The South Tea Exporters’ Association has sought the intervention of the Tea Board to help them get VAT refunds on time from the Commercial Tax Department.

The exporting community told Business Line that the outstanding refund from the department has shot up to over Rs 13 crore, and with the exporters continuing to remit one per cent tax on sales, the refund from the department is mounting by the day.

“The refund has been outstanding for over three years now,” Association Chairman Dipak Shah said.

He further said of the total exports of 100 million kg of tea from the South, close to 70 per cent was done by members of the association on payment of one per cent VAT.

Recapping the events that led to the present imbroglio, Shah said “until 2007, sales at the auction were permitted under three modes — on payment of local tax, export at zero per cent tax on production of Form H within six months of such sale and inter-State sales with C Form”.

“It was a smooth run, until the sales tax department caught a broker with fake C-Forms, which were doing the rounds in the market, and imposed a penalty on him. There was a total breakdown in the system thereafter; members of the Nilgiris Bought Leaf Tea Manufacturers' Association met some top executives in the Sales Tax department and at the ministerial level too. VAT was introduced around that time.”

“The matter was taken up with the then District Collector of Nilgiris, who convened an urgent meeting of the industry stakeholders. Tea Board representatives were not present at that meeting. We were told that we will get the tax refund on production of an export document (Bill of Loading). The Minutes were recorded but no gazette was passed. Everything was done in a hush hush manner and we as an exporting community, agreed to the understanding.”

“We were told that we will get the refund in two months, but it took seven–eight months. The wait only widened with the passage of time, which is when we sought the help of the Tea Board,” explained Shah.

To understand the plight of the exporters, the Tea Board convened a meeting of the industry stakeholders in the presence of the Deputy Commissioners of Commercial Taxes (Enforcement and Territorial) on July 2 at UPASI in Coonoor.

“We realised that the auction centres in Tamil Nadu (at Coonoor and Coimbatore) restricted the different modes of sale of tea as permitted under the provisions of Central Sales Tax without proper authority,” the Executive Director of the Tea Board at Coonoor R Ambalavanan told Business Line.

After examining the proceedings, the Tea Board executive, in a communication marked to the tea auction centres in Coonoor, Coimbatore and TeaServe, categorically stated that “it (sale) is inappropriate and illegal”.

The Board issued a directive to the trade associations “to permit different modes of sale of tea under the Central and State Laws, without any violation and similar to the other auction centres operating across the country with immediate effect.”

Shah said exporters took an impromptu decision and abstained from buying at the auction that week (first week of July). “About 60 per cent of the teas on offer were left unsold that week, resulting in turmoil in the industry. Obviously, we could not refrain from buying as we had orders from our importers,” he said, substantiating their return to the auction platform.

Exporters meanwhile say that the outstanding VAT refund from the commercial tax department has started to pinch their pocket.