The Pharmaceuticals Export Promotion Council (Pharmexcil) has sought the intervention of the union finance ministry to settle the issue of refusal by some of the central excise commissionerates which are not granting full rebate in cash to the exporters. This has been affecting their working capital and making them uncompetitive in domestic as well as in international markets resulting in substantial loss of export business for the country.

In a letter to the finance ministry, Pharmexcil's executive director Dr P V Appaji has asked the senior officials in the ministry to look into the matter of revision applications filed by the manufacturers and exporters in respect of rejection of entire refund claim as per the appeal procedures laid down under Central Excise Act.

Explaining the issue, Dr Appaji said that there are two concurrent exemption notifications under chapter 30 viz. notification no. 0412006-C.E. dated 01.03.2006 prescribed in 5 per cent rate of excise duty (prior to Union Budget 2011, this rate was 4 per cent (under this notification) and notification no. 02l2008-C.E. dated 01.03.2008 prescribed in 10 per cent rate of excise duty. Both the above notifications have been issued under section 5A of the Central Excise Act and both the notifications are concurrent, subsisting and valid today.

The manufacturers procure many raw and packing materials on which the 10 per cent excise duty is applicable. They procure many taxable services domestically on which 10 per cent service tax is applicable. They also procure many taxable services from outside India on which they pay 10 per cent service Tax in India under Reverse Charge Mechanism. However, the manufacturers clear finished products for domestic market on payment of 5 per cent excise duty (before Union Budget 2011-12 excise duty rate on finished products was 4 per cent).

The difference between excise duty/service tax rate on inputs/input services and finished products results into huge accumulation of the Cenvat Credit which is lying unutilized in the books of accounts of the manufacturers. Therefore, their working capital is getting adversely affected and make them uncompetitive in domestic as well as in international market.

Exporters export excisable products (P&P medicaments) and also sell the said products in domestic market. In respect of such goods, there are two exemption notifications that simultaneously subsist on the statute-book. They are clearing their products for domestic market at 5 per cent under notification no. 4/2006-C.E. dated 01.03.2006 as amended and have started clearing finished products for exports on payment of 10 per cent excise duty as per notification No. 02/2008-C.E. dated 01.03.2008 under rebate claim mechanism. They have adopted this course of action on the basis of settled law that whenever there are two concurrent notifications, an assessee is entitled to choose the notification which is beneficial to him.

However, the manufacturers are facing a problem from certain central excise field formations that they are not getting the full refund of excise duty in respect of the consignments cleared on payment of 10 per cent excise duty in spite of submitting Supreme Court judgements in favour of above mentioned settled law. The various Commissionerates are interpreting this procedure in a different manner. And most of the Commissionerates are not sanctioning refund claim in full whereas some Commissionerates are sanctioning the refund claim in full, the Dr Appaji in his letter said.