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  Tax queries answered by Dilip Lakhani, Senior Chartered Accountant

Service tax refund can be claimed if Cenvat credit has not been availed of'
August, 12th 2014

On our excisable export product, the All Industry Rate of Drawback is 4 per cent when Cenvat Credit is availed and 5 per cent when Cenvat Credit is not availed. We have been claiming drawback at 5 per cent, without availing Cenvat Credit. Can we now claim service tax refund for the exports made?

Under notification no. 41/2012-ST dated June 29, 2012, you have the option to claim refund of the service tax paid on taxable services that have been used beyond the place of removal, for the export of goods, either on the basis of rates specified in the schedule of rates annexed to that notification or on the basis of specified documents. For a claim on the basis of notified rates, you must have made a declaration in the shipping bill. So, on your future exports you can make a suitable declaration and claim the refund at notified rates. On your past exports, you may claim a refund on the basis of actual documents. In both the cases, you have to fulfil the conditions laid down in that notification.

We are based in West Bengal and plan to procure our raw material from a public sector unit (PSU) located in a SEZ in Tamil Nadu. Section 30 of the SEZ Act, 2005 provides for levy of customs duty on goods when removed from a SEZ unit to a DTA unit, as applicable on such goods when imported. Accordingly, we wish to pay customs duty (Basic + Additional + Cess + SAD) while procuring our raw material from the PSU. However, the PSU insists on payment of 2 per cent CST, instead of customs duty. Is this correct?

Under the respective sales tax laws, CST/VAT is leviable on goods cleared from SEZ to DTA. This levy is in addition to the duty payable under Section 30 of the SEZ Act, 2005. You can, however, claim exemption from payment of SAD under notification 45/2005-Cus dated May 16, 2005.

We are a manufacturer based in Gujarat. We want our raw material supplier based in Maharashtra to consign the goods to our job-worker in Maharashtra and then receive the goods processed by the job-worker at our factory for further manufacture. Are we required to pay CST or Maharashtra VAT? Does the transaction between us and the job worker fall under 'works contract'?

As per Section 3 of the CST Act, 1956, a sale or purchase of goods shall be deemed to take place in the course of inter-state trade or commerce if the sale or purchase (a) occasions the movement of goods from one state to another; or (b) is effected by a transfer of documents of title to the goods during their movement from one state to another. In your case, the raw materials do not move to another state and so, is not inter-state trade or commerce. So, VAT must be paid as per the local laws in Maharashtra. Since the job-worker only gives you the service of carrying out certain processes on the goods supplied by you, there is no works contract in your transaction with the job-worker.

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