Refund: formula sheet

Key formulas

Condition (a): nature of return

Goods returned to the person who paid (or on whose behalf paid), otherwise than by way of re-sale

A re-sale to the same person breaks the condition. The goods must come back as the exporter's own goods.

Condition (b): re-import period

Re-import date ≤ date of exportation + 1 year

The clock starts on the date of exportation, not the date of shipping bill filing or payment.

Condition (c): application period

Application date < date of proper officer's clearance order + 6 months

The statute says before the expiry of six months from the date the proper officer orders clearance of the goods. The clock starts at the clearance order, not at re-import.

Who gets the refund

Refund to the person by whom or on whose behalf the duty was paid

All three conditions are joined by 'and'. Failing any one defeats the claim.

Link to Section 27

Section 27(2), first proviso, clause (d): export duty as specified in section 26 is paid to the applicant

It is not credited to the Fund. Section 27(3) says no refund shall be made except as provided in section 27(2).

Trigger for interest

Deposit under section 129E + refund required consequent upon the order of the appellate authority ⇒ interest payable

Interest is payable to the appellant on the deposited amount.

Rate range

5% ≤ rate ≤ 36% per annum, as fixed by the Central Government by notification

Use the rate given in the question. The section itself does not fix one rate.

Period of interest

From the date of payment of the deposit till the date of refund

No three-month waiting period, unlike section 27A.

Interest computation

Interest = Deposit × Rate ÷ 100 × (Number of days ÷ 365)

Month-based working is also acceptable if the question gives months. Check how the question states the period.

Pre-deposit percentages under section 129E

7.5% of the duty (or of the penalty, where only penalty is in dispute) for an appeal to the Commissioner (Appeals) under section 128(1), against an order of an officer lower in rank than the Principal Commissioner or Commissioner; 7.5% for a Tribunal appeal against a decision or order under section 129A(1)(a); 10% for a Tribunal appeal against a decision or order under section 129A(1)(b); maximum deposit ₹10 crore

Needed to compute the deposit on which interest is paid. First identify which appeal route and which order is involved.

Maximum penalty under section 114AC

Penalty ≤ 5 × refund claimed

The text says 'not exceeding five times the refund claimed'. It is an upper limit, not a fixed rate.

Conditions for section 114AC

Invoice obtained by fraud/collusion/wilful misstatement/suppression + ITC on it used to pay duty or tax on goods entered for export + refund claimed

All three elements must be present.

Meaning of input tax credit

As in section 2(63) of the CGST Act, 2017

Stated in the Explanation to section 114AC.

Section 114A penalty (for contrast)

Penalty = duty or interest determined under section 28(8)

Applies for short-levy, non-levy or erroneous refund by collusion, wilful mis-statement or suppression. Reduced to 25% if duty, interest and penalty are paid within thirty days of the order.

Quick revision

• Section 26 refunds export duty paid on goods that come back.
• Condition 1: the goods are returned to the person by whom or on whose behalf the duty was paid, otherwise than by way of re-sale.
• Condition 2: the goods are re-imported within one year from the date of exportation.
• Condition 3: the refund application is made before six months expire from the date of the proper officer's clearance order.
• All three Section 26 conditions must be met together.
• Section 129E pre-deposit is 7.5% of duty (or penalty, where only penalty is disputed) for appeals to the Commissioner (Appeals), and 10% for the Tribunal appeals under section 129A(1)(b), with a ceiling of ₹10 crore.
• Section 129EE gives interest where a Section 129E deposit is refunded on the appellate authority's order.
• Interest under Section 129EE runs from the date of payment of the deposit till the date of refund.
• The Section 129EE rate is fixed by the Central Government by notification, not below 5% and not above 36% per annum.
• Section 114AC applies where an invoice is obtained by fraud, collusion, wilful misstatement or suppression of facts to use input tax credit for exports under a refund claim.
• The Section 114AC penalty can be up to five times the refund claimed; it is a ceiling, not a fixed amount.
• Input tax credit in Section 114AC has the meaning given in section 2(63) of the CGST Act, 2017.

Common mistakes

• Starting the six-month clock from the date of re-import. Fix: Read clause (c): six months run from the date the proper officer makes an order for clearance of the goods.
• Starting the one-year clock from the date of payment of duty. Fix: Under section 26(b), the one year runs from the date of exportation.
• Applying the three-month waiting period of section 27A to a pre-deposit refund. Fix: Section 27A applies to refund of duty under section 27 and starts after three months from the application. Section 129EE runs from the date of payment of the deposit.
• Computing interest on the full duty demanded. Fix: First compute the deposit (7.5% or 10%, subject to the ₹10 crore cap) and then apply the rate to that amount.
• Stating the penalty is fixed at five times the refund. Fix: Always write 'penalty not exceeding five times the refund claimed'.
• Calculating the penalty on the invoice value or the ITC amount. Fix: The base is the refund claimed, as the section says.

Exam tips

• In date-based questions, draw two timelines: one from exportation for re-import, one from the clearance order for the application. Do not mix them.
• Check for a re-sale in the facts. It is a favourite way to make an otherwise perfect claim fail.
• In MCQs, watch for options that quote the wrong starting point, such as date of payment or date of re-import, for the six months.
• Quote the words of the section where you can, especially 'otherwise than by way of re-sale' and 'before the expiry of six months'.
• In a long answer, link section 26 to section 27(2) proviso clause (d) to show the refund is paid to the applicant.
• Write the section number 129EE and the phrase 'from the date of payment till the date of refund'. These carry the marks in theory answers.
• In MCQs, watch for options that add a three-month waiting period. That belongs to section 27A, not 129EE.
• In numericals, show the deposit computation first, since interest is on the deposit and not on the duty demanded.