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CA Final · Indirect Tax Laws · Types of Duty

Meera Exports obtained provisional assessment on a consignment, paying ₹3,00,000. The duty was finally assessed at ₹2,50,000 and a refund of ₹50,000 became due; the assessment of duty finally was made on 10 March. Meera had not passed on the incidence of the duty to any buyer. The refund was not paid until 20 July. Which statement is correct as per section 18?

Interest at the section 27A rate is payable on the unrefunded ₹50,000 because the refund was not made within three months of final assessment, and the amount is paid to Meera rather than credited to the Fund, since she did not pass on the duty incidence.

  1. ANo interest is ever payable on refunds under provisional assessment
  2. BInterest on the unrefunded amount is payable at the rate fixed under section 27A, since refund was not made within three months of the final assessment, and the refund goes to Meera, not the FundCorrect
  3. CInterest is payable from 10 March itself, at the section 28AA rate
  4. DThe refund is credited to the Fund because the buyer is the real bearer of duty

Explanation

Under section 18(4), if the refund is not made within three months of the final assessment, interest at the section 27A rate is payable on the unrefunded amount till refund; 10 March to 20 July exceeds three months. Under 18(5)(a), because incidence was not passed on, the refund is paid to the importer or exporter instead of the Fund. The 28AA rate applies to amounts payable to the Government, not refunds.

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