NOVEMBER 12, 2015

By S Thirumalai, Advocate, Past-President, FTAPCCI

1. A careful scrutiny of the Chartered Accountant (CA)/Statutory auditor's certificate required under the "Scheme" would show that the same should cover three aspects relating to: compliance with the provisions of Cenvat Credit Rules, 2004, Service tax Rules, 1994 (Rule 6A) and Place of Provision of Service Rules, 2012. This would be an onerous responsibility on the part of the CA/ Statutory auditor particularly in a case where the entire refund claim stands rejected by an adjudication order "as not involving any output service". Such a claim would be covered by the expression "claims disposed of "in terms of the said Circular. This would call upon the said CA/Auditor to say something different in the teeth of a subsisting adjudication order under which the claim stands rejected.

1.1. As a logical consequence the CA/ Statutory auditor would be obligated to caveat his certification relying upon precedents.

1.2 History has shown that the certification under Rule 5 by the CA/ Statutory Auditor that carried notes as per the Institute of Chartered Accountant's guidance have come up for rejection by the Service Tax Department as being not in accordance with the form prescribed under the said Rule.

1.3 This will repeat itself under the "Provisional Payment Scheme" unless the certification by the CA/Statutory Auditor is limited to the facts as obtaining from the books of accounts and other records of the service provider. The CA/Statutory Auditor should not be required to express any opinion as to the applicability or otherwise of the various Rules that may have a bearing on the refund claim as aforesaid.

2. The other confusing aspect in the Circular is with the use of the expression "disposed of" in the context of the scheme for speedy settlement of claims of exporters under Rule 5 of the Cenvat Credit Rules, 2004. The relevant portion of the Circular reads as follows:

"2.2 The phrase "disposed of' in this context refers to either sanction of refund or denial, either in whole or in part, by way of an adjudication order...... (emphasis supplied)

3.0 Additional documents to be submitted (i.e. in addition to those required to be filed along with the claim)

3.1 A certificate from the statutory auditor in the case of companies, and from a chartered accountant in the case of assessees who are not companies, in the format given in Annexure-1."

When a refund claim has been sanctioned in whole the pendency could be on account of delay in the credit of the sanctioned amount to the assessee. How and why the CA/Auditor's certificate should be made applicable to such a case is not clear. The only reason the refund s pending is because the matter is under process internally in the Department after having already been sanctioned. There should be no requirement for a CA/Auditor's certificate in this case.

3 The Provisional payment scheme for clearance of past claims filed before March 31, 2015 is indeed a welcome measure as it would relieve the working capital pressure in the immediate term. But the successive processes of review envisaged in terms of the Circular could mean demands for repayment of provisionally released amounts at rates of interest ranging from 18-30 % p.a. Therefore the probability of this cost will have to be factored while accepting the provisional payment.