Refund on deemed exports - MoF and MoC point finger at each other

The author has written the article in superfluous on the concept of CENVAT. The Board circulars are only departmental instructions and guidance. The CENVAT credit is an element of tax paid already by the manufacturer or provider of output service and the amount is not lying with the assessee and it is with the Government exchequer. The CENVAT credit account is only showing the amount of tax already paid by them as balance for adjustment for payment of duty/ST on the final product or output service as the case may be. The deemed export is not only DTA unit to EOU. EOU to EOU (IUT) also considered as deemed export. Whether the cenvat credit amount showing accumulated balance or not, the tax/duty element is already suffered and built in the cost of the product. The refund of the duty element is a remedy to avoid cascading effect and remove the tax element from the export product.

EOU operations always is not an independent function. It is a team work from DTA units, other EOUs/SEZ etc. All of them are making the goods/providing services in India and earning free foreign exchange and adding value to the country. The amendment will question the survival of such units. They will either shift their status from EOU to DTA, add cost of the duty element to their product if the recipient unit is affordable, or change their operations to abroad. It will result and abnormal outflow of FFE and the FDI will be put into question mark.

The solutions does not come, by saying that we have already informed the trade and industry by circulars and notifications etc. Further adding the duty and taxes to export goods and services are against the article 286 of the constitution.

It is an urgent matter the TRU to look into it and give proper remedy to deemed exporters.

R Vaidyanathan
Consultant- indirect taxation
Bangalore

Ramadoss Vaidyanathan 13/03/2015