUND: All the cases except those are mentioned inpara
(D), where the dealer has filed form 501 on or before 31stDECEMBER 2007 are
eligible for grant of balance or full refund prior to auditsubject to the
following conditions:-
1. Form 501 must have been received on or before 31st DECEMBER2007
2. Only cases in which refund is due as per provisions of theMaharashtra
Value Added Tax Act (MVAT Act) will be eligible for refund.
3. All Form-501 must be accompanied with annexure in properformat. If
data is huge, the department may accept this annexure in Excelformat. If
Form-501 is already received and annexure is not appended, thenobtain
annexure from claimant dealer within 10 days.
4. The certified copy of return in which net refund is claimedbe obtained
from Returns Branch or claimant dealer. The certified copies ofreturns in
which refund is carried forward may also be obtained from thedealer.
5. The dealer should also certify that no sales tax dues areoutstanding
against him & also that he has not carried forward the saidrefund in any
other subsequent return/s or previous return/s nor has adjustedit against
any of his liability.
6. It goes without saying that all the above mentionedcertification must be
done by duly authorized person of the firm and should carry thestamp ofthe firm & name of the authorized person
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7. DISPOSAL: All the actions in the above mentioned cases mustbe
completed on or before 31st January 2008.
8. As per procedures, all cases in which Form-502 is completed,must be
submitted to RPO section for issue of RPOs.
9. All these cases will be taken up for post refund audit as perfollowing
procedure :-
C) POST GRANT OF REFUND ACTIONS : After grant of refund allthe
cases will be audited as per principles laid down hereunder:
1. Audit : The term audit refers to two stage process i.e. i)visit & detailed
scrutiny at the place of business of the claimant dealer and ii)summary audit
& cross-checking through MAHAVIKAS and/or visiting place ofbusiness of
the supplier dealers.
All the refund claims (per Form-501) above Rs 5 Lac shall be
fully audited i.e. visit, scrutiny as well as summary audit& cross checking. All
refund claims (per Form-501) of Rs 5 Lac or below shall be donethrough
summary audit and cross-checking only (i.e. a visit is notnecessary in these
cases unless there are special circ*mstances due to which visitis found
necessary)
2. Procedure of Summary Audit & Cross Checking :
i) All the ITC claim will be checked for whether return has beenfiled
by the supplier whose invoice the ITC claim is being askedfor.
ii) While checking, audit officer must check that the turnoverof sales
and taxes paid by the supplier is enough to cover the claim ofITC.
iii) In all cases where return has been filed, all ITC claims ofRs 25000/-
& above per supplier will be sent for cross checking to thecross check
section.
iv) In ITC claims which are below Rs 25000/- per supplier forwhich
return have been filed, cross checking may be carried out for 5%of the
suppliers by random selection
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v) In cases where supplier is detected as non-filer, ITC claimto that
extent be disallowed and such list be sent to Returns Branchfor
appropriate action.
3. If as a result of audit it comes to notice that excess refundhas been granted
to any claimant dealer, then the audit officer shouldimmediately initiate and
pass an assessment order as per section 23 of the MVAT Act anddemand so
raised shall be deducted from subsequent refund payable to theclaimant
dealer. If no refund is payable subsequently, then dues shall berecovered as
per the provisions of MVAT Act.
4. In cases where declarations under CST Act are missing,assessment order
under CST Act shall be passed and necessary recovery actionsshall be taken
accordingly.
D) In cases where claimant dealer is dealing in Iron & Steeland Dyes &
Chemicals, refund prior to the audit shall not be granted. Inthose cases,
refund shall be granted after the completion of detailedaudit.
E) All the departmental officers are directed to follow aboveinstructions
scrupulously.
4.3 Gist of other relevant Internal Circulars :-
1.InternalCircular No. 2A of2006, dt: 24.01.2006.
Instructions for issuing refundunder VAT System.
2.InternalCircular No. 3A of2006, dt: 27.01.2006.
Provisional refunds to the dealerscovered under thePackageScheme of Incentives Timelypayment of due refunds before
31.03.006.
3.InternalCircular No. 6A of2006, dt: 3.03.2006
Early grant of provisional refund.
4.Internal Circular No. 5 A of2007 Dt. 05.03.2008
Refunds under MVAT Act.Modifications in Internal Circular37A of2007.
4.4 Guidelines issued vide Trade Circular bearingno.VAT/MIA10-
07/ADM-5/3 Mumbai, dt.23.08.2007, Trade Circular No.- 56 Tof
2007, are reproduced herewith,
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Sub: Refund under MVAT.
1. Introductory:-
Section 51 of the Maharashtra Value Added Tax Act, 2002 dealswith
refund as per return. The corresponding Rules are, Rules 60 and61 of the
Maharashtra Value Added Tax Rules, 2005. Till date, the refundU/s. 51 were
granted on ad-hoc basis by issuing various Trade Circulars fromtime to time.
This was done keeping in view that the automation andreorganization of the
department were not completed. The automation of the departmentis still
few months away. However, it is now decided to lay down a stableprocedure
for the grant of refund.
Applicability of this Circular
(i). The instructions contained in this circular will apply toall returns filed
before the date of this circular, (subject to making anapplication in Form-
501,) and will also be applicable for all the subsequent refundclaims filed
after the date of this circular.
(ii). It is to be noted that for further grant of refund, unlessa specific circular
is issued, the instructions contained in this circular wouldcontinue to apply.
The dealers should therefore follow the instructions in thiscircular for
claiming the refund for the subsequent periods also.
Refund and Due Returns:
i)It may be noted that refunds as per returns would be payableonly in respectof the returns which the dealer is due to file asper the rules. For example, if
a dealer is due to file a quarterly return but instead filesmonthly returns,
then the refund would not be granted in respect of the monthlyreturn.
Accordingly, no refund under this circular will be allowed for areturns filed
for an incorrect period.
ii)The return should be correct, complete and self consistent.The application
in Form 501 should be consistent with the return.
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(i) The refund for the financial year 2005-06 in case of dealerswho have
filed the return alongwith form 501 before the issue of thiscircular shall be
granted on or before 31st October, 2007, if the applicantfulfills the other
conditions of this circular.
(ii) There could be cases for the year 2005-06 wherein only partof the
refund is granted till date and the balance refund is pendingdue to various
reasons. In all such cases also the balance refund shall begranted on or before
31stOctober, 2007, if the applicant fulfills the otherconditions of this circular.
Grant of Refund:-
(i). The refund of dealers U/s. 8(3) of MVAT Act shall begranted within 30
days from the date of making the application or from the date offiling the
necessary details as may be required by the refund authority,whichever is
later, provided the claim of refund is made alongwith theapplication in
Form 501 filed with the respective refund branch.
(ii). The dealers holding a certificate of entitlement under thepackage
scheme of incentive shall be granted a refund within a period ofthree
months from the date of application in Form 501 or from the dateof
submitting the necessary details to refund authority, whicheveris later.
(iii). In case of a P.S.I. dealer who holds the entitlementcertificate for part of
an industrial undertaking through investment in a expansion unitand
whose production from the old and expansion investments isidentifiable,
(i.e. production facilities are separate), then in such cases,the refund will be
granted only in respect of purchases corresponding to theproduction of the
expansion unit in the total production. Cases in which theinvestment in
expansion unit does not result in identifiable (separate)production capacity
but strengthens/upgrades the existing technology, productquality or
quantity, purchases entitled for refund shall be worked out inproportion to
the new (PSI) investment in the total investment.
(iv). In all cases other than the above mentioned cases therefund will be
granted within 3 months from the date of making the applicationin Form
501/or from the date of submitting the details, whichever islater.
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(v). There could be some pending cases of refund for the year2006-07,
wherein the entire refund claim of the dealer is pending or partof the
refund, i.e. 10% or 40% is pending, as the refund audit/crosschecking of the
transactions are not completed. In all such cases, the refundwill be granted
on or before 30th November, 2007.
Non availability of CST declarations:-
(i) There could be cases wherein a refund cannot be granted onlybecause
all or some of the declaration under Central Sales Tax Act forany period
either [2005-06 or 2006-07] are not received by the dealer. Inall such cases,
after deciding the CST payable as per Section 8 of the CST Actin respect of
unreceived declarations the balance refund will be granted asper the above
guidelines. Needless to say that the dealer will have to submitthe list of
declarations received and not received alongwith the Form501.
(ii)If after the grant of refund, the dealer receives thedeclarations under
the CST Act then the dealer can make a fresh application beforethe refund
granting authority alongwith an application in Form 501.However, no such
application will be entertained within a period of six monthsfrom the date of
order granting the refund and not more than one such applicationshall be
entertained by the Refund granting authority.
Bank Guarantee:-
(i) Following parameters will be applied to the dealers willingto
submit the B G for early refund.
SrNo
Category of the DealerResult of previous
auditsExtent of Bank
Guarantee
Extent of Pre-audit refundto be issued
1All Dealers No Discrepancy in
previous FOUR audits10 per cent 100 per cent
2All Dealers No Discrepancy in
previous three audits15 per cent 100 per cent
3All Dealers No Discrepancy in
previous two audits20per cent 100 per cent
4 Newly Registered Dealers Not Applicable 100 per cent 100 percent
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SrNo
Category of the DealerResult of previous
auditsExtent of Bank
Guarantee
Extent of Pre-audit refundto be issued
5
Dealers who have effectedinterstate sales
i) No Discrepancy inprevious two audits
i) 50 per cent
ii) First claim ii) 100 per cent
100 per cent
6
Govt Organization andPSU
No discrepancies Zero BG100 per cent
Discrepancies Zero BG 90 per cent
7Diplomatic authorities No B G 100 % on
same day
8 All dealer First time claim 100% BG 100percent
Note:-
1. If dealer falls under more than one category, he should betreated in
the category with higher amount of BG.
2. Discrepancy means the disallowance exceeding 5 per cent inthe
refund audit period or Rupees one lakh whichever is less.
(ii) It may be noted that the refund against the Bank Guaranteecan be given
only in those cases wherein the refund is due. The cases whereinthe refund is
not due, such as, the cases covered by Para 7 (iii) of thiscircular or the return
not filed as per the periodicity would not be covered by thisclause. And in
such cases the dealer can not claim the refund by furnishing theBank
Guarantee. Once the Bank Guarantee is accepted, then the refundmust be
granted within 3 days.
(iii) If after the Refund Audit no discrepancies are found, thenthe BG
submitted by the dealer could be released or roll-over for thefurther period,at the option of the dealer.
Assessment of Refund:-
(i). Section 51(6)(a) of the MVAT Act 2002 provides that thedealer can not
make a claim of refund as per Section 51 of the Act, if thenotice U/s. 23 is
issued. Before granting the refund, the refund grantingauthority may like to
obtain certain details and / or may like to conduct a refundaudit. If the
dealer has not submitted the details as required by theauthority or has not
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cooperated with the officer during the course of audit or if theauditor is of
the view that the assessment of the dealer is necessary then theofficer shall
issue a notice U/s. 23 of the Act and assess the dealeraccordingly.
(ii). Unless, such notice U/s. 23 is issued, the refund claim ofthe dealer can
not be withheld and the same shall be granted as per theinstructions of this
circular.
Refund Audit and cross checking:-
(i). In cases wherein the refund is granted prior to refundaudit or after
incomplete refund audit, the audit will be completedexpeditiously.
(ii). It will be the endeavor of the department to complete therefund audit
and also the cross checking of the transactions as early aspossible and in
any case within the time limit prescribed above.
(iii). To facilitate the cross checking of transactions, thedealers are requested
to submit the details of sales and purchases in a electronicallyprescribed
format to the department as and when asked for. This willfacilitate cross
checking of the transactions and will also avoid the multiplevisits for cross
checking to the dealers place of business. This should ensurethe
expeditious grant of refund.
(iv). If a particular dealer claims a refund in any return /s ina Financial
Year, he would be audited by the Refund Audit Branch only. Insuch case
no separate Business Audit would be conducted by the BusinessAudit
Branch. However, in all such cases the Refund Audit Branchwould
conduct a Desk Audit at the end of the year on the basis ofAudit Report in
Form 704 and may conduct the Business Audit of the same dealerwith prior
approval of concern Joint Commissioner of Sales Tax.
Adjustment of refund in the subsequent period:
Although, the law provides for compulsory claiming of the refundat
the end of the Financial Year, a facility was provided by way ofTrade
Circular to adjust the refund for the years 2005-06, 2006-07 inthe subsequent
years return. It is hereby clarified that, henceforth suchfacility for the
adjustment of refund in the subsequent financial year will notbe given and
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Act,2002.
8.Trade Circular No. 3T of2007 , Dt: 10.01.2007.
Refund Audit under MVAT Act.
9.
Trade Circular No. 4T
of 2007, Dt. 12.01.2007.
Refund for the period from 01/04/2005
onwards.
10.Trade Circular No. 14 Tof 2007, Dt. 08.02.2007.
Grant of Provisional Refund.
11.Trade Circular No.22T of2007, Dt. 01.03.2007.
Grant of Refund.
12.Trade Circular No.41T of2007, Dt. 21.05.2007.
Adjustment of refund of the FinancialYear 2006-07 to theFinancial Year 2007-08.
13.Trade Circular No. 1T of2008, Dt: 25.01.2008
Procedure for Issuance of Statutory Formsunder Central Sales TaxAct, 1956.
14.Trade Circular No. 3T of2008, Dt. 06/02/2008.
Filing of correct and complete returns andfurnishing copies ofthe returns to theSales tax authorities.
15.Trade Circular No. 5T of2008, Dt. 28/02/2008.
Furnishing of copies of challans / returnsto the Sales TaxAuthorities.
16.Trade Circular No. 6T of2008, Dt. 01/03/2008.
Grant of Refunds : Bank Guarantee
5. COMPETENT AUTHORITIES & TARGETS:-
5.1 The competent authorities to process / audit and authorizethe cases
are as follows:-
Processing / auditingOfficer
Authorising Officer Amount of refund claim
Sales Tax Officer Dy. Commissioner Below Rs. 3.5 lakh
Assistant Commissioner Dy. Commissioner Above Rs. 3.5 lakhuptoRs. 10 lakh
Dy. Commissioner Joint Commissioner Above Rs. 10 lakh
5.2 The competent authority to issue RPO & AdviceNotes:-
Amount of refund Competent authority to issue RPOs /AdviceNotes
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Equal to or less than Rs. 5 lakh Asstt. Commissioner
Above Rs. 5 lakh to Rs. 25 lakh Dy. Commissioner
Above Rs. 25 lakh Joint Commissioner
5.3 TARGETS:-
6. THE PROCESS IN BRIEF:-
3
Sr.No.
DesignationUnitsSanctionedstrength
Target permonth
Target perannum
Individual Unit Individual Unit
1 D.C. 8 8 64 80 640
2 A.C. 26(24+2) 11 264 110 26403 STO 16 (8+8) 15 120 1501200
Total 256 448 4480
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7. PROCEDURE OF BRANCH:-
Refund claim in form 501 received in the office of JCST ofR&RA.
Acceptance on MAHAVIKAS & entry in Centralised Register.
Refund claim in form 501without Bank Guarantee.
Refund claim in form 501against Bank Guarantee.
Allotment to concernedDC Unit
Sub-Allotment to DC/AC/STO
Visit to dealer & verificationof books of accounts.
Issue Cross-checks toCross-check cell.
Custody of BG and BGAcceptance Order to bepassed byDesignatedOfficer in the office ofC R&RA
As per Audit findings,confirmation of Refundclaim.
Amend the claim byRevised Return /AcceptanceLetter.
If dealer disagree-then notice inForm 301 to be
Assessment order in
Orderresulting inRefund
Authorisation of claim byRefund AuthorisingOfficer.
Issue Audit Form 6
Issue RSO Form 502.
RPO issued by RPO Signing
Authority
Allotment to concernedDC Unit.
Sub-Allotment to DC / AC /STO
Orderresulting inDues
Update CentralisedMaster File.
Claims processed withBank Guarantee.* * (Follow theprocedureexcept issueof Form 502).
Reconciliation ofpaid Advice Notesreceived from RBI byDesignatedOfficer inthe office of JCR&RA.
Send recovery toRecovery Branch.
As per Audit findings,variation in RefundClaim.
Authorisation of claim byRefund AuthorisingOfficer.
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7.1 Fast Track Window
for acceptance of return wherein refund is claimed :-
7.1.1 The returns of claimant dealers shall be accepted atFastTrack
Window specially created for this purpose.
7.1.2 After acceptance, such returns will be photo copied bythe
Refund & Refund Audit Branch and such photo copies are tobe
retained with the Branch.
7.1.3 The photocopy of the return is to be certified by the AC /STO
(in-charge for return acceptance) & such certified copiesofreturn will be forwarded to the concerned unit dealing thecase.
7.1.4 Thereafter, original return will be sent back to theconcern
authority of the Return Branch, within 7 days and receipt forthe
same, to be obtained.
7.1.5 Returns filed up to 20.06.2006:- In some cases, it hasbeen
observed that, dealers who have filed returns up to 20.06.06
have not applied for refund in Form-501. To claim the refund,it
has been made mandatory to file application in form 501, w. e.f.
20.06.2006. Hence, in such cases, the courtesy letter is tobe
issued and if dealer failed to apply in Form 501, thenassessment
should be initiated and necessary actions to be taken.
7.2 Single Window System
for acceptance of Application for Refund in Form 501 :-
7.2.1 The application for refund in Form 501 is to be accepted,in the
office of the Joint Commissioner of Sales Tax, Refund &Refund
Audit Branch, where the Single Window System for acceptance
is introduced.
7.2.1 The Officer in-charge for acceptance of Application forRefund
in Form 501, shall keep ready the checklist for documents
required to be submitted along with application for refundin
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Form 501 and such checklist is required to be displayed near
Single Window System.
7.2.2 The Sales Tax Inspector shall face-check the applicationfor
refund in Form 501 along with return and documents,
submitted by the dealer. And only correct & complete
applications will be accepted.
7.2.3 In case of incorrect and / or incomplete and / ordefective
application for refund in Form 501, the Officer in-chargeshall
issue duly signed letter, narrating the reason / reasons fornon-
acceptance of such application.
7.2.4 The receipt for an application for refund in Form 501 isto be
generated through the MAHAVIKAS System. In exceptional
cases, the concerned staff person at the Single WindowSystem
shall record the reason / reasons on the application itself,for
non generation of receipt through MAHAVIKAS System.
7.2.5 The applications for refund in Form 501 received fromdealers of
the category of Large Taxpayers Unit (LTU) are to beforwarded
to Large Taxpayers Unit, for further actions. For thispurpose,
the Officer in-charge should keep the list of dealers ofsuch
category.
7.2.6 The entry of applications for refund in Form 501 is to betaken in
Centralised Register No. R&RA-1 (format enclosed), inthe
office of the Joint Commissioner.
7.3 Acceptance and custody of Bank Guarantee :-
7.3.1 If correct & complete application is received from thedealer
claiming refund against Bank Guarantee and the Bank
Guarantee furnished is in the prescribed format as notifiedby
the Commissioner for the prescribed amount and period, then,
7.3.2 The details of such Bank guarantee furnished by thedealer
should be entered in the Bank Guarantee Register (Reg. No.
R&RA-5)
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7.3.3 The register of Bank Guarantee (Reg. No. R&RA-5) is tobe
maintained in the Office of the Joint Commissioner.
7.3.4 An Officer has to be designated and the custody of suchbank
guarantees should be assigned to him.
7.3.5 The Bank Guarantees for higher amounts have to be
authenticated from the concerned Banks.
7.3.6 For this purpose, the Designated Officer shall issueletter to the
Manager or Officer In-charge of the Branch / Bank,requesting
him to affirm the facts related to said Bank Guarantee suchas
amount and period, as enumerated in the said Bank Guarantee.
7.3.7 The Designated Officer shall carry out the work relatedto
release or roll over of such bank guarantees after resultsof
refund audit relevant to said refund claims, as per thedealers
desire.
7.3.8 The Designated Officer shall keep the status and follow upof
cases wherein Bank Guarantee has been accepted.
7.3.9 JCST, R&RA should keep follow up and ensure that,refund
audit to be expedited in such cases, where period of thesaid
Bank Guarantee is likely to be expired.
7.4 Allotment of cases within the Division:-
7.4.1 The correct & complete applications shall be allottedto the
respective unit by the Joint Commissioner.
7.4.2 Certain cases are to be retained with the DesignatedOfficer in
the office of JCST, R&RA for such processing of refundclaims
such as,
(i) claims of miscellaneous refund,
(ii) refund claims pertaining to dealers of Non ResidentCircle
category,
(iii) refund claims pertaining to un-registered dealers i.e. incase of
TDS etc.
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(iv) and refund claims pertaining to last return in respectof
cancellation of Certificate of Registration etc.
7.4.3 Through the MAHAVIKAS system, applications pertainingto
the category of SEZ dealers covered under section 8(3) ofthe
Maharashtra Value Added Tax Act, 2002, will be forwarded to
the unit designated for such category of the dealers, for
processing of refund claims.
7.4.4 In case of other category dealers, applications will bedistributed
to different units through the MAHAVIKAS system,
7.4.5 The allotment of cases is to be done on the basis ofTIN.
7.4.6 The JCST R&RA may reallocate or transfer the caseswithin the
units, depending on the work load with each unit.
7.5 Allotment of cases within the Unit :-
7.5.1 On receipt of cases from the office of JCST, R&RA, allsuch cases
have to be entered in Unit wise Register for Acceptance ofForm
-501 (Register No. R&RA-2), for this purpose, each unitshould
maintain the said Register.
7.5.2 Intra unit allotment of cases is to be done by the DCST,R&RA,
as per following slabs:-
Amount of refund claimed
per form 501
Designation of
Refund Processing
Authority
Above Rs. 10 lakhs Dy. Commissioner
Rs. 3.51 to 10 lakhs Asstt. Commissioner
Below Rs. 3.5 lakhs Sales Tax Officer
7.5.3 In exceptional cases, the changes in aforesaid slab willbe done
by DCST, R&RA with prior approval of JCST, R&RA.
7.5.4 Cases shall be distributed to different authorities withinthe unit
through the MAHAVIKAS system,
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7.5.5 As far as possible, DCST, R&RA should ensure that,various
refund claims made by the dealer within one financial yearare
to be allotted to same authority.
7.5.6 Processing of refund claims should be done as per the
procedure laid down hereinafter.
7.5 Processing of Refund Claims made against Bank Guarantee:-
7.5.1 Procedure for grant of refund, is to be followed as perthe
guidelines issued vide Trade Circular No. VAT/MIA10-
07/ADM-5/3 Trade Circular No. 56T of 2007 dt. 23.08.2007.
(Refer page No. 25)
7.5.2 Such refund claims are to be processed on priority basisand
refund has to be granted within three days, as per theguidelines
issued vide para 9(iii) of the Trade Circular 56T of 2007dated
23/08/2007.
7.5.3 The Refund Processing Authority shall submit refund
processing report to the Refund Authorising Authority, for
authorisation of such claim.
7.5.4 After authorisation, the concerned Refund ProcessingAuthority
shall pass Refund Sanctioning Order in Form 502.
7.5.5 Entry of Refund Sanctioning Order in Form 502 shall betaken in
a Refund Sanction Order Register (Reg. No. R&RA-4).
7.5.6 Thereafter, proposal for issue of Refund Payment Order
(Annexure - B) should be forwarded / submitted to the
concerned RPO signing authority (ACST R&RA /DCSTR&RA
/JCST R&RA as per the prescribed limit).
7.5.7 After grant of refund, the claim is to be audited bythe
concerned officer, as per the procedure laid down in chapter 8of
the Manual,
7.5.8 The concerned authority should ensure that, the refundaudit
procedure should be completed within the prescribed periodof
the said Bank Guarantee,
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7.5.9 The proposal for adjustment of Bank Guarantee towardsdues
raised on account of excess grant of refund if any, is to be
submitted to the office of JCST, R&RA,
7.5.10 After completion of Refund Audit procedure, the proposalfor
release or roll over of the Bank Guarantee as per thedealers
desire, is to be submitted to the office of JCST, R&RA.
7.6 Processing of refund claims made without Bank Guarantee:-
7.6.1 The Refund Processing Authorities should ensure that,the
actions regarding the processing of refund claims should be
initiated on FIFO basis, i.e. in order of the date of receiptof
application for refund in form 501,
7.6.2 Immediate face-checking of the return including revisedreturn,
if any and application in Form 501 should be done by the
Refund Processing Authority with respect to the periodicityof
return, eligibility of refund as per the return in relationto
provisions of the Act / Rule i.e. whether the dealer is entitledfor
refund as per the periodic return or at the end of year.
7.6.3 On face checking of return if it is found that, there isdefect in
the return; take necessary steps to intimate the same to the
dealer and request him to correct the same and to file fresh
application for refund in form 501 accordingly. The copy ofsuch
intimation should be forwarded to the concerned authority of
Return Branch, for necessary actions.
7.6.4 In case of refund claims made without bank guarantee,
procedure for grant of refund is to be followed as per the
guidelines issued vide Internal Circular No. VAT-2007/Adm-
7/Refund & Refund Audit/B- 503 Mumbai, dt: 28.12.2007
Internal Circular No. 37 A of 2007.
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8. REFUND AUDIT PROCEDURE :-
Vide Internal Circular No. 37 A of 2007, it is stated that,
The term audit refers to two stage process i.e.
i) visit & detailed scrutiny at the place of business oftheclaimant dealer and
ii) summary audit & cross-checking through MAHAVIKAS
and/or visiting place of business of the supplier dealers.
Vide Internal Circular No. 5 A of 2008, it is stated that,
After grant of refund all the cases be audited as per principleslaid
down hereunder.
. Desk Audit :- If the refund claim is less than Rs. 5 lakh perForm
501 , then only desk audit is to be done (No field visits.). Thedesk
audit is to be conducted immediately after the grant of refund.The
desk audit is to be completed in the following manner.
a) The copies of Form 704 to be obtained from Business Audit
Branch .( If available)
b) The refund granting officer should first ascertainfromMAHAVIKAS the position regarding the filing of returns
by all the suppliers of the refund claiming dealer.
c) While checking, the audit officer must check that the
turnover of sales and the taxes paid by the supplier are
enough to cover the claim of ITC of the refund claimant in
respect of that supplier.
d) In cases, where the dealer has effected Interstate Sales,the
details of availability of declarations under CST Act should
be checked by calling the dealer with details and pass the
appropriate order accordingly (wherever necessary).
e) visit is not necessary in these cases unless there arespecial
circ*mstances due to which visit is found necessary. Forthis
approval of JC concerned should be taken.
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periods. Then in such cases, the refund audit should becarried
out from the period, from where the refund has been brought
forwarded.
8.2.5 The Refund Processing Authority shall prepare summary,short
notes regarding sales transactions eligible and ineligible totax
and claims on purchase side at different tax slabs,
8.3 C. During the visit scrutiny & checks :-
8.3.1 Record the particulars of visit i.e. date of visit, timeof entry and
place of visit etc.,
8.3.2 While initiating the audit, carry out brief interview withthe
authorised person regarding nature of business, business
process, commodity dealt, inputs, intermediates and outputs
and their ratio,
8.3.3 If there are any changes in the registration details, areto be
communicated to the Registration Branch accordingly,
8.3.4 Record particulars regarding the books of accounts /documents
produced by the dealer and verified,
8.3.5 Inspect the business premises / factory / warehouse, etc.to
ascertain the equipment / capital goods in use, inputs andthe
outputs of the dealer.
8.3.6 Details regarding inputs, to be verified :-
i. Reconciliation of turnover of purchase as per ledger,
register and return,
ii. Verify purchases effected by the dealer from Registered
Dealers, Un-registered Dealers, interstate, imports &high
seas etc and
iii. Verify all tax invoices against which the dealer have
claimed Input Tax Credit (ITC),
iv. Record particulars regarding the commodities purchased
i.e. inputs against each tax rate,
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xvi. In case of purchase of Capital Goods, verify the taxinvoice,
physical examination of goods whether such goods exist or
disposed off.
xvii. In case of a P.S.I. dealer who holds the entitlement
certificate for part of an industrial undertaking through
investment in a expansion unit and whose production from
the old and expansion investments 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 does not result in identifiable (separate)
production capacity but strengthens / upgrades 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.
8.3.7 Details regarding outputs, to be verified:-
i. Reconciliation of turnover of sales as per ledger, registerand
return,
ii. Record particulars regarding the commodities sold i.e.
outputs against each tax rate,
iii. As far as possible, record the Central Excise Tariff Headsof
outputs, especially in case of Excisable Units.
iv. Sales shown at different tax rates is to be verified andtotal
VAT payable as per tax slab wise is to be compiled and same
to be reconciled with figures shown in the return.
v. In certain cases like Pharmaceutical Dealers, DPCO andnon-
DPCO medicines are to be segregated and summary to be
prepared,
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vi. Identify and ascertain amount of VAT payable on accountof
sale of fixed asset or capital goods,
xviii. Verify claims regarding goods return, discounts and
Dr./Cr. Notes.
vii. Verify the Branch Transfers / Consignment transfers, ifany
viii. Verify and record details regarding tax free sales andjob
work charges received.
ix. Verify interstate sales shown against declarations andlist
out declaration received and not received, if any.
x. In case of Exporter, verify the documents viz.
i. commercial evidence of export,
ii. copy of custom clearance certificate,
iii. contract with foreign buyer,
iv. evidence of export (bill of lading / airway bill), etc.
v. evidence of payment for the goods or a letter of credit.
(Note that, all above details are illustrative in nature and arenot exhaustive,
depending upon the fact and necessity of the case the AuditingOfficer should apply
his mind).
8.4 D. Concluding the visit:-
8.4.1 Prepare the summary of transactions relevant to theperiod.
8.4.2 Prepare summary / verification report in the view ofAudit
Form 5.
8.4.3 The documents & statements to be taken at the time ofvisit and
to be kept on record are given in Annexure-C8. Before concludingthe visit, the Refund Audit Officer should
obtain signature of the dealer on the proceedings, narrating
the facts of visits and additional requirement to befurnished
and intimating the date on or before which he has to comply
the same etc.
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8.5 Submission of preliminary visit report:-
8.5.1 Refund Processing / Auditing Officer shouldimmediately
prepare a preliminary visit report envisaging the details ofvisit
and the same should be submitted for perusal, to theRefundAuthorising Officer, as per the slabs set right vide para 5.1of the
manual.
8.5.2 Along with preliminary submission, a visit report in FormNo.
R&RA-5 is to be prepared by the Refund Processing /Auditing
Authority and the same should be submitted for perusal, tothe
Refund Authorising Officer.
8.6 CROSS CHECKS:-
8.6.1 In order to verify genuineness of the ITC claimed by thedealer,
it is required to check the tax liability and payment of tax ofthe
vendors.
8.6.2 For this purpose cross checks are to be issued to Crosscheck
Unit.
8.6.3 The details regarding the cross checks issued, are to beentered
in the Cross Check Register (Reg.No.R&RA-3).
8.6.4 The procedure for cross checking is to be followed asper
guidelines issued vide Internal Circular 6A of 2008 dated
12/03/2008, which reproduced herewith,
While conducting the Desk Audit or the Field Audit, thecross
checks to be done in the following manner-
. The officer should confirm filing of returns by all thesuppliers
of the refund claiming dealer from the MAHAVIKAS and
from Return Branch.
. For the purpose of cross checking, where total ITC claimin
respect of a supplier is of Rs. 50,000/- and above and where
return has been filed, 10 % of suppliers will be selected by
way of Random Sampling Method (duly approved by the
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concerned JC) and to be sent for cross checking to the cross
check section .
. Where ITC claims in respect of any supplier is less thanRs.
50,000/- per supplier and where return has been filed , 5 %of
suppliers will be selected by way of Random Sampling
Method (duly approved by the concerned JC) and be sent for
cross checking to the cross check section
. During the cross check, if it is found that any transactionis
not accounted for by a particular supplier in his books of
accounts , then a comprehensive Business Audit of that
supplier is to be taken immediately by the Refund Audit
Branch. The Cross Check Cell should immediately inform this
fact to the Refund Audit Branch. Also, instead of the sample
cross check, 100% of the cross checks of the claimant dealeris
to be issued immediately. The claimant dealer should be
informed about such result and reasons for issuances of 100%
cross checks in his case. The claimant dealer should also be
informed if any of his suppliers is not available on thegiven
address.
. It is pertinent to note here that, the information aboutsuch
suppliers should be shared with all officers through E-mail.
The list of such dealers should be prepared and monthly
updating should be done by the Cross Check Section. The
information about such suppliers may also be published on
the official Web Site of the department after canceling theR.C.
of the concerned dealer to make aware the dealers at large. Ifit
is found during the process of cross check that the supplieris
not found at the address given , then list of such dealers
should be shared with all the officers through Email . The
action to cancel the TIN Certificate or RegistrationCertificate
should be initiated in respect of such suppliers, in duecourse.
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The details of such suppliers should be reported to the
Registration Branch to initiate the actions of cancellationof
R.C.
. No cross checks to be issued for a single bill containing taxup
o Rs.5,000/-, Rs.4,000/- and Rs.3,000/- for the casesaudited
by Deputy Commissioner, Assistant Commissioner and Sales
Tax Officer respectively .
. It is needless to add that in case, any of the supplier hasnot
filed the relevant return, then refund to the extent of ITCclaim
of that supplier should be reduced by passing appropriate
order. In any case, the ITC claim in respect of any supplier
should not be granted, unless it is verified that thesupplier
has filed the return for the corresponding return period. If itis
found after cross checking, that a particular supplier isnot
traceable, then the refund to the extent of purchases ofsuch
dealer should be withdrawn by passing an appropriate order.
8.6.5 On receiving the results of Crosschecks, thecorresponding
entry in the Register No. R&RA-3 is to be rounded andfollow
up should be made for the un-received cross checks.
8.6.6 In case, where the cross checks of supplier resulted innon-
confirmation of ITC claim, then show cause notice for citingthe
provisions of sub-section 48(5) should be served on thedealer
and after affording reasonable opportunity of hearing, suchITC
reductions are to be made from the refund claim.
8.7 CONCLUDING THE AUDIT :-
8.7.1 Auditing Officer shall keep on record documents &statements
as enlisted in Annexure-C, which are submitted by the dealerat
the time of visit and during the Refund Audit proceedings.
8.7.2 On receipt of total results of cross checks, it isrequired to
summarise the same and such summary should be kept onrecord.
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8.7.3 The summary of sales and purchases relevant to the saidperiod
is to be prepared i.e. VAT payable, ITC eligible, Taxliability
under the CST Act etc. and its reconciliation with thedetails
disclosed as per the return / returns, is to be made.
8.7.4 A proposal highlighting the effect in totality should beprepared
by the Auditing Officer.
8.7.5 The Refund Audit may result in two types of contingencies:-
(I) Refund Audit resulted in confirmation of the
refund claim,
(II) Refund Audit resulted in variation of the refund
claim.
8.8 Refund Audit resulted in confirmation of the refund claim:-
8.8.1 Submit the case for authorisation of the claim along withAudit
Form No.R&RA-6 duly signed by the Refund Processing
Authority.
8.8.2 Refund Authorising Authority should scrutinise theproposal
submitted and should note his remarks if any and if the
proposal is found to be correct and in order, then authorisethe
proposal and should sign on Audit Form No.R&RA-6.
8.8.3 After the claim has been authorised, the concernedRefund
Processing Authority should pass the Refund SanctioningOrder
in Form 502.
8.8.4 Entry of Refund Sanctioning Order in Form 502 shall betaken in
a Refund Sanction Order Register (Reg. No. R&RA-4).
8.8.5 Thereafter, the proposal for issue of Refund PaymentOrder
(Annexure - B) should be forwarded / submitted to the
concerned RPO signing authority (ACST R&RA /DCSTR&RA
/JCST R&RA as per the prescribed limit).
Refund Audit resulted in variation of the refund claim :
1.9. Appropriate corrective actions will be initiated by the
auditor. If the dealer accepts the auditors findings, thenhe
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6.10. The return branch officer will make the necessary
endorsem*nt on the original return on the basis of the list
received by him and update records.
7.10. The Return Branch officer will acknowledge the listreceived
by him.
8.10. The authority issuing the R.P.O. should maintain aregister,
viz., Refund Payment Register (R&RA-7). He should make a
note of R.P.O. number and advice note number in the refund
file, should keep a record of the dealers to whom theR.P.Os.
have been issued by them along with their registration
number and address.
9.10. The authority issuing R.P.O. will also issue advice notesto
the banks simultaneously. Caution should, however, be
taken to ensure that the advice note should reach the banks
before the R.P.O is presented by the dealers bank to the
Reserve Bank of India or State Bank of India for payment.
10.10. Custody and account of RPO and advice notes. Thebooks
of the refund payment orders and the advice notes should
remain in the personal custody of the officers who are to
issue the refund payment orders.
11.10. Accounts of stationery of RPO books and advice note
books. -- The R.P.O. books and advice note books will
hereafter be issued by the stationery cell to the respective
Joint Commissioners. On receipt thereof, an entry of the
book numbers along with voucher numbers therein should
be kept in a register to be maintained for this purpose bythe
concerned Joint Commissioner.
12.10. This register and the RPO books / advice note booksshould
invariably figure in the charge report whenever there is a
change of officer holding the job. It would be in theinterest
of the officers themselves to take a receipt from their
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successor of having handed over the RPO books (both used
and unused), advice note books and register of accounts.
13.10. Inspection of register of R.P. Os and advice notes. --During
office inspection of any of the officers issuing RPOs and
advice notes, the inspection should invariably cover
verification of the register of RPOs and advice notes tomake
sure that it has been correctly and kept up to date and that
the physical stock of RPO books and advice note books tally
with the register.
14.10. Apart from the above, the officers should carry outfrequent
check of the RPOs issued, physical stock of unused forms
and uptodateness of the stock register.
15.10. Specimen signatures of refund signing officers.-- Theofficers
who would hereafter be issuing the refund payment orders
and advice notes should send their specimen signatures to
the Reserve Bank of India, Mumbai, (for officers situated in
Greater Mumbai ) and to the State Bank of India/State Bank
of Hyderabad at the district headquarters/places where the
refund payment orders will ultimately come for
clearance/payment (for officers situated outside Greater
Mumbai ). Whenever there is a change in the incumbency of
any of these posts, the specimen signatures of the newly
appointed officer should immediately be sent to the
concerned banks as mentioned above. For Greater Mumbai,
the work of sending the specimen signatures of refund
signing authority should be centralised in the office of the
Joint Commissioner (Head Quarters-1) and in mofussil the
respective Joint Commissioner.
16.10. Entry of R.P.0. number, date and amount.-- After anR.P.O.
has been issued by the R.P.O. Issuing Authority, entry ofthe
R.P.O. number, its date and the amount should invariably be
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made in different places, namely, proceeding sheet of thefile
for the relevant period; the Refund Proposal Register and
Refund Payment Register maintained by the Refund
Processing and Issuing Authority, respectively ; order in
Form 502; and the copy of the return or order kept in the
return file of the dealer.
17.10. Scroll to be obtained from Treasury / Banks. It ishereby
clarified that the scrolls including e-scrolls regarding the
paid R.P.O.s should be obtained from the Treasury /Banks
only, which in most of the district places would be theState
Bank of India..
18.10. Separate R.P.O. books for each RPO issuing authority.
For this purpose, it is suggested that the number of R.P.O.
books being used by the Joint Commissioner of Sales Tax
and the Assistant Commissioner of Sales Tax may be
communicated to the Treasury / Bank under a common
letter so that the work of Treasury / Bank for checking also
become simplified. This work should be coordinated by the
concerned Joint Commissioner.
19.10. It is clarified that all RPOs should invariably be sentto the
dealers by the R.P.O. Issuing Authority itself under RPAD
letters.
20.10. Toprevent any misuse of these RPOs, all the RPOs shouldbe
crossed and made A/c payee only by putting an
endorsem*nt A/c payee only on the left hand top corner of
the R.P.O. issued. Further, the amounts should be written,
both in figures and words, in the counterfoils or officecopies
apart from Refund Payment Order to be issued to the
dealers.
21.10. The name of bank, branch and account number of dealer isto
be incorporated on the RPO to prevent misuse of RPO.
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the R.P.O. may be referred to the Joint Commissioner of
Sales Tax (H.Q.-1), Maharashtra State, Mumbai.
25.10. No re-validation of R.P.O.s The R.P.O. should not be
revalidated and no corrections should be carried out in the
same R.P.O. Most of the R.P.O.s would not be encashed only
if they are not presented within three months from the
month of issue of R.P.O. The returned back R.P.O. should be
cancelled by making proper endorsem*nt of cancellation on
the same. After canceling such R.P.O., it should be kept in
the record of the dealer and a note regarding cancellation
should be taken in the remarks column of Refund Proposal
Register and Refund Payment Register. A new Refund
Payment Order should beissued in lieu of the duly cancelled
R.P.O and a fresh entry should be taken in the Refund
Proposal Register and Refund Payment Register. Cross
reference of old entry as well as new entry should be taken
in the remarks column. In the remarks column of oldentry
the endorsem*nt should be cancelled on . . . . . . . . . . .Fresh
R.P.O. issued at Sr.No . . . . .. Similarly, in the remarks
column ofthenew entry, the endorsem*nt should be Issued
in lieu of R.P.O. at Sr. No.
26.10. Necessary endorsem*nt to that effect should also be madein
the following:
(i) proceeding sheet of the file for the relevant period;
(ii) the Movement-cum-Accounts Register maintained by the
Refund Processing and Issuing Authority respectively in the
format given in
(iii) order in Form 502; and the copy of the return or order
kept in the return file of the dealer.
27.10. Partly used R.P.O. Books. Partly used R.P.O. books
containing some blank R.P.O. vouchers should not be used
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for issue of R.P.O. to the dealers. Unused R.P.O. vouchersin
such books should be cancelled and such books along with
the used R.P.O. books should be returned to the respective
Joint Commissioner. While doing so, a list of R.P.O. books
showing the Sr. No. of vouchers therein should be prepared.
The respective Jt. Commissioner should, in turn, prepare a
list for his division and send these R.P.O. books (bothfully
used and also partly used) to the Jt. Commissioner (H.Q.-1),
Mumbai along with the list for safe custody.
28.10. Reconciliation of RPOs with banks. -- It is necessaryto
carry out periodic reconciliation of the Advice Notes issued
by the various officers and payments as recorded in the bank
(paid Advice Notes). For this purpose, the periodicity of
reconciliation should be a three calendar months i.e. allthe
scrolls received for a particular three calendar months
should be examined together. Cases of over payment, if any,
should be immediately investigated.
29.10. The dedicated officer of Pay & Accounts cadre maybe
assigned these works. It shall be ensured that the officer
issuing cheque and officer carrying reconciliation shall be
different one.
30.10. To reconcile the paid Advice notes received fromReserve
Bank of India / Treasury, is to be carried out by the
Designated Officer in the office of JCST R&RA.
31.10. Reconciliation of paid advice notes and relevantrecord
pertaining to the refund claim, is to be verified and
reconciled from following authorities.
Amountas perpaidAdvice
Notes
Refund ProcessingAuthority
Refund SigningAuthority
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1.13. Form 704 in refundable cases should be collected fromthe
Business Audit Branch, where the dealer is required to file
the same.
2.13. Desk audit of all Form 704 in refundable cases is to bedone.
3.13. Desk audit of cases in which Form 704 is subsequentlyfiled
by the dealer.
4.13. Verify the correctness of the refund claim made withreturns
during the period, books of accounts and Form 501.
5.13. If any discrepancy is found, take necessary actionsincluding
business audit of the case with prior approval of Joint
Commissioner.
6.13. Business Audit in refund cases:- If the dealer hasfiled
application in Form 501 in any period of financial year,then
Refund Audit should be taken for complete financial year.
Form 704 submitted by the dealer to Business Audit Branch
is to be obtained. Desk Audit of all Form 704 is to be
undertaken in comparison with the refunds granted.
7.13. Chapter 6 of Business Audit Manual, is reproduced herefor
reference,
6.1 Note: A separate manual has been prescribed for
Refund Audits. The case wherein the dealer has already
filed application in form 501, the audit is to be conductedby
the refund audit branch for whole of the year. The cases
which are selected for business audit and as a result ofaudit
it is found that the dealer stands to get a refund, that isthe
case results in over declaration, in such cases the auditor
while carrying out the business audit shall also apply the
procedure prescribed for the refund audit in refund audit
manual for carrying out the refund audit and thereafter
completing the procedure and coming to the conclusion in
the matter should give such findings in audit form 7. The
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dealer may be advised to file the revised return and on such
filing the dealer may file the prescribed form 501 with the
refund audit authorities. The refund audit branch , however
may give the refund on basis of the findings of the Auditor
issued to dealer in form Audit form 7. The refund audit
branch need not again carry out the Audit as prescribed in
their manual. The auditor of business audit branches at end
of each mont
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