DEPARTMENT OF SALES TAX

MANUAL OF PROCEDURE

REFUND & REFUND AUDIT

REFUND & REFUND AUDIT MANUAL INDEX Sr. No. 1. 2. 3. 4. 5. 6. 7. 8. 9. 10. 11. 12. 13. 14. 15. Subject Objectives of the branch. Organisational Structure. Relevant provisions of Act and Rules. Relevant Internal and Trade Circulars. Competent Authorities and Targets. The process in brief. Procedure of Branch. Refund Audit Procedure. Duties & Responsibilities. Inspection procedure & frequency. Responsibility & date for updating the manual. Record filing system. Reporting Formats of the Branch. Various control Registers. Annexures. Page No. From - To 3 4 to 5 6 to 15 16 to 32 33 34 35 to 41 42 to 62 63 to 70 71 71 71 72 to 74 75 to 76 77 to 84 10109

2. OBJECTIVES OF THE BRANCH:-

Processing refund claims within the prescribed time limits.

To ensure that, the refund claim made in the return is valid and accurate by audit.

3. ORGANISATIONAL STRUCTURE:A) MUMBAI :Design. Sanctioned strength J.C. 1 D.C. 8 A.C. 26 STO 21 STI 70 Clerk 70 Othe r 67 Total 263

B) MOFFUSIL :Sanctioned strength as per re-organisation:Designation Thane Kalyan Thane Rural Nalasopara Raigad Pune Solapur Osmanabad Barshi Kolhapur Satara Sangli Ratnagiri Oras Nasik Malegaon Ahemadnaga r Dhule Jalgaon Nandurbar D.C. 2 A.C. STO STI Clerk Total Thane Division 2 4 7 11 26 1 3 3 7 Thane Rural Division 3 7 16 17 44 1 2 3 6 Raigad Division 2 1 8 8 21 Pune Division 6 14 36 32 92 1 3 9 10 25 1 1 1 3 1 1 1 3 Kolhapur Division 2 5 12 12 33 1 2 2 6 1 2 2 6 1 2 3 6 1 1 2 4 Nasik Division 2 3 8 10 25 1 1 2 4 1 Dhule Division 2 3 1 3 10 2 1 2 8 2 2 6 25 5 3

2 4 2

2 1 1

Designation Nagpur Chandrapur Gondia Gadchiroli Vardha Bhandara Amravati Yeotmal Khamgaon Akola Vashim Aurangabad Beed Jalna Nanded Parbhani Latur Hingoli

D.C.

A.C. STO STI Nagpur Division 2 2 5 1

Clerk 12 1 1 1 1 9 1 1 2 1 12 1 1 10 1 2 1 12 1 1 1 2 2 7 2 2 5 1 8 2 2 12 2 3 2

Total 33 3 2 1 4 3 23 4 4 8 2 27 4 4 29 4 6 3

1 Amravati Division 2 3 1 1 Aurangabad Division 2 3 1 1 2 3 1 1

2 1

RELEVANT PROVISIONS OF ACT AND RULE:3.1 3.1.1 RELEVANT PROVISIONS OF ACT:-

Section-22. Audit

(1) With a view of promoting compliance with the provisions of this Act, the Commissioner may arrange for audit of the business of any registered dealer. For the purpose of this section, the selection of dealers for audit shall be made from amongst the dealers, (a) (b) (c) who have not filed returns by the prescribed dates; or who have claimed refund of tax; or where the Commissioner is not, prima-facie, satisfied with the

correctness of any return filed by a dealer or is not satisfied with any claim made, deduction claimed or turnover disclosed in any return filed by the dealer; or (d) who are selected by the Commissioner on the basis of the application

of any criteria or on a random selection basis; or (e) where the Commissioner has reason to believe that detailed scrutiny of

the case is necessary. (2).. (3) On the appointed day or, as the case may be, at anytime within the aforesaid period, any officer to whom the powers and duties under this section have been delegated, by the Commissioner, in writing, may conduct audit of the business. (The above sub-section (3) is deleted by the Maharashtra Act No. XXV of 2007 Dt. 06.08.2007). (4) .. (5) (a) During the course of the audit, the officer may require the dealer, (i) to afford him the necessary facility to inspect such books of accounts or

other documents as he may require and which may be available at such place, (ii) to afford him the necessary facility to check or verify the cash or stock which may be found therein. And (iii)to furnish such information as he may require as to any matter which may be useful for or relevant to any proceedings under this Act. (b) The officer conducting the audit shall on no account remove or cause to he removed any books of accounts, other documents or any cash or stock. (6) ... (7).. (8) ... 3.1.2 Section-50. Refund of excess payment

(1) Subject to the other provisions of this Act and the rules made there under, the Commissioner shall, by order refund to a person amount of tax, penalty, interest, deposit and fee except when the fee is paid by way of court fee stamp , if any, paid by such person in excess of the amount due from him. The refund may be either by deduction of such excess from the amount of tax, penalty, amount forfeited and interest due, if any, in respect of any other period or in any other case, by cash payment: (In the above para for the words the commissioner shall refund the words the Commissioner shall, by order refund are substituted by the Maharashtra Act No. XXXII of 2006 Dt. 05.08.2006) Provided that, the Commissioner shall first apply such excess towards the recovery of any amount due in respect of which a notice under subsection (4) of section 32 has been issued, or, as the case may be. any amount which is due as per any return or revised return but not paid and shall then refund the balance, if any. (2) Where any refund is due to any dealer according to the return or revised return furnished by him for any period, then subject to the other provisions of

this Act including the provisions regarding provisional refunds such refund may provisionally be adjusted by him against the tax due and payable as per the returns or revised return furnished under section 20 for any subsequent period: the word, subsequent shall be deleted with effect from 20th June 2006. Provided that, the amount of tax or penalty, interest or sum forfeited or all of them due from, and payable by, the dealer on the date of such adjustment shall first be deducted from such refund before making the adjustment. (For the above subsection (2) the following subsection (2) is substituted by the Maharashtra Act No. XXXII of 2006 Dt. 05.08.2006) (2) If a registered dealer has filed any returns, fresh returns or revised returns in respect of any period contained in any year and any amount is refundable to the said dealer according to the return, fresh return or revised return, then subject to rules, the dealer may adjust such refund against the amount due as per any return, fresh return or revised return for any subsequent period contained in the said year, filed under this Act or the Central Sales Tax Act, 1956 or the Maharashtra Tax on the Entry of Goods into Local Areas Act, 2002.

3.1.3

Section-51. Grant of Refunds

(1) Where a registered dealer has in any return, fresh return or revised return shown any amount to be refundable and has not undertaken to adjust such amount against the amount due as per any subsequent return in accordance with section 50, the Commissioner shall, on an application made by the dealer and subject to rules, and the other provisions of this Act, grant refund of such amount to the said dealer. (2) (a) The registered dealer, may after the end of the year to which the

return, fresh return or revised return relates, make an application in the prescribed form after filing the said return for grant of refund of the amount

claimed refundable as aforesaid. The Commissioner may within one month of the receipt of the application call for such additional information as he may think necessary. The refunds relating to all the periods contained in one year may be granted by a single order. (b) Notwithstanding anything contained in clause (a), where a dealer has obtained a registration certificate as provided under this Act, then the refund in respect of the returns, fresh returns or revised returns in respect of the year containing the date of effect of registration shall be granted within six months of the end of the year succeeding the said year: Provided that, the said dealer may apply in the prescribed form to the Commissioner at any time after the end of the said succeeding year to which the refund relates for grant of the said refund. Provided further that, where the return, fresh return or, as the case may be, revised return is filed at any time after the date prescribed for filing the last return of the said year, then the refund shall be granted within eighteen months of the date of filing of the return, fresh return or revised return. (The above proviso is deleted by the Maharashtra Act No. XXV of 2007 Dt. 06.08.2007) (3) (a) Notwithstanding anything contained in sub-section (2), if a dealer is, (i) an exporter within the meaning of sub-section (1) or sub-section (3) of section 5 of the Central Sales Tax Act, 1956 ; or (ii) a unit specified in the Explanation to sub-section (3) of

section 8 ; or (iii) a holder of a Certificate of Entitlement under any Package Scheme of Incentives except the New Package Scheme of Incentives for Tourism Projects, 1999, (iv) selling any goods in the course of inter-State trade or commerce; or (v) the Canteen Stores Department and the Indian Naval Canteen Services,

then he may apply in the prescribed form to the Commissioner after filing the return for grant of refund relating to the period covered by a return, fresh return or revised return; or (b) The Commissioner, within one month of the receipt of the said application, (i) may require the dealer to furnish such bank guarantees for such amounts from such banks, for such periods and to such authorities as may be prescribed; and (ii) may call for such additional information as he may think necessary. (4) The Commissioner shall grant the refund under this section within three months of the receipt of application or receipt of additional information whichever is later. If the additional information is not furnished, then the refund shall be granted within six months of the receipt of the application. (5) Notwithstanding anything contained in paragraph (a), the dealer may at his option furnish a bank guarantee for such amount, from such bank, for such periods and to such authorities as may be prescribed and on the dealer furnishing such bank guarantee, the Commissioner shall grant the refund due under sub-section (2) or (3) within one month of the furnishing of the bank guarantee irrespective of whether the additional information has been furnished. (6) (a) If before the grant of refund under this section, a notice for assessment covering the period to which the return relates is issued or if any proceedings under sub-section (3) or sub-section (4) of section 64 are initiated in respect of the period to which the return relates, then, (i) if the dealer has not furnished a bank guarantee then no refund under this section shall be granted ; and (ii) if the dealer has furnished a bank guarantee then an amount equal to the guaranteed amount shall be refunded.

(b) If it is found as a result of any order passed under this Act that the refund granted under this section is in excess of the refund, if any, determined as per the said order, then the excess amount shall be recovered as if it is an amount of tax due from the dealer and the dealer shall be liable to pay simple interest at the prescribed rate per month or part thereof from the date of the grant of refund. (7) No refund under this section shall be granted unless an application as provided is made and no application under this section shall be entertained unless it is made within three years from the end of the year containing the period to which the return relates.

3.1.4

Section- 52. Interest on amount of refund

Where refund of any tax becomes due to a registered dealer, he shall, subject to rules, if any, be entitled to receive, in addition to the refund, simple interest at the prescribed rate on the amount of refund for the period commencing on the date next following the last date of the period to which the refund relates and ending on the date of the order sanctioning the refund or for a period of twenty four months, whichever is less. The interest shall be calculated on the amount of refund due to the registered dealer in respect of the said period after deducting therefrom the amount of penalty, sum forfeited and interest, if any, charged in respect of the said period and also the amount of refund, if any, adjusted towards any recovery under this Act or any earlier law or as the case may be, under the Central Sales Tax Act, 1956. If, as a result of any order passed under this Act, the amount of such refund is enhanced or reduced, as the case may be, such interest shall be enhanced or reduced accordingly. If the interest is reduced, then the amount granted in excess shall be recovered as if it is an amount payable under this Act. Provided that, interest under this section shall not be granted towards any refund granted under section 51. Explanation. For the purposes of this section, where the refund of tax, 1

whether in full or in part, includes any amount of refund on any payment of tax made after the date prescribed for making the last payment in respect of the said period, then the interest, in so far as it relates to the refund arising from such payment, shall be calculated from the date of such payment to the date of such order.

3.1.5 (1)

Section-53. Interest on delayed refund Where an amount required to be refunded by the Commissioner to any

person, by virtue of the provisions contained in section 51 or by virtue of an order passed under any other provision of this Act, is not so refunded to him within ninety days of the end of the respective period provided in section 51 or, as the case may be, of the date of the said order, the Commissioner shall pay such person simple interest at the prescribed rate on the said amount from the date immediately following the expiry of the period of ninety days to the date of the refund. Provided that, where the amount becomes refundable by virtue of an order of the Tribunal or the High Court or the Supreme Court, the interest under the provisions of this section shall be payable from the date immediately following the expiry of period of ninety days from the date of receipt of the order of the Tribunal, the High Court or the Supreme Court, by the officer whose order forms the subject of the proceedings before the Tribunal, the High Court or the Supreme Court, to the date of refund. The applicant dealer or person may supply to the said officer a certified copy of such order and if the copy is so furnished, interest shall become payable after the expiry of period of ninety days from the date of such supply. Explanation. If the delay in granting the refund within the period of ninety days aforesaid is attributable to the said person, whether wholly or in part, the period of the delay attributable to him shall be excluded from the period for which interest is payable. (2) Where any question arises as to the period to be excluded for the purposes 1

of calculation of interest under the provisions of this section, such question shall be determined by the Commissioner, whose decision shall be final.

1.1.5

Other Relevant provisions of the Maharashtra Value Added Tax Act, 2002

Section 20 Section 21 Section 23 Section 48 Section - 49 Section 65 Section 96

Returns and Self-assessment. No notice for Assessment in certain cases. Assessment. Set-off, refund, etc. Refund of tax on declared goods sold in the course of interstate trade or commerce. Cross-checking of transactions. Savings

3.2 3.2.1

RELEVANT PROVISIONS OF RULE:Rule-60. Grant of Refund.-

(1)Application for refund under section 51 shall be made in form 501. (2)When the Commissioner is satisfied that a refund is due, he shall pass an order in Form 502, showing the amount of refund due and shall communicate the same to the dealer. (3)When an order for refund has been made under any rule, the Commissioner shall, if Applicant desires payment in cash, issue to him a refund payment order either in form 503 or in form 504. If the dealer desires adjustment of refund, against tax payable in respect of any subsequent period contained in the year to which the refund relates under this Act, the Central Sales Tax Act,1956, or the Maharashtra Tax on Entry of Goods into Local Areas Act, 2003, the Commissioner shall issue a Refund Adjustment Order in form 506.

3.2.2

Rule-61.

Bank Guarantee.-

The Bank Guarantee shall be obtained from any branch of a bank notified as a Government Treasury. The maximum period for a Bank Guarantee shall be of 36 months. It shall be furnished to respective Joint Commissioner in charge of grant of refunds. The Bank Guarantee shall be for such amounts and such periods as the Commissioner may by public notice notify from time to time. 3.2.3 Rule-62. Order sanctioning interest on delayed refunds:(1) Where upon an application by any person claiming interest on any delayed refund or otherwise the Commissioner is satisfied that such interest is due and payable to the applicant or any person under section 53, the Commissioner shall record an order specifying therein the amount of refund, the payment of which was delayed, the period of delay for which interest is payable and the amount of interest payable by the Commissioner therefore, and shall communicate the same to the applicant or person concerned. (2) When an order for payment of interest on any delayed refund has been made under this rule, the Commissioner shall issue to the applicant or person concerned an interest payment order in Form 505. 3.3 Other Relevant provisions of the Maharashtra Value Added Tax Rule, 2005 Rule 17 Rule 18 Rule 19 Rule 20 Rule 21 Rule 23 Rule 24 Rule 25 Submissions of returns. Special provision for first and last return in certain cases and for dealers under the package scheme of incentives Separate return. Complete and self-consistent return. Form of Notice for assessment. Form of order of assessment. Application for cancellation of assessment order. Order imposing penalty or interest.

Rule 51 Rule 52 Rule 53 Rule 54 Rule 55 Rule 68 Rule 77 Rule 79 Rule 88

Claim and grant of set-off in respect of purchases held in stock on the appointed day. Claim and grant of set-off in respect of purchases made in the periods commencing on or after the appointed day. Reduction in set-off. Non-admissibility of set-off. Condition for grant of set-off or refund and adjustment of drawback, set-off in certain circumstances. Preservation of books of accounts, registers, etc. Particulars to be specified in a tax invoice, bill or cash memorandum. Refund of tax to eligible units. Rates of interest.

4. 4.1

Relevant Internal and Trade Circulars:Guidelines issued vide Internal Circular no. 13.03.2008, Internal Circular No. 6A of 2008. Sub : Refunds under MVAT Act. Modifications in Internal Circular 5A of 2008 Ref:- Internal Circular No. 37A of 2007 Dt. 28.12.2007 .
Internal Circular No. 5 A of 2007 Dt. 05.03.2008.

No.:- VAT-2008/JC./ Refund and Refund Audit / B- 4579 Mumbai, Dt :

1) INTRODUCTORY :This office had earlier issued Internal Circulars No. 37 A of 2007 Dt. 28th December, 2007 and 5A of 2008 Dt. 05.03.2008. These circulars were issued to provide the guidelines for facilitating early processing of refunds and to remove the difficulties faced in processing the refund claims. The pendancy of the refund has been reviewed and in addition to earlier instructions, fresh guidelines are given hereunder, to expedite the process of granting of refund and completion of refund audits. 1

2) GRANT OF REFUND :. All the cases, where the dealer has filed returns for the relevant period on or before 25th February 2008 would be eligible for grant of refund without prior Refund Audit and application in Form 501 is filed on or before 19th March 2008, The refund without pre audit, as per earlier circulars was not allowed in respect of the claimant dealers (both manufacturers and traders) of Iron and Steel and Dyes & Chemicals. However, certain relaxations are hereby given to process the refund claims in respect of such dealers, if they fulfill any of the following conditions. This relaxation is made only for the refund processed up to 31.03.2008. ) If the Refund Audit is completed by the Refund Audit Branch of such dealers for any previous period and no substantial reduction in refund amount is noticed after the Refund Audit or ) If such dealers have submitted the Statutory Audit Report in Form 704 for previous year. ) If the dealer is a manufacturer. The departmental authorities are instructed to start the Refund Audit immediately after 1st April, 2008 of the dealers to whom pre audit refund is granted. The above mentioned categories will be audited on priority. . The copy of Return claiming the refund should be obtained from the Return Branch. The dealer may be called to produce the copies of the challans, if necessary. The instructions contained in Circular 5 T of 2008 should be scrupulously followed. However, the claimant dealer if encloses certified copies of the returns along with the application in Form 501, then such certified copies may be considered.

. A certificate should be obtained from the dealer, certifying that, no dues are outstanding against him and he has not carried forward this refund in any of the earlier or subsequent returns. . The dealer should be asked to submit the necessary information required to process the refund claim. This communication should invariably be made in writing and the dealer should be made aware that his claim of refund shall not be processed unless the requisite information is submitted by him. . In case, the refund granting authority decides to assess the dealer, then the notice for assessment should be issued within a period of 3 months from the date of submitting Form 501. . The refund should be granted only in respect of the refund which is due. e.g. in case of a P.S.I. dealer who holds the entitlement certificate for part of an industrial undertaking through investment in a expansion unit and whose production from the all JC old and expansion investments is identifiable, (i.e. production facilities are separate), then in such cases, the refund will be granted only in respect of purchases corresponding to the production of the expansion unit in the total production. Cases in which the investment in expansion unit does not result in identifiable (separate) production capacity but strengthens/upgrades the existing technology, product quality or quantity, purchases entitled for refund shall be worked out in proportion to the new (PSI) investment in the total investment. . Where the dealer has submitted application in Form 501 and subsequently revised the corresponding return claiming refund for any reasons, then the corresponding application in Form 501 would become redundant and such dealer should be asked to submit fresh application in Form 501 to that effect. In cases where, after submitting the applications in Form 501 and if it is noticed

that the returns are not filed as per the periodicity, in such case the dealer should be asked to submit the revised returns as per the correct periodicity and also the new application in Form 501 . Only those cases wherein the claim of refund remains unaltered shall be eligible for pre audit refund as per this circular. No fresh annexure will be required if the contents of the earlier annexure remains unaltered. This action on the part of the dealer should have been completed on or before 19th March 2008. . The completed Form 502 should be submitted to R.P.O. section for issue of Refund Payment Orders. All the actions of granting refund in the above mentioned cases should be completed on or before 25th March, 2008. 3). POST GRANT OF REFUND ACTIONS / REFUND AUDIT After grant of refund all the cases be audited as per principles laid down hereunder. I. Desk Audit :- If the refund claim is less than Rs. 5 lakh per Form 501 , then only desk audit is to be done (No field visits.). The desk audit is to be conducted immediately after the grant of refund. The desk audit is to be completed in the following manner. a) The copies of Form 704 to be obtained from Business Audit Branch .( If available) b) The refund granting officer should first ascertain from MAHAVIKAS the position regarding the filing of returns by all the suppliers of the refund claiming dealer. c) While checking, the audit officer must check that the turnover of sales and the taxes paid by the supplier are enough to cover the claim of ITC of the refund claimant in respect of that supplier. d) In cases, where the dealer has effected Interstate Sales, the details of availability of declarations under CST Act should be checked

by calling the dealer with details and pass the appropriate order accordingly (wherever necessary). e) Visit is not necessary in these cases unless there are special circumstances due to which visit is found necessary. For this approval of JC concerned should be taken. II. Field Audit :- The Field Audit is to be conducted in all the cases wherein the refund claim is Rs. 5 lakh or more. 4 ) CROSS CHECKING OF THE TRANSACTIONS :While conducting the Desk Audit or the Field Audit, the cross checks to be done in the following manner. The officer should confirm filing of returns by all the suppliers of the refund claiming dealer from the MAHAVIKAS and from Return Branch. . For the purpose of cross checking, where total ITC claim in respect of a supplier is of Rs. 50,000/- and above and where return has been filed, 10 % of suppliers will be selected by way of Random Sampling Method (duly approved by the concerned JC) and to be sent for cross checking to the cross check section . . Where ITC claims in respect of any supplier is less than Rs. 50,000/per supplier and where return has been filed , 5 % of suppliers will be selected by way of Random Sampling Method (duly approved by the concerned JC) and be sent for cross checking to the cross check section . During the cross check, if it is found that any transaction is not

accounted for by a particular supplier in his books of accounts , then a comprehensive Business Audit of that supplier is to be taken immediately by the Refund Audit Branch. The Cross Check Cell should immediately inform this fact to the Refund Audit Branch. Also, instead of the sample cross check, 100% of the cross checks of the claimant dealer is to be issued immediately. The claimant dealer

should be informed about such result and reasons for issuances of 100% cross checks in his case. The claimant dealer should also be informed if any of his suppliers is not available on the given address. . It is pertinent to note here that, the information about such suppliers should be shared with all officers through E-mail. The list of such dealers should be prepared and monthly updating should be done by the Cross Check Section. The information about such suppliers may also be published on the official Web Site of the department after canceling the R.C. of the concerned dealer to make aware the dealers at large. If it is found during the process of cross check that the supplier is not found at the address given, then list of such dealers should be shared with all the officers through Email. The action to cancel the TIN Certificate or Registration Certificate should be initiated in respect of such suppliers, in due course. The details of such suppliers should be reported to the Registration Branch to initiate the actions of cancellation of R.C. . No cross checks to be issued for a single bill containing tax upto Rs.5,000/-, Rs.4,000/- and Rs.3,000/- for the cases audited by Deputy Commissioner, Assistant Commissioner and Sales Tax Officer respectively . . It is needless to add that in case, any of the supplier has not filed the relevant return, then refund to the extent of ITC claim of that supplier should be reduced by passing appropriate order. In any case, the ITC claim in respect of any supplier should not be granted, unless it is verified that the supplier has filed the return for the corresponding return period. If it is found after cross checking, that a particular supplier is not traceable, then the refund to the extent of purchases of such dealer should be withdrawn by passing an appropriate order. All the departmental officers are directed to follow above instructions scrupulously.

4.2

Guidelines issued vide Internal Circular bearing no. 37A, dt: 28.12.2007, are reproduced herewith,

Sub: Refunds under MVAT Act. A) Background: The issue of pending refund claims is reviewed on 17th of December 2007 to expedite early finalisation of refund claims. Considering the huge pendancy, delay in completing audit, some major decisions are taken in the public interest in the meeting related to grant of refund and audit of such cases. The decisions taken in the meeting should be followed by all the Joint Commissioners (Refund and VAT-Adm) with immediate effect. B) GRANT OF REFUND: All the cases except those are mentioned in para (D), where the dealer has filed form 501 on or before 31st DECEMBER 2007 are eligible for grant of balance or full refund prior to audit subject to the following conditions:1. Form 501 must have been received on or before 31st DECEMBER 2007 2. Only cases in which refund is due as per provisions of the Maharashtra Value Added Tax Act (MVAT Act) will be eligible for refund. 3. All Form-501 must be accompanied with annexure in proper format. If data is huge, the department may accept this annexure in Excel format. If Form-501 is already received and annexure is not appended, then obtain annexure from claimant dealer within 10 days. 4. The certified copy of return in which net refund is claimed be obtained from Returns Branch or claimant dealer. The certified copies of returns in which refund is carried forward may also be obtained from the dealer. 5. The dealer should also certify that no sales tax dues are outstanding against him & also that he has not carried forward the said refund in any other subsequent return/s or previous return/s nor has adjusted it against any of his liability. 6. It goes without saying that all the above mentioned certification must be done by duly authorized person of the firm and should carry the stamp of the firm & name of the authorized person 2

7. DISPOSAL: All the actions in the above mentioned cases must be completed on or before 31st January 2008. 8. As per procedures, all cases in which Form-502 is completed, must be submitted to RPO section for issue of RPOs. 9. All these cases will be taken up for post refund audit as per following procedure :C) POST GRANT OF REFUND ACTIONS : After grant of refund all the cases will be audited as per principles laid down hereunder: 1. Audit : The term audit refers to two stage process i.e. i) visit & detailed scrutiny at the place of business of the claimant dealer and ii) summary audit & cross-checking through MAHAVIKAS and/or visiting place of business of the supplier dealers. All the refund claims (per Form-501) above Rs 5 Lac shall be fully audited i.e. visit, scrutiny as well as summary audit & cross checking. All refund claims (per Form-501) of Rs 5 Lac or below shall be done through summary audit and cross-checking only (i.e. a visit is not necessary in these cases unless there are special circumstances due to which visit is found necessary) 2. Procedure of Summary Audit & Cross Checking : i) All the ITC claim will be checked for whether return has been filed by the supplier whose invoice the ITC claim is being asked for. ii) While checking, audit officer must check that the turnover of sales and taxes paid by the supplier is enough to cover the claim of ITC. iii) In all cases where return has been filed, all ITC claims of Rs 25000/& above per supplier will be sent for cross checking to the cross check section. iv) In ITC claims which are below Rs 25000/- per supplier for which return have been filed, cross checking may be carried out for 5% of the suppliers by random selection

v) In cases where supplier is detected as non-filer, ITC claim to that extent be disallowed and such list be sent to Returns Branch for appropriate action. 3. If as a result of audit it comes to notice that excess refund has been granted to any claimant dealer, then the audit officer should immediately initiate and pass an assessment order as per section 23 of the MVAT Act and demand so raised shall be deducted from subsequent refund payable to the claimant dealer. If no refund is payable subsequently, then dues shall be recovered as per the provisions of MVAT Act. 4. In cases where declarations under CST Act are missing, assessment order under CST Act shall be passed and necessary recovery actions shall be taken accordingly. D) In cases where claimant dealer is dealing in Iron & Steel and Dyes & Chemicals, refund prior to the audit shall not be granted. In those cases, refund shall be granted after the completion of detailed audit. E) All the departmental officers are directed to follow above instructions scrupulously. 4.3 Gist of other relevant Internal Circulars :1. Internal Circular No. 2A of 2006, dt: 24.01.2006. Internal Circular No. 3A of 2006, dt: 27.01.2006. Internal Circular No. 6A of 2006, dt: 3.03.2006 Internal Circular No. 5 A of 2007 Dt. 05.03.2008 Instructions for issuing refund under VAT System. Provisional refunds to the dealers covered under the Package Scheme of Incentives Timely payment of due refunds before 31.03.006. Early grant of provisional refund. Refunds under MVAT Act. Modifications in Internal Circular 37A of 2007.

2.

3. 4. 4.4

Guidelines issued vide Trade Circular bearing no.VAT/MIA1007/ADM-5/3 Mumbai, dt.23.08.2007, Trade Circular No.- 56 T of 2007, are reproduced herewith,

Sub: Refund under MVAT. 1. Introductory:Section 51 of the Maharashtra Value Added Tax Act, 2002 deals with refund as per return. The corresponding Rules are, Rules 60 and 61 of the Maharashtra Value Added Tax Rules, 2005. Till date, the refund U/s. 51 were granted on ad-hoc basis by issuing various Trade Circulars from time to time. This was done keeping in view that the automation and reorganization of the department were not completed. The automation of the department is still few months away. However, it is now decided to lay down a stable procedure for the grant of refund. Applicability of this Circular (i). The instructions contained in this circular will apply to all returns filed before the date of this circular, (subject to making an application in Form501,) and will also be applicable for all the subsequent refund claims filed after the date of this circular. (ii). It is to be noted that for further grant of refund, unless a specific circular is issued, the instructions contained in this circular would continue to apply. The dealers should therefore follow the instructions in this circular for claiming the refund for the subsequent periods also. Refund and Due Returns: i)It may be noted that refunds as per returns would be payable only in respect of the returns which the dealer is due to file as per the rules. For example, if a dealer is due to file a quarterly return but instead files monthly returns, then the refund would not be granted in respect of the monthly return. Accordingly, no refund under this circular will be allowed for a returns filed for an incorrect period. ii)The return should be correct, complete and self consistent. The application in Form 501 should be consistent with the return.

iii) The claim of refund can be made only when the dealer is entitled to claim it. Application for Refunds:(i). The application for the refund is to be made in Form 501 appended to the Maharashtra Value Added Tax Rules, 2005 (hereinafter referred to as the Rules). For dealers situated in Mumbai, the application is to be made to the Officer-in-charge of VAT Refunds (Joint Commissioner, Refunds), Vikrikar Bhavan, Mazgaon, Mumbai-400 010. For dealers situated outside Mumbai, the application should, at present, be made to the Officer-in-charge of VAT refunds in the jurisdictional Sales Tax Office. The Annexure to the Form 501 provides for details regarding the suppliers. The information should, as far as possible, be provided in both hard copy as well as a soft copy format, which may be submitted along with the application in Form 501. (ii). As per Rule 60 of the MVAT Rule 2005 the applicant has to make an application in Form 501 to the refund granting authority. There could be cases wherein the dealer has filed a return claiming the refund but an application in Form 501 is not made to the refund granting authority. In all such cases, the dealers are now required to make an application to the concerned refund granting authority along with self attested copies of the return claiming the refund. In order to expedite the process of grant of Refund, the application should be made in Form 501. Additional Information:Section 51 of the Act authorises the departmental authorities to ask for additional information (other than that provided in Form 501) before grant of refund under section 51. The departmental authorities may, at their option, depending upon the individual case, decide to either conduct a refund audit or call for additional information or grant a refund without calling for any additional information. The refund granting authority, with approval of the concerned Jt. Commissioner of Sales Tax, may ask for a bank guarantee for grant of refund when the Refund is being given without Refund Audit. Refund for financial year 2005-06:-

(i)

The refund for the financial year 2005-06 in case of dealers who have

filed the return alongwith form 501 before the issue of this circular shall be granted on or before 31st October, 2007, if the applicant fulfills the other conditions of this circular. (ii) There could be cases for the year 2005-06 wherein only part of the refund is granted till date and the balance refund is pending due to various reasons. In all such cases also the balance refund shall be granted on or before 31st October, 2007, if the applicant fulfills the other conditions of this circular. Grant of Refund:(i). The refund of dealers U/s. 8(3) of MVAT Act shall be granted within 30 days from the date of making the application or from the date of filing the necessary details as may be required by the refund authority, whichever is later, provided the claim of refund is made alongwith the application in Form 501 filed with the respective refund branch. (ii). The dealers holding a certificate of entitlement under the package scheme of incentive shall be granted a refund within a period of three months from the date of application in Form 501 or from the date of submitting the necessary details to refund authority, whichever is later. (iii). In case of a P.S.I. dealer who holds the entitlement certificate for part of an industrial undertaking through investment in a expansion unit and whose production from the old and expansion investments is identifiable, (i.e. production facilities are separate), then in such cases, the refund will be granted only in respect of purchases corresponding to the production of the expansion unit in the total production. Cases in which the investment in expansion unit does not result in identifiable (separate) production capacity but strengthens/upgrades the existing technology, the new (PSI) investment in the total investment. (iv). In all cases other than the above mentioned cases the refund will be granted within 3 months from the date of making the application in Form 501/or from the date of submitting the details, whichever is later. product quality or quantity, purchases entitled for refund shall be worked out in proportion to

(v). There could be some pending cases of refund for the year 2006-07, wherein the entire refund claim of the dealer is pending or part of the refund, i.e. 10% or 40% is pending, as the refund audit/cross checking of the transactions are not completed. In all such cases, the refund will be granted on or before 30th November, 2007. Non availability of CST declarations:(i) There could be cases wherein a refund cannot be granted only because all or some of the declaration under Central Sales Tax Act for any period either [2005-06 or 2006-07] are not received by the dealer. In all such cases, after deciding the CST payable as per Section 8 of the CST Act in respect of unreceived declarations the balance refund will be granted as per the above guidelines. Needless to say that the dealer will have to submit the list of declarations received and not received alongwith the Form 501. (ii)If after the grant of refund, the dealer receives the declarations under the CST Act then the dealer can make a fresh application before the refund granting authority alongwith an application in Form 501. However, no such application will be entertained within a period of six months from the date of order granting the refund and not more than one such application shall be entertained by the Refund granting authority. Bank Guarantee:(i) Following parameters will be applied to the dealers willing to submit the B G for early refund.
Sr No 1 2 3 4 Category of the Dealer All Dealers All Dealers All Dealers Newly Registered Dealers Result of previous audits No Discrepancy in previous FOUR audits No Discrepancy in previous three audits No Discrepancy in previous two audits Not Applicable Extent of Bank Guarantee 10 per cent 15 per cent 20per cent 100 per cent Extent of Preaudit refund to be issued 100 per cent 100 per cent 100 per cent 100 per cent

Sr No

Category of the Dealer Dealers who have effected interstate sales

Result of previous audits i) No Discrepancy in previous two audits ii) First claim

Extent of Bank Guarantee i) 50 per cent

Extent of Preaudit refund to be issued 100 per cent

ii) 100 per cent Zero BG Zero BG No B G 100 per cent 90 per cent 100 % on same day 100percent

Govt Organization and PSU

No discrepancies Discrepancies

7 8

Diplomatic authorities All dealer First time claim

100% BG

Note:1. If dealer falls under more than one category, he should be treated in the category with higher amount of BG. 2. Discrepancy means the disallowance exceeding 5 per cent in the refund audit period or Rupees one lakh whichever is less. (ii) It may be noted that the refund against the Bank Guarantee can be given only in those cases wherein the refund is due. The cases wherein the refund is not due, such as, the cases covered by Para 7 (iii) of this circular or the return not filed as per the periodicity would not be covered by this clause. And in such cases the dealer can not claim the refund by furnishing the Bank Guarantee. Once the Bank Guarantee is accepted, then the refund must be granted within 3 days. (iii) If after the Refund Audit no discrepancies are found, then the BG submitted by the dealer could be released or roll-over for the further period, at the option of the dealer. Assessment of Refund:(i). Section 51(6)(a) of the MVAT Act 2002 provides that the dealer can not make a claim of refund as per Section 51 of the Act, if the notice U/s. 23 is issued. Before granting the refund, the refund granting authority may like to obtain certain details and / or may like to conduct a refund audit. If the dealer has not submitted the details as required by the authority or has not

cooperated with the officer during the course of audit or if the auditor is of the view that the assessment of the dealer is necessary then the officer shall issue a notice U/s. 23 of the Act and assess the dealer accordingly. (ii). Unless, such notice U/s. 23 is issued, the refund claim of the dealer can not be withheld and the same shall be granted as per the instructions of this circular. Refund Audit and cross checking:(i). In cases wherein the refund is granted prior to refund audit or after incomplete refund audit, the audit will be completed expeditiously. (ii). It will be the endeavor of the department to complete the refund audit and also the cross checking of the transactions as early as possible and in any case within the time limit prescribed above. (iii). To facilitate the cross checking of transactions, the dealers are requested to submit the details of sales and purchases in a electronically prescribed format to the department as and when asked for. This will facilitate cross checking of the transactions and will also avoid the multiple visits for cross checking to the dealers place of business. This should ensure the expeditious grant of refund. (iv). If a particular dealer claims a refund in any return /s in a Financial Year, he would be audited by the Refund Audit Branch only. In such case no separate Business Audit would be conducted by the Business Audit Branch. However, in all such cases the Refund Audit Branch would conduct a Desk Audit at the end of the year on the basis of Audit Report in Form 704 and may conduct the Business Audit of the same dealer with prior approval of concern Joint Commissioner of Sales Tax. Adjustment of refund in the subsequent period: Although, the law provides for compulsory claiming of the refund at the end of the Financial Year, a facility was provided by way of Trade Circular to adjust the refund for the years 2005-06, 2006-07 in the subsequent years return. It is hereby clarified that, henceforth such facility for the adjustment of refund in the subsequent financial year will not be given and

the dealers have to claim the refund at the end of each financial year only without adjusting it towards the liability of the subsequent year. Order of Refund:The refund granting authority while granting the refund should clearly mention in refund sanctioning order in form No. 502 the following details. Rs. (i) Amount of refund claimed as per form No. 501 : (ii) If Refund Audit is completed. (a) (b) Amount disallowed: Amount approved: (-) ----------------------------------------------------------------------------------------------------------------------------

(iii) Refund granted earlier if any (iv) Refund to be granted: (v) Refund actually granted under this order: (vi) Balance refund due/withhold, if any ECS of Refund:-

The refund claimants must submit alongwith form 501 the details of his bank account (the name of the bank, branch and account number) alongwith a cancelled cheque. Those who have already submitted these details need not submit these details again. This is to ensure the credit of refund in the bank by way of ECS. 4.5 1. 2. 3. 4. 5. 7. Gist of other relevant Trade Circulars :Trade Cir.- 27 T of 2005, Dt : 22/09/ 2005. Trade Cir.- 33 T of 2005, Dt : 21/10/2005. Trade Cir- 2T of 2006, Dt : 7/1/2006. Trade Cir- 8T of 2006, Dt: 28/02/2006. Trade Cir-18 T of 2006 Dt: 01/08/2006. Trade Cir-2T of 2007 Dt: 8/01/2007. Refund Payment orders under the Maharashtra Value Added Tax Act, 2002. Provisional Refund : Early Refund Provisional Refund: Early Refund: Second Circular. Provisional Refund: Early Refund. Refund for the Financial Year 2005-06 and 2006-07. Adjustment of amount of refunds under BST Act, 1959 against dues under MVAT

Act,2002. 8. 9. 10. 11. 12. 13. 14. Trade Circular No. 3T of 2007 , Dt: 10.01.2007. Trade Circular No. 4T of 2007, Dt. 12.01.2007. Trade Circular No. 14 T of 2007, Dt. 08.02.2007. Trade Circular No.22T of 2007, Dt. 01.03.2007. Trade Circular No.41T of 2007, Dt. 21.05.2007. Refund Audit under MVAT Act. Refund for the period from 01/04/2005 onwards. Grant of Provisional Refund. Grant of Refund.

15. 16.

Adjustment of refund of the Financial Year 2006-07 to the Financial Year 200708. Trade Circular No. 1T of Procedure for Issuance of Statutory Forms 2008, Dt: 25.01.2008 under Central Sales Tax Act, 1956. Filing of correct and complete returns and Trade Circular No. 3T of furnishing copies of the returns to the 2008, Dt. 06/02/2008. Sales tax authorities. Furnishing of copies of challans / returns Trade Circular No. 5T of to the Sales Tax Authorities. 2008, Dt. 28/02/2008. Trade Circular No. 6T of Grant of Refunds : Bank Guarantee 2008, Dt. 01/03/2008.

5. COMPETENT AUTHORITIES & TARGETS:5.1 The competent authorities to process / audit and authorize the cases are as follows:-

Processing / auditing Officer Sales Tax Officer

Authorising Officer Dy. Commissioner

Amount of refund claim Below Rs. 3.5 lakh Above Rs. 3.5 lakh upto Rs. 10 lakh Above Rs. 10 lakh

Assistant Commissioner Dy. Commissioner Dy. Commissioner Joint Commissioner

5.2

The competent authority to issue RPO & Advice Notes:Amount of refund Competent authority to issue RPOs / Advice Notes 3

Equal to or less than Rs. 5 lakh Above Rs. 5 lakh to Rs. 25 lakh Above Rs. 25 lakh

Asstt. Commissioner Dy. Commissioner Joint Commissioner

5.3 Sr. No. 1 2 3

TARGETS:Designation

Units Sanctioned strength 8 26(24+2) 16 (8+8) 256

Target per month

Individual Unit

Target per annum

Individual Unit

D.C. A.C. STO Total

8 11 15

64 264 120 448

80 110 150

640 2640 1200 4480

6. THE PROCESS IN BRIEF:-

Refund claim in form 501 received in the office of JCST of R&RA.

Acceptance on MAHAVIKAS & entry in Centralised Register.

Refund claim in form 501 against Bank Guarantee.

Refund claim in form 501 without Bank Guarantee.

Custody of BG and BG Acceptance Order to be passed by Designated Officer in the office of JC R&RA

Allotment to concerned DC Unit

Sub-Allotment to DC/AC/STO

Allotment to concerned DC Unit.

Sub-Allotment to DC / AC / STO

Claims processed with Bank Guarantee. * * (Follow the procedure except issue of Form 502).

Visit to dealer & verification of books of accounts.

Issue Cross-checks to Cross-check cell.

As per Audit findings, confirmation of Refund claim.

As per Audit findings, variation in Refund Claim.

Amend the claim by Revised Return / Acceptance Letter.

If dealer disagreethen notice in Form 301 to be issued.

Authorisation of claim by Refund Authorising Officer.

Authorisation of claim by Refund Authorising Officer.

Issue Audit Form 6

Assessment order in Form 303 to be issued.

Issue RSO Form 502.

Reconciliation of paid Advice Notes received from RBI by Designated Officer in the office of JC R&RA.
Order resulting in Refund Order resulting in Dues

RPO issued by RPO Signing Authority

Update Centralised Master File.

Send recovery to Recovery Branch.

7. PROCEDURE OF BRANCH:-

7.1

Fast Track Window for acceptance of return wherein refund is claimed :7.1.1 7.1.2 The returns of claimant dealers shall be accepted at Fast Track Window specially created for this purpose. After acceptance, such returns will be photo copied by the Refund & Refund Audit Branch and such photo copies are to be retained with the Branch. 7.1.3 The photocopy of the return is to be certified by the AC / STO (in-charge for return acceptance) & such certified copies of return will be forwarded to the concerned unit dealing the case. 7.1.4 Thereafter, original return will be sent back to the concern authority of the Return Branch, within 7 days and receipt for the same, to be obtained. 7.1.5 Returns filed up to 20.06.2006:- In some cases, it has been observed that, dealers who have filed returns up to 20.06.06 have not applied for refund in Form-501. To claim the refund, it has been made mandatory to file application in form 501, w. e. f. 20.06.2006. Hence, in such cases, the courtesy letter is to be issued and if dealer failed to apply in Form 501, then assessment should be initiated and necessary actions to be taken.

7.2

Single Window System for acceptance of Application for Refund in Form 501 :7.2.1 The application for refund in Form 501 is to be accepted, in the office of the Joint Commissioner of Sales Tax, Refund & Refund Audit Branch, where the Single Window System for acceptance is introduced. 7.2.1 The Officer in-charge for acceptance of Application for Refund in Form 501, shall keep ready the checklist for documents required to be submitted along with application for refund in

Form 501 and such checklist is required to be displayed near Single Window System. 7.2.2 The Sales Tax Inspector shall face-check the application for refund in Form 501 along with return and documents, submitted by the dealer. And only correct & complete applications will be accepted. 7.2.3 In case of incorrect and / or incomplete and / or defective application for refund in Form 501, the Officer in-charge shall issue duly signed letter, narrating the reason / reasons for nonacceptance of such application. 7.2.4 The receipt for an application for refund in Form 501 is to be generated through the MAHAVIKAS System. In exceptional cases, the concerned staff person at the Single Window System shall record the reason / reasons on the application itself, for non generation of receipt through MAHAVIKAS System. 7.2.5 The applications for refund in Form 501 received from dealers of the category of Large Taxpayers Unit (LTU) are to be forwarded to Large Taxpayers Unit, for further actions. For this purpose, the Officer in-charge should keep the list of dealers of such category. 7.2.6 The entry of applications for refund in Form 501 is to be taken in Centralised Register No. R&RA-1 (format enclosed), in the office of the Joint Commissioner. 7.3 Acceptance and custody of Bank Guarantee :7.3.1 If correct & complete application is received from the dealer claiming refund against Bank Guarantee and the Bank Guarantee furnished is in the prescribed format as notified by the Commissioner for the prescribed amount and period, then, 7.3.2 The details of such Bank guarantee furnished by the dealer should be entered in the Bank Guarantee Register (Reg. No. R&RA-5)

7.3.3

The register of Bank Guarantee (Reg. No. R&RA-5) is to be maintained in the Office of the Joint Commissioner. An Officer has to be designated and the custody of such bank guarantees should be assigned to him. The Bank Guarantees for higher amounts have to be authenticated from the concerned Banks. For this purpose, the Designated Officer shall issue letter to the Manager or Officer In-charge of the Branch / Bank, requesting him to affirm the facts related to said Bank Guarantee such as amount and period, as enumerated in the said Bank Guarantee.

7.3.4 7.3.5 7.3.6

7.3.7

The Designated Officer shall carry out the work related to release or roll over of such bank guarantees after results of refund audit relevant to said refund claims, as per the dealers desire.

7.3.8

The Designated Officer shall keep the status and follow up of cases wherein Bank Guarantee has been accepted. JCST, R&RA should keep follow up and ensure that, refund audit to be expedited in such cases, where period of the said Bank Guarantee is likely to be expired.

7.3.9

7.4

Allotment of cases within the Division:7.4.1 7.4.2 The correct & complete applications shall be allotted to the respective unit by the Joint Commissioner. Certain cases are to be retained with the Designated Officer in the office of JCST, R&RA for such processing of refund claims such as, (i) claims of miscellaneous refund, (ii) refund claims pertaining to dealers of Non Resident Circle category, (iii) refund claims pertaining to un-registered dealers i.e. in case of TDS etc.

(iv) and refund claims pertaining to last return in respect of cancellation of Certificate of Registration etc. 7.4.3 Through the MAHAVIKAS system, applications pertaining to the category of SEZ dealers covered under section 8(3) of the Maharashtra Value Added Tax Act, 2002, will be forwarded to the unit designated for such category of the dealers, for processing of refund claims. 7.4.4 In case of other category dealers, applications will be distributed to different units through the MAHAVIKAS system, 7.4.5 7.4.6 The allotment of cases is to be done on the basis of TIN. The JCST R&RA may reallocate or transfer the cases within the units, depending on the work load with each unit. 7.5 Allotment of cases within the Unit :7.5.1 On receipt of cases from the office of JCST, R&RA, all such cases have to be entered in Unit wise Register for Acceptance of Form -501 (Register No. R&RA-2), for this purpose, each unit should maintain the said Register. 7.5.2 Intra unit allotment of cases is to be done by the DCST, R&RA, as per following slabs:Amount of refund claimed per form 501 Above Rs. 10 lakhs Rs. 3.51 to 10 lakhs Below Rs. 3.5 lakhs 7.5.3 7.5.4 Designation of Refund Authority Dy. Commissioner Asstt. Commissioner Sales Tax Officer Processing

In exceptional cases, the changes in aforesaid slab will be done by DCST, R&RA with prior approval of JCST, R&RA. Cases shall be distributed to different authorities within the unit through the MAHAVIKAS system,

7.5.5

As far as possible, DCST, R&RA should ensure that, various refund claims made by the dealer within one financial year are to be allotted to same authority.

7.5.6

Processing of refund claims should be done as per the procedure laid down hereinafter.

7.5

Processing of Refund Claims made against Bank Guarantee :7.5.1 Procedure for grant of refund, is to be followed as per the guidelines issued vide Trade Circular No. VAT/MIA1007/ADM-5/3 Trade Circular No. 56T of 2007 dt. 23.08.2007. (Refer page No. 25) 7.5.2 Such refund claims are to be processed on priority basis and refund has to be granted within three days, as per the guidelines issued vide para 9(iii) of the Trade Circular 56T of 2007 dated 23/08/2007. 7.5.3 The Refund Processing Authority shall submit refund processing report to the Refund Authorising Authority, for authorisation of such claim. 7.5.4 7.5.5 7.5.6 After authorisation, the concerned Refund Processing Authority shall pass Refund Sanctioning Order in Form 502. Entry of Refund Sanctioning Order in Form 502 shall be taken in a Refund Sanction Order Register (Reg. No. R&RA-4). Thereafter, proposal for issue of Refund Payment Order (Annexure - B) should be forwarded / submitted to the concerned RPO signing authority (ACST R&RA /DCST R&RA /JCST R&RA as per the prescribed limit). 7.5.7 After grant of refund, the claim is to be audited by the concerned officer, as per the procedure laid down in chapter 8 of the Manual, 7.5.8 The concerned authority should ensure that, the refund audit procedure should be completed within the prescribed period of the said Bank Guarantee,

7.5.9

The proposal for adjustment of Bank Guarantee towards dues raised on account of excess grant of refund if any, is to be submitted to the office of JCST, R&RA,

7.5.10 After completion of Refund Audit procedure, the proposal for release or roll over of the Bank Guarantee as per the dealers desire, is to be submitted to the office of JCST, R&RA. 7.6 Processing of refund claims made without Bank Guarantee :7.6.1 The Refund Processing Authorities should ensure that, the actions regarding the processing of refund claims should be initiated on FIFO basis, i.e. in order of the date of receipt of application for refund in form 501, 7.6.2 Immediate face-checking of the return including revised return, if any and application in Form 501 should be done by the Refund Processing Authority with respect to the periodicity of return, eligibility of refund as per the return in relation to provisions of the Act / Rule i.e. whether the dealer is entitled for refund as per the periodic return or at the end of year. 7.6.3 On face checking of return if it is found that, there is defect in the return; take necessary steps to intimate the same to the dealer and request him to correct the same and to file fresh application for refund in form 501 accordingly. The copy of such intimation should be forwarded to the concerned authority of Return Branch, for necessary actions. 7.6.4 In case of refund claims made without bank guarantee, procedure for grant of refund is to be followed as per the guidelines issued vide Internal Circular No. VAT-2007/Adm7/Refund & Refund Audit/B- 503 Mumbai, dt: 28.12.2007 Internal Circular No. 37 A of 2007.

8.

REFUND AUDIT PROCEDURE :The term audit refers to two stage process i.e. i) visit & detailed scrutiny at the place of business of the claimant dealer and ii) summary audit & cross-checking through MAHAVIKAS and/or visiting place of business of the supplier dealers.

Vide Internal Circular No. 37 A of 2007, it is stated that,

Vide Internal Circular No. 5 A of 2008, it is stated that, After grant of refund all the cases be audited as per principles laid down hereunder. . Desk Audit :- If the refund claim is less than Rs. 5 lakh per Form 501 , then only desk audit is to be done (No field visits.). The desk audit is to be conducted immediately after the grant of refund. The desk audit is to be completed in the following manner. a) The copies of Form 704 to be obtained from Business Audit Branch .( If available) b) The refund granting officer should first ascertain from MAHAVIKAS the position regarding the filing of returns by all the suppliers of the refund claiming dealer. c) While checking, the audit officer must check that the turnover of sales and the taxes paid by the supplier are enough to cover the claim of ITC of the refund claimant in respect of that supplier. d) In cases, where the dealer has effected Interstate Sales, the details of availability of declarations under CST Act should be checked by calling the dealer with details and pass the appropriate order accordingly (wherever necessary). e) visit is not necessary in these cases unless there are special circumstances due to which visit is found necessary. For this approval of JC concerned should be taken.

II. Field Audit

:- The Field Audit is to be conducted in all the cases

wherein the refund claim is Rs. 5 lakh or more. 8.1 A. 8.1.1 8.1.2 Appointment for the visit:The respective Refund Processing Officer will conduct the visit and carry out the audit of the refund claim. Take the appointment of the dealer for audit by issuing a notice u/s 22 (format attached at Annexure-A) and plan should be chalked out accordingly. An enclosure should be attached, requesting the dealer to keep ready the specific details regarding sales and purchases and their summary etc. 8.1.3 Before proceeding on visit, the Refund Processing Authority should take entry in the Visit Register maintained in the Office of JCST, R&RA. 8.1.4 Details regarding visit viz. name and address of dealer, contact telephone nos. should be filled and signatures of immediate Administrative Authority should be taken against such entry. 8.2 B. 8.2.1 Pre-visit scrutiny & checks :The Refund Processing Authority shall see details of the dealer regarding Certificate of Registration from the MAHAVIKAS System viz. nature of business, commodity dealt, details of POB, POR and additional POB etc., 8.2.2 The Refund Processing Authority shall carry out scrutiny of annexure submitted by the dealer, in respect to various inputs received from the Investigation Branch or Return Branch or from any other Branches, if any. 8.2.3 The purpose is that, during the course of visit, it would be useful for the Authority to gather essential and requisite evidences, to initiate necessary actions against the dealer under the audit. 8.2.4 The compilation of returns should be done, especially when the dealer has brought forward refund from previous period / 4

periods. Then in such cases, the refund audit should be carried out from the period, from where the refund has been brought forwarded. 8.2.5 The Refund Processing Authority shall prepare summary, short notes regarding sales transactions eligible and ineligible to tax and claims on purchase side at different tax slabs, 8.3 C. 8.3.1 8.3.2 During the visit scrutiny & checks :Record the particulars of visit i.e. date of visit, time of entry and place of visit etc., While initiating the audit, carry out brief interview with the authorised person regarding nature of business, business process, commodity dealt, inputs, intermediates and outputs and their ratio, 8.3.3 8.3.4 8.3.5 If there are any changes in the registration details, are to be communicated to the Registration Branch accordingly, Record particulars regarding the books of accounts / documents produced by the dealer and verified, Inspect the business premises / factory / warehouse, etc. to ascertain the equipment / capital goods in use, inputs and the outputs of the dealer. 8.3.6 Details regarding inputs, to be verified :i. Reconciliation of turnover of purchase as per ledger, register and return, ii. Verify purchases effected by the dealer from Registered Dealers, Un-registered Dealers, interstate, imports & high seas etc and iii. Verify all tax invoices against which the dealer have claimed Input Tax Credit (ITC), iv. Record particulars regarding the commodities purchased i.e. inputs against each tax rate,

v. As far as possible, record the Central Excise Tariff Heads of inputs, especially in case of Excisable Units. vi. ITC claimed at different tax rates is to be verified and total ITC claimed tax slab wise is to be compiled and same to be reconciled with the return ITC claimed. vii. Verify the details regarding goods held in stock as on 1st April 2005 such as tax paid separately invoices and tax inclusive invoices and whether such goods are sold prior to 31st December 2005, viii. Verify details regarding purchases made against various declarations, ix. In certain cases like Pharmaceutical Dealers, DPCO and non-DPCO medicines are to be segregated and summary to be prepared, x. Identify and ascertain amount of reduction to be made on account of rule 53, xi. Identify and ascertain amount of ITC not admissible on account of rule 54, xii. Verify claims regarding goods return, discounts and Dr./Cr. Notes. xiii. Verify the Branch Transfers / Consignment transfers in, if any. xiv. A list of purchases party-wise / bill wise / date wise to be taken on record, as far as possible such list should be taken in electronic form i.e. MS Excel format, this will facilitate the cross checking procedure contemplating the return verification through MAHAVIKAS System, xv. Additional checks such as bank statements for evidence of payments, stock on hand and capital goods and its delivery records may be verified and taken on record, if necessary.

xvi. In case of purchase of Capital Goods, verify the tax invoice, physical examination of goods whether such goods exist or disposed off. xvii. In case of a P.S.I. dealer who holds the entitlement certificate for part of an industrial undertaking through investment in a expansion unit and whose production from the old and expansion investments is identifiable, (i.e. production facilities are separate), then in such cases, the refund will be granted only in respect of purchases corresponding to the production of the expansion unit in the total production. Cases in which the investment in expansion unit does not result in identifiable (separate) production capacity but strengthens / upgrades the existing technology, product quality or quantity, purchases entitled for refund shall be worked out in proportion to the new (PSI) investment in the total investment. 8.3.7 Details regarding outputs, to be verified:i. Reconciliation of turnover of sales as per ledger, register and return, ii. Record particulars regarding the commodities sold i.e. outputs against each tax rate, iii. As far as possible, record the Central Excise Tariff Heads of outputs, especially in case of Excisable Units. iv. Sales shown at different tax rates is to be verified and total VAT payable as per tax slab wise is to be compiled and same to be reconciled with figures shown in the return. v. In certain cases like Pharmaceutical Dealers, DPCO and nonDPCO medicines are to be segregated and summary to be prepared,

vi. Identify and ascertain amount of VAT payable on account of sale of fixed asset or capital goods, xviii. Verify claims regarding goods return, discounts and Dr./Cr. Notes. vii. Verify the Branch Transfers / Consignment transfers, if any viii. Verify and record details regarding tax free sales and job work charges received. ix. Verify interstate sales shown against declarations and list out declaration received and not received, if any. x. In case of Exporter, verify the documents viz. i. commercial evidence of export, ii. copy of custom clearance certificate, iii. contract with foreign buyer, iv. evidence of export (bill of lading / airway bill), etc. v. evidence of payment for the goods or a letter of credit. (Note that, all above details are illustrative in nature and are not exhaustive, depending upon the fact and necessity of the case the Auditing Officer should apply his mind). 8.4 D. 8.4.1 8.4.2 8.4.3 Concluding the visit:Prepare the summary of transactions relevant to the period. Prepare summary / verification report in the view of Audit Form 5. The documents & statements to be taken at the time of visit and to be kept on record are given in Annexure-C 8. Before concluding the visit, the Refund Audit Officer should obtain signature of the dealer on the proceedings, narrating the facts of visits and additional requirement to be furnished and intimating the date on or before which he has to comply the same etc.

8.5

Submission of preliminary visit report:8.5.1 Refund Processing / Auditing Officer should immediately prepare a preliminary visit report envisaging the details of visit and the same should be submitted for perusal, to the Refund Authorising Officer, as per the slabs set right vide para 5.1 of the manual. 8.5.2 Along with preliminary submission, a visit report in Form No. R&RA-5 is to be prepared by the Refund Processing / Auditing Authority and the same should be submitted for perusal, to the Refund Authorising Officer.

8.6

CROSS CHECKS:8.6.1 In order to verify genuineness of the ITC claimed by the dealer, it is required to check the tax liability and payment of tax of the vendors. 8.6.2 8.6.3 8.6.4 For this purpose cross checks are to be issued to Cross check Unit. The details regarding the cross checks issued, are to be entered in the Cross Check Register (Reg.No.R&RA-3). The procedure for cross checking is to be followed as per guidelines issued vide Internal Circular 6A of 2008 dated 12/03/2008, which reproduced herewith, While conducting the Desk Audit or the Field Audit, the cross checks to be done in the following manner. The officer should confirm filing of returns by all the suppliers of the refund claiming dealer from the MAHAVIKAS and from Return Branch. . For the purpose of cross checking, where total ITC claim in respect of a supplier is of Rs. 50,000/- and above and where return has been filed, 10 % of suppliers will be selected by way of Random Sampling Method (duly approved by the

concerned JC) and to be sent for cross checking to the cross check section . . Where ITC claims in respect of any supplier is less than Rs. 50,000/- per supplier and where return has been filed , 5 % of suppliers will be selected by way of Random Sampling Method (duly approved by the concerned JC) and be sent for cross checking to the cross check section . During the cross check, if it is found that any transaction is not accounted for by a particular supplier in his books of accounts , then a comprehensive Business Audit of that supplier is to be taken immediately by the Refund Audit Branch. The Cross Check Cell should immediately inform this fact to the Refund Audit Branch. Also, instead of the sample cross check, 100% of the cross checks of the claimant dealer is to be issued immediately. The claimant dealer should be informed about such result and reasons for issuances of 100% cross checks in his case. The claimant dealer should also be informed if any of his suppliers is not available on the given address. . It is pertinent to note here that, the information about such suppliers should be shared with all officers through E-mail. The list of such dealers should be prepared and monthly updating should be done by the Cross Check Section. The information about such suppliers may also be published on the official Web Site of the department after canceling the R.C. of the concerned dealer to make aware the dealers at large. If it is found during the process of cross check that the supplier is not found at the address given , then list of such dealers should be shared with all the officers through Email . The action to cancel the TIN Certificate or Registration Certificate should be initiated in respect of such suppliers, in due course.

The details of such suppliers should be reported to the Registration Branch to initiate the actions of cancellation of R.C. . No cross checks to be issued for a single bill containing tax up o Rs.5,000/-, Rs.4,000/- and Rs.3,000/- for the cases audited by Deputy Commissioner, Assistant Commissioner and Sales Tax Officer respectively . . It is needless to add that in case, any of the supplier has not filed the relevant return, then refund to the extent of ITC claim of that supplier should be reduced by passing appropriate order. In any case, the ITC claim in respect of any supplier should not be granted, unless it is verified that the supplier has filed the return for the corresponding return period. If it is found after cross checking, that a particular supplier is not traceable, then the refund to the extent of purchases of such dealer should be withdrawn by passing an appropriate order. 8.6.5 On receiving the results of Crosschecks, the corresponding entry in the Register No. R&RA-3 is to be rounded and follow up should be made for the un-received cross checks. 8.6.6 In case, where the cross checks of supplier resulted in nonconfirmation of ITC claim, then show cause notice for citing the provisions of sub-section 48(5) should be served on the dealer and after affording reasonable opportunity of hearing, such ITC reductions are to be made from the refund claim. 8.7 CONCLUDING THE AUDIT :8.7.1 Auditing Officer shall keep on record documents & statements as enlisted in Annexure-C, which are submitted by the dealer at the time of visit and during the Refund Audit proceedings. 8.7.2 On receipt of total results of cross checks, it is required to summarise the same and such summary should be kept on record. 4

8.7.3

The summary of sales and purchases relevant to the said period is to be prepared i.e. VAT payable, ITC eligible, Tax liability under the CST Act etc. and its reconciliation with the details disclosed as per the return / returns, is to be made.

8.7.4 8.7.5

A proposal highlighting the effect in totality should be prepared by the Auditing Officer. The Refund Audit may result in two types of contingencies :(I) (II) Refund Audit resulted in confirmation of the refund claim, Refund Audit resulted in variation of the refund claim.

8.8

Refund Audit resulted in confirmation of the refund claim :8.8.1 Submit the case for authorisation of the claim along with Audit Form No.R&RA-6 duly signed by the Refund Processing Authority. 8.8.2 Refund Authorising Authority should scrutinise the proposal submitted and should note his remarks if any and if the proposal is found to be correct and in order, then authorise the proposal and should sign on Audit Form No.R&RA-6. 8.8.3 After the claim has been authorised, the concerned Refund Processing Authority should pass the Refund Sanctioning Order in Form 502. 8.8.4 8.8.5 Entry of Refund Sanctioning Order in Form 502 shall be taken in a Refund Sanction Order Register (Reg. No. R&RA-4). Thereafter, the proposal for issue of Refund Payment Order (Annexure - B) should be forwarded / submitted to the concerned RPO signing authority (ACST R&RA /DCST R&RA /JCST R&RA as per the prescribed limit).

Refund Audit resulted in variation of the refund claim : 1.9. Appropriate corrective actions will be initiated by the auditor. If the dealer accepts the auditors findings, then he

may file revised return or may submit acceptance letter or may sign the proceeding sheet to that effect. 2.9. Then, the Refund Processing Authority shall follow the procedure as laid down vide earlier paras 8.7.1 to 8.7.5. 3.9. In case of the second possibility, if the dealer does not accept the auditors findings, then the auditor will issue a notice for assessment in Form 301 u/s. 23 of Maharashtra Value Added Tax Act, 2002 to assess the dealer. 4.9. In such situation the Refund Processing Authority shall close the entry of such application for refund in form 501. Since, if at all the assessment proceedings result in refund, then the refund would be processed under section 23 and not under section 51 of the Maharashtra Value Added Tax Act, 2002. PROCEDURE FOR ISSUE OF REFUND PAYMENT ORDER : 1.10. The procedure is laid down vide Internal Circular No. Circular No. 2A of 2006 dt: 24.01.2006, and certain instructions are reproduced herewith, 2.10. The proposal for issue of Refund Payment Order in duplicate should be sent in the prescribed format. (format attached at Annexure B) 3.10. Outstanding dues, if any in respect of any other period shall first be adjusted to arrive at the net refundable amount and a copy of the Refund Adjustment Order (RAO) shall be endorsed to the Recovery Branch. 4.10. Entry should be taken in Refund Proposal Register No. R&RA-6, maintained by each unit. 5.10. After audit, the list of RPO issued is to be sent to the Return Branch for endorsement on original return and update the record.

6.10.

The return

branch officer will make the necessary

endorsement on the original return on the basis of the list received by him and update records. 7.10. The Return Branch officer will acknowledge the list received by him. 8.10. The authority issuing the R.P.O. should maintain a register, viz., Refund Payment Register (R&RA-7). He should make a note of R.P.O. number and advice note number in the refund file, should keep a record of the dealers to whom the R.P.Os. have been issued by them along with their registration number and address. 9.10. The authority issuing R.P.O. will also issue advice notes to the banks simultaneously. Caution should, however, be taken to ensure that the advice note should reach the banks before the R.P.O is presented by the dealers bank to the Reserve Bank of India or State Bank of India for payment. 10.10. Custody and account of RPO and advice notes. The books of the refund payment orders and the advice notes should remain in the personal custody of the officers who are to issue the refund payment orders. 11.10. Accounts of stationery of RPO books and advice note books. -- The R.P.O. books and advice note books will hereafter be issued by the stationery cell to the respective Joint Commissioners. On receipt thereof, an entry of the book numbers along with voucher numbers therein should be kept in a register to be maintained for this purpose by the concerned Joint Commissioner. 12.10. This register and the RPO books / advice note books should invariably figure in the charge report whenever there is a change of officer holding the job. It would be in the interest of the officers themselves to take a receipt from their

successor of having handed over the RPO books (both used and unused), advice note books and register of accounts. 13.10. Inspection of register of R.P. Os and advice notes. -- During office inspection of any of the officers issuing RPOs and advice notes, the inspection should invariably cover verification of the register of RPOs and advice notes to make sure that it has been correctly and kept up to date and that the physical stock of RPO books and advice note books tally with the register. 14.10. Apart from the above, the officers should carry out frequent check of the RPOs issued, physical stock of unused forms and uptodateness of the stock register. 15.10. Specimen signatures of refund signing officers.-- The officers who would hereafter be issuing the refund payment orders and advice notes should send their specimen signatures to the Reserve Bank of India, Mumbai, (for officers situated in Greater Mumbai ) and to the State Bank of India/State Bank of Hyderabad at the district headquarters/places where the refund payment orders will ultimately come for clearance/payment (for officers situated outside Greater Mumbai ). Whenever there is a change in the incumbency of any of these posts, the specimen signatures of the newly appointed officer should immediately be sent to the concerned banks as mentioned above. For Greater Mumbai, the work of sending the specimen signatures of refund signing authority should be centralised in the office of the Joint Commissioner (Head Quarters-1) and in mofussil the respective Joint Commissioner. 16.10. Entry of R.P.0. number, date and amount.-- After an R.P.O. has been issued by the R.P.O. Issuing Authority, entry of the R.P.O. number, its date and the amount should invariably be

made in different places, namely, proceeding sheet of the file for the relevant period; the Refund Proposal Register and Refund Payment Register maintained by the Refund Processing and Issuing Authority, respectively ; order in Form 502; and the copy of the return or order kept in the return file of the dealer. 17.10. Scroll to be obtained from Treasury / Banks. It is hereby clarified that the scrolls including e-scrolls regarding the paid R.P.O.s should be obtained from the Treasury /Banks only, which in most of the district places would be the State Bank of India.. 18.10. Separate R.P.O. books for each RPO issuing authority. For this purpose, it is suggested that the number of R.P.O. books being used by the Joint Commissioner of Sales Tax and the Assistant Commissioner of Sales Tax may be communicated to the Treasury / Bank under a common letter so that the work of Treasury / Bank for checking also become simplified. This work should be coordinated by the concerned Joint Commissioner. 19.10. It is clarified that all RPOs should invariably be sent to the dealers by the R.P.O. Issuing Authority itself under RPAD letters. 20.10. To prevent any misuse of these RPOs, all the RPOs should be crossed and made A/c payee only by putting an endorsement A/c payee only on the left hand top corner of the R.P.O. issued. Further, the amounts should be written, both in figures and words, in the counterfoils or office copies apart from Refund Payment Order to be issued to the dealers. 21.10. The name of bank, branch and account number of dealer is to be incorporated on the RPO to prevent misuse of RPO.

22.10.

The RPAD should be sent by the R.P.O. Issuing Authority and the acknowledgement when received should be recorded (in dispatch register in which, entry of RPAD has been kept) Advice Notes. The advice notes should reach the treasury / bank before the dealer presents the R.P.O. for payment and there should be no occasion for treasury / bank to dishonor the R.P.O.s only because advice note is not received in time. For Greater Mumbai alone, Reserve Bank of India has desired to give a code No. to each R.P.O. Issuing Authority to facilitate easier verification of signatures on the R.P.O.s with the specimen signatures. Code Nos. are based on the post. Code numbers for the posts of various R.P.O. Issuing Authorities have been separately communicated to the Joint Commissioner, Refund & Refund Audit, Mumbai and they have also been orally instructed as to the manner in which the specimen signature card should be filled up. For Greater Mumbai alone, R.P.O. Issuing Authorities should also indicate the code number along with their designation stamp. Counting of R.P.O. sheets before using an R.P.O. Book The competent authorities issuing such Refund Payment Orders, on receipt of Refund Payment Order Books, should check and see that, all the forms contained in each book are intact and no form is missing. A Certificate of the number of Refund Payment Orders, beginning number and last number, should be recorded on the fly leaf of each book, by each Refund Payment Order issuing authority. The typical format for such certificate is certified that this R.P.O. book contains . . . . . . . . . . . . R.P.O.s bearing distinctive numbers from . . . . . . . . to . . . . . . . . . .. Any other matter relating to

23.10.

24.10.

the R.P.O. may be referred to the Joint Commissioner of Sales Tax (H.Q.-1), Maharashtra State, Mumbai. 25.10. No re-validation of R.P.O.s The R.P.O. should not be revalidated and no corrections should be carried out in the same R.P.O. Most of the R.P.O.s would not be encashed only if they are not presented within three months from the month of issue of R.P.O. The returned back R.P.O. should be cancelled by making proper endorsement of cancellation on the same. After canceling such R.P.O., it should be kept in the record of the dealer and a note regarding cancellation should be taken in the remarks column of Refund Proposal Register and Refund Payment Register. A new Refund Payment Order should be issued in lieu of the duly cancelled R.P.O and a fresh entry should be taken in the Refund Proposal Register and Refund Payment Register. Cross reference of old entry as well as new entry should be taken in the remarks column. In the remarks column of old entry the endorsement should be cancelled on . . . . . . . . . . . Fresh R.P.O. issued at Sr.No . . . . .. Similarly, in the remarks column of the new entry, the endorsement should be Issued in lieu of R.P.O. at Sr. No. 26.10. Necessary endorsement to that effect should also be made in the following: (i) proceeding sheet of the file for the relevant period; (ii) the Movement-cum-Accounts Register maintained by the Refund Processing and Issuing Authority respectively in the format given in (iii) order in Form 502; and the copy of the return or order kept in the return file of the dealer. 27.10. Partly used R.P.O. Books. Partly used R.P.O. books containing some blank R.P.O. vouchers should not be used

for issue of R.P.O. to the dealers. Unused R.P.O. vouchers in such books should be cancelled and such books along with the used R.P.O. books should be returned to the respective Joint Commissioner. While doing so, a list of R.P.O. books showing the Sr. No. of vouchers therein should be prepared. The respective Jt. Commissioner should, in turn, prepare a list for his division and send these R.P.O. books (both fully used and also partly used) to the Jt. Commissioner (H.Q.-1) , Mumbai along with the list for safe custody. 28.10. Reconciliation of RPOs with banks. -- It is necessary to carry out periodic reconciliation of the Advice Notes issued by the various officers and payments as recorded in the bank (paid Advice Notes). For this purpose, the periodicity of reconciliation should be a three calendar months i.e. all the scrolls received for a particular three calendar months should be examined together. Cases of over payment, if any, should be immediately investigated. 29.10. The dedicated officer of Pay & Accounts cadre may be assigned these works. It shall be ensured that the officer issuing cheque and officer carrying reconciliation shall be different one. 30.10. To reconcile the paid Advice notes received from Reserve Bank of India / Treasury, is to be carried out by the Designated Officer in the office of JCST R&RA. 31.10. Reconciliation of paid advice notes and relevant record pertaining to the refund claim, is to be verified and reconciled from following authorities. Amount as per paid Advice Notes Refund Processing Authority Refund Signing Authority

Below 5 Lacs Below 25 Lacs Above 25 Lacs POST AUDIT ACTIONS:-

Sales Tax Officer, Asstt. Commissioner Asstt. Commissioner Deputy Commissioner Deputy Commissioner

Asstt. Commissioner Deputy Commissioner Joint Commissioner

1.11.Power To Withhold Refund:If the order giving rise to a refund is the subject matter of an appeal or further proceeding & the concern authority is of opinion that giving refund may adversely affect the revenue. 2.11.Prior approval of Joint Commissioner is necessary. 3.11.Joint Commissioner shall give approval only if he is satisfied that on the conclusion of the proceeding, it will become necessary to recover the amount of refund in full or part. 4.11.No order withholding the refund shall be made after the expiry of 90 days from the date of the service of the order giving rise to refund. 5.11.If the withheld refund is paid, interest is to be paid from the expiry of 90 days from the order of refund to date of refund as per prescribed rate. Centralised Master File :1.12.The office of the JCST, R&RA is required to maintain and update the master file. 1.12.It is necessary to maintain the centralised master file (index file) of the individual dealer in which entry is to be taken regarding details of Form 501 passed and position of refunds granted to the dealer. 2.12.The centralised master file is to be kept in alphabetical manner. The format of Index is enclosed at Annexure-D. Desk audit :-

1.13.

Form 704 in refundable cases should be collected from the Business Audit Branch, where the dealer is required to file the same. Desk audit of all Form 704 in refundable cases is to be done. Desk audit of cases in which Form 704 is subsequently filed by the dealer. Verify the correctness of the refund claim made with returns during the period, books of accounts and Form 501. If any discrepancy is found, take necessary actions including business audit of the case with prior approval of Joint Commissioner. Business Audit in refund cases:- If the dealer has filed application in Form 501 in any period of financial year, then Refund Audit should be taken for complete financial year. Form 704 submitted by the dealer to Business Audit Branch is to be obtained. Desk Audit of all Form 704 is to be undertaken in comparison with the refunds granted. Chapter 6 of Business Audit Manual, is reproduced here for reference, 6.1 Note: A separate manual has been prescribed for Refund Audits. The case wherein the dealer has already filed application in form 501, the audit is to be conducted by the refund audit branch for whole of the year. The cases which are selected for business audit and as a result of audit it is found that the dealer stands to get a refund, that is the case results in over declaration, in such cases the auditor while carrying out the business audit shall also apply the procedure prescribed for the refund audit in refund audit manual for carrying out the refund audit and thereafter completing the procedure and coming to the conclusion in the matter should give such findings in audit form 7. The

2.13. 3.13.

4.13.

5.13.

6.13.

7.13.

dealer may be advised to file the revised return and on such filing the dealer may file the prescribed form 501 with the refund audit authorities. The refund audit branch , however may give the refund on basis of the findings of the Auditor issued to dealer in form Audit form 7. The refund audit branch need not again carry out the Audit as prescribed in their manual. The auditor of business audit branches at end of each month should forward to his immediate superior authority a statement in form H6 stating their in the list of dealers ,their over-declarations, the date of findings in form 7, date of filing of revised return and a copy of findings in form 7 issued to the dealer. These statements should be consolidated at section level by the office of Joint commissioner and then forwarded to the office of the Joint Commissioner of Sales Tax Refund Audit Branch.

9. DUTIES & RESPONSIBILITIES :9.1 Joint Commissioner (Refunds & Refund Audit) 9.1.1 Purpose of Job Overall management of Refund & Refund Audit ensuring that Audit of Refund claims and sanctioning of Refund claim is done in an effective and efficient manner. 9.1.2 9.1.3 Reports to: Additional Commissioner VAT Line manager for: Deputy Commissioner (Refund & Refund Audit) Assistant Commissioner (Refund & Refund Audit) Assistant Commissioner (PA Section) Sales Tax Officer Establishment Officer 9.1.4 Main duties and accountabilities: i. Assist the Additional Commissioner (VAT) in the formulation of policies and objectives expeditious disposal of refund claims in Mumbai ii. Manage the staff of the branch, ensuring that refunds are lessened in accordance with legal time limits and interest on late refunds is minimized. iii. Manage the formulation and implementation of the annual operational plans of the branch, allocate work accordingly, receive reports on implementation from section heads and make monthly reports to the Additional Commissioner summarizing progress against plans and accounting for any variations. iv. Maintain the prescribed registers and prepare monthly abstracts of such registers.

v. Prepare an annual expenditure budget for the branch, monitor actual expenditure and account for any variations between actual and budgeted expenditure vi. Ensure that standard systems and procedures are consistently applied and observed, and that adequate security checks are in place to prevent fraudulent refunds. vii. Provide guidance to the staff on issues relating to the interpretation of law and the exercise of discretion within the limits allowed by law. viii. Carry out quality control checks on the work of the branch. ix. Report persistent issues that need to be addressed through taxpayer education, redesign of forms, changes in rules, revised procedures etc. x. Conduct performance appraisals of Deputy Commissioners. xi. Identify training and development needs for Deputy Commissioners and arrange appropriate training. xii. Deputize for the Additional Commissioner as required. 9.1.4 targets. 9.2 Deputy Commissioner (Refund & Refund Audit ) 9.2.1 Purpose of job: i. In Mumbai, managing a section within Audit Branch ii. Ensuring that audits carried out by the section are conducted in an impartial and efficient manner and in accordance with the provisions of law. iii. Auditing the complex cases, or those with the tax risk. iv. Assisting the Joint Commissioner in the management and administration of the branch. 9.2.2 Reports to: Joint Commissioner-Head of District Office : or Main performance indicators Performance of the Branch against operational and budgetary

 9.2.3 9.2.4

Joint Commissioner(R&RA)-Mumbai Assistant Commissioner (Refund Audit) Sales Tax Officer(Refund Audit) Sales Tax Inspector(Refund Audit)

Line Manager for:

Main duties and accountabilities i. Assist the Joint Commissioner in the formulation of strategy and objectives for the branch/office. ii. Organize and supervise the work of subordinates and manage the staff of the section.

iii. Manage and implementation of the annual operational plans, receive reports on implementation from officers and make monthly reports summarizing performance of unit under his charge. iv. Maintain the prescribed registers and prepare monthly abstracts of such registers. v. Ensure that clear systems and procedures are complied by audit officer under him and to verify within prescribed time limits and that these are consistently applied and observed. vi. Authorize refunds in accordance with prescribed authorization limit. vii. Provide guidance to the staff on issues relating to the interpretation of the law and the exercise of discretion within the limit allowed by law. viii. Carry out quality control checks on the work of the section, ensure that suspect repayments or refunds are referred for audit or investigation as appropriate. ix. Monitor workload and distribute evenly among officers working in his unit. x. Ensure that amendments to MVAT Act & Rules are circulated and are followed in his unit.

xi. Conduct performance appraisals of Assistant Commissioners in the section. xii. Supervise assessment and post-audit jobs according to provisions of law. xiii. Identify training and development needs for section staff and arrange appropriate training. 9.2.5 Main performance indicators: Performance of the section against operational cases cleared within prescribed time limits) 9.3 Assistant Commissioner ( Refund & Refund Audit) 9.3.1 Purpose of Job Auditing VAT more complex returns and refund claims. Supervising and advising less experienced auditors. 9.3.2 Reports to: Deputy Commissioner(Refund Audit) 9.3.3 Line Manager for: Sales Tax Inspector Clerk 9.3.4 Main duties and accountabilities: i. Carry out business and refunds audits in accordance with the STD Audit Manual, departmental operational instructions and annual audit plans. ii. Provide guidance to junior staff on audit techniques and procedures. iii. Compile periodic reports and statistics on work performed. iv. Maintain the prescribed registers and prepare monthly abstracts of such registers. v. Other duties as may be assigned by the Deputy Commissioner. vi. Deputize for the Deputy Commissioner as required. 9.3.5 Main performance indicators: targets (ex. number of claims processed, average time for processing, %

*Number of audits audited to the required standard. *Tax yield 9.4 SALES TAX OFFICER (Refund & Refund Audit) 9.4.1 Purpose of Job: Auditing VAT returns for the purpose of refund claims submitted by dealers. 9.4.2 9.4.3 Reports to *Deputy Commissioner (Refund Audit); Line Manager for: *Sales Tax Inspector *Clerk 9.4.4 Main duties and accountabilities: i. Carry out refund audits in accordance with the STD Audit Manual, departmental operational instructions and annual audit plans. ii. Compile periodic reports and statistics on work performed. iii. Manage Sales Tax Inspectors and clerks. iv. Other duties that may be assigned by the Deputy Commissioner. 9.4.5 Main Performance Indicators: Number of audits to the required standard. Tax yield. 9.5 SALES TAX INSPECTOR (Refund & Refund Audit) 9.5.1 PURPOSE OF JOB: i. Assisting the Sales Tax Officers, Assistant Commissioners and Deputy Commissioner with refund audit casework. ii. Carrying out audits of the small dealers(under the supervision of more senior officers) . iii. Ensuring that dealer files and accounting records are properly maintained.

9.5.2

Reports to: *Deputy Commissioner ( Refund Audit) *Assistant Commissioner (Refund Audit) *Sales Tax Officer (Refund Audit)

9.5.3

Main duties and accountabilities:

i. Provide general assistance to officers responsible for the conduct of tax audits, including: maintaining records of audit visits and notes of meetings; examining and analyzing business records and other documents ;basic word processing and spreadsheet preparation. ii. Conduct audits of small dealers in accordance with the procedures outlined in the audit. Manual. iii. Other duties that may be assigned by the Sales Tax Officer or the Asstt. Commissioner or Deputy Commissioner. 9.6 CLERK (REFUNDS): 9.6.1 Purpose of Job: Providing clerical and general administrative support to the officers of the section. 9.6.2 Reports to: Assistant Commissioner (Refunds) 9.6.3 Main duties and accountabilities: i. Receive and register refund claims. ii. Issue refund orders etc. iii. File claims and other documents in dealer file. iv. Update the prescribed registers and prepare monthly abstracts of such registers. v. Update the Centralized Master File in respect of refunds granted vi. Other duties that may be assigned by the Assistant Commissioner or Deputy Commissioner. 9.7 CLERK(REFUND AUDIT): 9.7.1 Purpose of Job

Providing clerical and general administrative support to the officers of the Refund Audit section. 9.7.2 Reports to: *Dy. / Assistant Commissioner (Refund Audit). Sales Tax Officer( Refund Audit). 9..3 Main duties and accountabilities i. Sort and circulate post and other communication. ii. Schedule of appointments. iii. File reports, returns and other documents. iv. Update the prescribed registers and prepare monthly abstracts of such registers. v. Photocopying. vi. Other duties that may be assigned by the Sales Tax Officer or Asstt. Commissioner or Deputy Commissioner. 9.8 P.A. to the JOINT COMMISSIONER( REFUND AUDIT): 9.8.1 Purpose of Job: Assisting the Joint Commissioner in the administration of the branch. 9.8.2 9.8.3 Reports to: *Joint Commissioner( Refund & Refund Audit)-Mumbai. Line Manager For: *clerk(JCs office) 9.8.4 Main Duties and accountabilities: received and will put up to Joint Commissioner for allotment. ii. Assist the Joint Commissioner in day to day work relating to the administration of the branch and will keep liaison with other officers and staff of the branch. iii. Prepare unit wise inspection / internal Audit programs and arrange inspection and audit. i. Prepare a list of cases in which application in form No.501 is

iv. Carry

out consolidation of

statements

received

in

Joint

Commissioners office from audit units and submitting such information to higher offices within stipulated time limit. v. Organise fortnightly meetings of Unit Heads and Audit Officers to take stalk of the performance of the branch and disposal of the cases allotted. vi. Solve operational/functional problems of units and update Unit Heads regarding latest amendments relating to the branch. 9.9 ESTABLISHMENT OFFICER: 9.9.1 Purpose of Job: Assisting the Joint Commissioner in the Establishment matters of the branch. 9.9.2 Reports to: Joint Commissioner 9.9.3 9.9.4 Line Manager : Main duties and accountabilities: establishment. ii. Liaisons with other sections of the branch regarding matters of establishment and accounts. iii. Maintain leave records,. Dead stock registers, Service books as well confidential records, reports and records related to Departmental inquiry and work related thereto. iv. Maintain the prescribed registers and prepare monthly abstracts of such registers. v. Look after maintenance of computer and requirements of stationary for the branch. vi. Carry out work related to pay bills, supplementary bills etc. vii. Carry out all establishment matters and any other work allotted by the Joint Commissioner.

i. Assist Joint Commissioner in day to day work relating to

INSPECTION PROCEDURE AND FREQUENCY:10.1 10.2 10.3 10.4 10.5 10.6 10.7 Inspection of Form 501 received and its distribution, Inspection of individual units which includes receipt, disposal and pendancy of applications Inspection of RPO / Advice notes / Paid Advice notes and its reconciliation Internal Audit of cases wherein refunds have been granted Inspection of negative cross check & its corrective actions Inspection is to be done by PA to Joint Commissioner of Sales Tax Frequency of inspection will be six monthly

11. RESPONSIBILITY & DATE FOR UPDATING THE MANUAL:The responsibility of preparation, updating, modification &

amendment of manual lies with PA to JCST, R&RA. The date for updating manual will be 1st April & 1st October every year. 12. RECORD FILING SYSTEM:Centralised Master File will be maintained & update by PA to JCST, R&RA.

13. REPORTING FORMATS OF THE BRANCH:Statement No. R&RA-1

STATEMENT NO. 1/2 STATEMENT OF REFUND AUDIT FOR THE MONTH , 2008

Year / Category of the dealer

Opening balance at the beginning of the month

Addition during the month

Cases closed due to withdrawl/rejected/transferred during the month

Total valid applications

No. of visits paid out of Col.5

Summary audits completed out of Col.5

Cases closed after visit or summary audit

Amou / dis

Case s 1 2(a)

Amoun t 2(b)

Case s 3(a)

Amoun t 3(b)

Cases 4(a)

Amount 4(b)

Case s 5(a)

Amoun t 5(b)

Case s 6(a)

Amoun t 6(b)

Case s 7(a)

Amoun t 7(b)

Case s 8(a)

Amoun t 8(b)

Case s 9(a)

2005-06

Exporter u/s. 8(3) PSI Interstate Normal New RC Others Total 2006-07 Exporter u/s. 8(3) PSI Interstate Normal New RC Others Total 2007-08 Exporter u/s. 8(3) PSI Interstate Normal New RC Others Total GRAND TOTAL Exporter u/s. 8(3) PSI Interstate Normal New RC Others Total

Statement No. R&RA-2

REFUND & REFUND AUDIT, MUMBAI STATEMENT NO. 2/2 STATEMENT OF REFUND GRANTED FOR THE MONTH , 2008

Refunds granted during the month Year / Category of the dealer Total valid applications Pre-audit Post audit As per Circulars Case s 1(a) Amoun t 1(b) Case s 2(a) Amoun t 2(b) Bank Guarantee Case s 2 Amoun t 2(d) Case s 2(e) 2005-06 Exporter u/s. 8(3) PSI Interstate Normal New RC Others Total 2006-07 Exporter u/s. 8(3) PSI Interstate Normal New RC Others Total 2007-08 Exporter u/s. 8(3) PSI Interstate Normal New RC Others Total GRAND TOTAL Exporter u/s. 8(3) PSI Interstate Normal New RC Others Total Amoun t 2(f) Case s 2(g) Amoun t 2(h) Case s 3(a) Amoun t 3(b) Case s 4(a) Amoun t 4(b) Total Progressive refunds granted during the year Pending cases for grant of refund (Col.1-Col.2)

14. VARIOUS CONTROL REGISTERS FOR THE BRANCH:REG.NO. R&RA-1:- CENTRALIZED REGISTER FOR ACCEPTANCE OF FORM -501
Sr. No. Name of Dealer Tin Address Dt. of F 501 Period Amt. of Refund Claimed Category of Dealer Amt. Granted before Audit

RSO No. & Dt. 10

Allotted to Unit No. 11

Reg. No. of Audit Unit 12

Dt. of Form-6 13

Amt. Authorise d 14

RSO No. & Dt. 15

RPO No. & Dt. 16

Remarks

17

REG. NO. R&RA-2:- UNITWISE REGISTER FOR ACCEPTANCE OF FORM -501

Sr. No. 1 Name Of Dealer 2 TIN Address Dt. of F501 5 Period Amt. of Refund Claimed 7 Category of Dealer 8 Dt. of Visit 9

Dt. of Form-6 10

Amt. Approved 11

Cross Check Reg. No. 12

Remarks

13

REG. NO. R&RA-3:- CORSS CHECK REGISTER

Sr. No. 1. Unit No. 2. Reg. Name Dealer 3. of Total ITC Refund Claimed 5. Cross Check Issued NO. 6. AMONT 8.

4.

REG. NO. R&RA-4:- REFUND SANCTION ORDER REGISTER

Sr. No. Name of The Dealer 2. Tin Period Date of Filing Of Return 5. Dt. of Form 501 6. Amount of Refund claimed in Form-501 7. Refund Granted Remarks

1.

3.

4.

8.

9.

REG.NO. R&RA-5:- REGISTER OF BANK GUARANTEE

Sr. No. Name of The Dealer Tin Amt. & Date of Bank Guarantee With Bank & Branch 4. Order No. & Dt. on Which Bank Guarantee Accepted 5. Expiry Date of Bank Gurantee

1.

2.

3.

6.

Assessment & Dues Pendancy at the time Of release of Bank Guarantee 7.

Date of report for release of Bank Guarantee 8.

Order No. & Dt. of release of Bank Guarantee 9.

Remarks

10.

REG.NO. R&RA-6:REFUND PROPOSAL REGISTER

Sr. No. Date of submission of proposal with file sanctioning refund 2. Signature in taken of having received case record (To be signed by R.P.O. issuing Authority) 9. Name of the dealer Tin Period of return / assessment Date of Order In Form 502 Refund Amt. Sanctioned (Rs.)

1. Net Refund (Rs.)

3. R.P.O. No.

4. Date of R.P.O.

5. Advice Note No. and Date of payment Date of return of case record

6. Signature of Refund Processing Officer

7. Remarks

8.

10.

11.

12.

13.

14.

15.

REG.NO. R&RA-7:REFUND PAYMENT REGISTER (To be maintained by R.P.O. issuing Authority)

Sr. No. UOR No. Of The Refund Processi ng Officer And Officer From Whom The Proposal Received Date Of Receipt of proposal with case record to issue R.P.O. Name Of Dealer TIN Period of return /
assessment

Date of Order In Form 502

Refund Amt. sanctioned (Rs.)

Date 1. 2. 3. 4. 5. 6. 7. 8. 9.

ANNEXURE -A Notice (Under Sub-Section 1(b) of Section 22 of the Maharashtra Value Added Tax Act, 2002) To, M/s. . .. Reference:- TIN under MVAT Act, 2002 __________________________________ TIN under CST Act, 1956 ___________________________________ Whereas, you have applied for refund in application in Form 501 under Sub-Rule (1) of Rule 60 of the MVAT Rules,2005 dt. ____________ for the period from ______________ to ________________ for the Refund Claim of Rs. ___________________ . To verify the correctness of the refund claim, you are requested to make available the books of accounts for Audit purpose. As per the telephonic talk with you on dt. _______________ , the date for Audit at your place of business is fixed on ____________________at _______am/pm. Therefore, as per the provisions of Sub-Section 5 of Section 22 of the Maharashtra Value Added Tax Act, 2002, you are requested to keep ready all books of accounts, records, documents and declarations in relation to refund claim for verification at the time of visit. It is also required that you should furnish self-attested copies, extracts and details of documents required for the relevant period. Please note that the compliance of the statutory requirements under Section 74 of MVAT Act, 2002 are binding.

Recon Reconcili

(.) Signature, Name & Designation of Refund Audit Officer

ANNEXURE -B Proposal for issue of Refund Payment Order under __________________ Act. U.O.R.No. ______________________ Date _______________________________ PART I 1 2 3 4 5 6 7 8 9 10 11 Name of the dealer Full postal address of the dealer R.C. No. & Date Period of Return / Assessment Entry Number in Refund Proposal Register Refund as per Order in Form 502 Refund payable as per the Order Dues adjusted (if any) Amount for which R.P.O. to be issued (7-8) Any other amount outstanding against the dealer? If so, why not adjusted? Remarks, if any. Signature Name & Designation of Refund Processing Officer Encl. 1. File sanctioning refund for the period--------------2. ______________________________________________________ Submitted to : R.P.O. issuing authority 1. PART II Issued R.P.O. No Date Advice Note No Rs. Rs. Rs. Date d M.V.A. T C.S.T .

from Book No for Rs Date Signature & Stamp of R.P.O. issuing Authority Date ____________________ Returned to: Refund

U.O.R. No. ____________________ Processing Officer Place:- .. Date:-

ANNEXURE - C LIST OF DOCUMENTS & STATEMENTS TO BE KEPT ON THE RECORD 1. 2. 3. 4. 5. 6. 7. 8. Monthly summary of purchases for the period of audit. Monthly summary of sales for the period of audit. Reconciliation statement of sales / purchases, if any List of Debit / Credit Notes. Goods return statement. Trading, Profit & Loss Account in case of yearly audit only. Balance Sheet in case of yearly audit only. Trial Balance in case of yearly audit only (If Balance Sheet is not prepared for part of the Refund Audit Period and dealer having no separate financial statements for the Branch). 9. List of transactions of Interstate Sales / Consignment / Branch Transfers. Branch Transfers. 11. Certified copy of return of immediate next period (To confirm Input Tax Credit is not carried forward). 12. Certified copy of Revised Return filed, if any. 13. Certified copies of Tax Paid Challans. 14. List of Cross Checks issued. 15. List of Cross Checks received. 16. List of Defective Cross Checks and compliance thereof. 17. Statement of set-off claim in respect of Opening Stock held on prescribed date. 10. List of valid declarations in Form C / F/ H, etc. for Interstate Sales / Consignment /

ANNEXURE- D

INDEX TO CENTRALISED MASTER FILE TIN:- .. NAME OF THE DEALER :- M/S. CATEGORY OF THE DEALER:- .. DETAILS:DATE OF FORM-501 AMOUNT (RS.) REFUND GRANTED (RS.) RPO NO. & DATE REFUND WITHHELD / REDUCED (RS.) Remarks

ANNEXURE-E

FORM AUDIT-5

Summary of Business Activities & Record for the period From . To

Sr. No. 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 Name of the dealer MVAT TIN :CST TIN :Date and time of visit

PART-I DEALERS INFORMATION

Name of the Authorised person with Designation:Telephone Numbers & E-mail id:Address of the dealer visited Effective Date of Registration Name of Accountant / C.A. Address of the Accountant /C.A. Telephone Numbers & E-mail id of Accountant /C.A. Financial year ends on Address of Principal Place of Business Main Business Activity Other Business Activities Commodities dealt in Accounting Method Current Accounting Records Special Comment on Records (if any) PART-II RATIO OF BUSINESS ACTIVITIES Turnover of Purchases Details Amount
% ratio with Total T.O.

Turnover of Sales
Details Amount % ratio with Total T.O.

1 2 3 4 5

Imports Interstate Purchases Br. Transfer/ Consignment Tax Free Local RD purchases eligible for Setoff

Exports out of India Interstate Sales Branch Transfers to other States Tax Free Other Sales u/s. 8

Local RD purchases not eligible for Setoff URD purchases Other (please specify) TOTAL Name of commodities purchased

VAT Collected

Taxable local sales other (please pecify) TOTAL

8 9 10 11 12

TAX RATEWISE INPUT

Tax rate
Net Amount

TAX RATEWISE INPUT

% with T.O. Net Amount Tax % with T.O.

Tax

13 14 15 16 17 18 19 20 21 22 23

1% 4% 12.50% Tax Free Works Contract other (Specify) 1) 2) 3) TOTAL Discrepancies observed, if any:Additional information called from the dealer, if any. Date:Name & Signature of Auditor

24

25

ANNEXURE-F

FORM AUDIT-6

AUDIT VISIT REPORT FOR THE PERIOD FROM TO

1 2 3 4 5 6 7 8 9 10 11 12

Name of the dealer MVAT TIN Address visited Person(s) interviewed and his status in the firm Date and Time of visit Form Audit-5 updated, signed & enclosed? Comments on Basic Check Inspected VAT registration Certificate? Checked VAT return filing records? Checked VAT payment records? Compared dealer's record to VAT return summary? Record tax period checked? Details of check undertaken Specify the records examined, period the check were applied to

13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31

Discrepancies found.

Post visit action (specify actions taken) Cross Checks issued Revised Returns Filed Assessment initiated Communication with other Branches In case of their actions (specify) Recomputation of Refund Refund claimed as per Return Less- Claim reduced after audit Refund allowable Provisional Refund Granted Additional Refund to be granted / Refund to be recovered

32 33 34 35 36 37 38 39 40 41 42 43 44 45 46 47 48 49 50 51 52

Interest leviable on excess Refund Granted Refund to be granted / Dues to be recovered Summary of Audit findings Change in commodity code Change in business activity VAT under declared Reasons for under declaration VAT over declared Interest (if applicable) Penalty (if applicable) Reasons for disallowing of refunds (if applicable)

Further findings (in respect of disallowances etc) Actions to be taken by other Branches Return Branch Business Audit Branch Registration Branch Enforcement Branch Other (Specify) Audit Report as submitted above may be authorised & approved Signature Place Date Remarks of Supervisory Authority:Signature Place Date Name:Designation:Name:Designation:-

Submitted to the Dy. Commissioner of Sales Tax / Joint Commissioner of Sales Tax