REFUND OF CENVAT CREDIT ON REVERSE CHARGE MECHANISM

Rule 5B of CENVAT Credit Rules, 2004 provides that a  provider of service providing services notified under sub-section (2) of section 68 of the Finance Act and being unable to utilize the CENVAT credit availed on inputs and input services for payment of service tax on such output services, shall be allowed refund of such unutilized CENVAT credit subject to procedure, safeguards, conditions and limitations, as may be specified by the Board by notification in the Official Gazette.                 

Section 68 of Finance Act, 1994 deals with the  payment of service tax by the service providers as well as service recipients under Reverse Charge Mechanism.  The proviso to Section 68(2) gives powers to Central Government to notify the service and the extent of service tax which shall be payable by such person and the provisions of this Chapter shall apply to such person to the extent so specified and the remaining part of the service tax shall be paid by the service provider.

In exercise of the powers conferred by Rule 5B of CENVAT Credit Rules, 2004 the Central Board of Excise and Customs gives directions to give refund of CENVAT credit to a provider of services notified under Section 68(2) subject to the procedures, safeguards, conditions and limitations as specified in Notification No. 12/2014/CE-NT, dated 3.3.2014.  The following are the safeguards, conditions and limitations specified by the Board:

• The refund shall be claimed of unutilized CENVAT credit taken on inputs and input services during the half year (from 1^st April to 30^th September; and from 1^st October to 31^st March)  for which refund is claimed, for providing the following output services, namely:-

• Renting of a motor vehicle designed to carry passengers on non abated value, to any person who is not engaged in a similar business;
• Supply of manpower for any purpose or security services; or
• Service portion in the execution of a works contract.

• The refund of unutilized CENVAT credit shall not exceed an amount of service tax liability paid or payable by the recipient of service with respect to the partial reverse charge services provided during the period of half year for which refund is claimed;
• The amount claimed as refund shall be debited by the claimant from his CENVAT credit account at the time of making the claim;
• The claimant shall submit not more than one claim of refund under this Notification for every half year;
• The refund claim shall be filed after filing of service tax return as prescribed under Rule 7 of the Service Tax Rules for the period for which refund is claimed;
• No refund shall be admissible for the CENVAT credit taken on input or input services received prior to 01.07.2012.

The formula for calculation of unutilized CENVAT credit taken on input and input services during the half year for providing partial reverse charge services= (A) – (B)

B= Service tax paid by the service provider for such partial reverse charge services During the half year.

The following is the procedure prescribed in this Notification for refund claim:

• The applicant shall submit an application in Form A along with the documents and enclosures to the Jurisdictional Assistant Commissioner of Central Excise or Deputy Commissioner of Central Excise, as the case may be, before the expiry of one year from the due date of filing of return for the half year;
• The last date of filing application for the period standing from 1^st day of July 2012 to 30^th day of September 2012, shall be the 30^th day of June 2014;
• If more than one return is required to be filed for the half year, then the time limit of one year shall be calculated from the due date of filing of the return for the later period;
• The applicant shall filed the refund claim with the copies of returns filed for the half for which the refund is claimed;
• The Authority may call for any document in case he has reason to believe that information provided in the refund claim is incorrect or insufficient and further enquiry needs to be caused before the sanction of refund claim;
• At the time of sanctioning the refund claim the Authority shall satisfy himself or herself in respect of the correctness of the refund claim and that the refund claim is complete in every aspect.

The following are the particulars to be provided in Form A  -

• Description of service;
• Value of output services during the half year;
• Total service tax liability during the half year;
• Service tax liability discharged by the provider of output service during the half year;
• Service tax liability of the receiver of such output service during the half year

The following are the particulars are to be given for the refund:

• Period for which refund is claimed;
• Service tax liability of the receiver of such output service during the half year;
• Amount of unutilized CENVAT credit taken on inputs or input services during the half year for providing services taxable under partial reverse charge;
• The eligible refund amount.

The details of the bank account of the applicant to which the refund amount is to be credited is to be furnished and the required declaration in Form A.

The refund claim will be processed and the eligible refund amount will be deposited in bank account of the applicant.