preparation for indirect tax exam -pcc
This query is : Resolved
16 September 2009
From where should i study for vat & service tax for PCC Nov 2009 exam.
Can you please send me the detail study material.
Best Regards
Ashwini
Can you please send me the detail study material.
Best Regards
Ashwini
16 September 2009
VALUE ADDED TAX
Frequently Asked Questions
1. What is VAT?
VAT is a multi point levy where the tax paid on local purchases from the
registered dealer can be set off against the tax payable on the sale of goods,
other than special goods.
2. How is the method of calculation of determining the tax liability
under the present Sales Tax system different from this
method ?
In the present Sales tax system, tax liability of a dealer for a particular
period is determined using the multiplication method i.e. The taxable
turnover of a dealer for a particular period is multiplied by the rate of tax
applicable to that turnover. In VAT, the method adopted is Input Tax Credit
method as stated above. This is the only difference between the present
Sales Tax system and the VAT.
3. What are the taxes that will be replaced by VAT?
General Sales Tax, Resale Tax, Surcharge, Additional Sales Tax will be
replaced by VAT. The Central Sales Tax Act, 1956 regulating the inter-state
transactions of sale and purchase will continue. The Entry Tax on Vehicles
and Goods will continue.
4. What are rates of tax under VAT?
The rates are 1%, 4% and 12.5% on goods eligible for input tax credit.
5. Is there any special rate of tax other than above 3 rates?
Yes. There are special rates of tax on certain goods which are kept out of
VAT. No input tax credit is allowable for these goods.(e.g) Petrol
2
6. Who are dealers under VAT?
A dealer is a person who purchases, sells, supplies or distributes the goods in
the course of his business for valuable consideration. The VAT Act includes:
(1) Local authority, Company, Hindu undivided family,
Association of persons, Firm
(2) Casual trader, factor, commission agent, delcredere agent,
auctioneer, local branch of the firm or company situated
outside the State
(3) Person who effects transfer of property in goods other than
by way of sale
(4) dealer in hire purchase, works contract, person who
transfers right to use the goods
(5) Dealer in eatables including food and drinks (ie., hotels,
restaurants and sweet stalls).
(6) Port Trust, Railway Administration, Shipping, Transport and
Construction Companies, Air Transport Corporation and
Airlines.
(7) Any person holding permit for transport vehicles
(8) Tamil Nadu State Road Transport Corporation
(9) Customs Department, Insurance Company, Advertising
Agencies
(10) Corporation or Companies of State and Central Governments
7. Who are liable for Registration?
1) Those dealers whose total turnover in respect of purchase and sales
in the State is not less than Rs.10 lakhs for a year are to get
registered under the Act.
2) The other dealers whose total turnover for a year is not less than
Rs.5 lakhs shall get registered.
3) Casual Traders, agent of non-resident dealer and dealers in
jewellery irrespective of quantum of turnover shall obtain
registration.
3
4) Those dealers who intend to commence the business, on option,
may obtain registration.
8. What is the Registration fee?
The registration fee is Rs.500/- for principal place of business and Rs.50/- for
each additional place of business. (Branches, Godowns). No Security Deposit
is necessary for Registration, for dealers. There is no renewal of registration
under VAT and it is permanent till it is cancelled by the Department or on
stoppage of business when reported by the dealer. No security deposit is
necessary for Registration.
9. Who is the registering authority?
Head of the assessment circle in whose jurisdiction the dealer’s principal
place of business is situated.
10. What is TIN?
The registration number allotted to the dealers is popularly known as TIN i.e.
Taxpayer Identification Number. This is a eleven digit number to be quoted
in all VAT transactions and correspondence
11. Whether dealer registered under Tamil Nadu General Sales Tax
Act, 1959 has to apply for TIN ?
All registered dealers under TNGST Act 1959 whose registration is in force
shall be provided with TIN automatically without any fee. But after receipt of
TIN, the dealers have to file application for obtaining certificate of
registration under VAT. Dealers may get TIN, download application and file
the details of the application online in the websites ‘www.tnsalestax.com, or
www.tnsalestax.gov.in or www.tnvat.gov.in to speed up the process of
registration
4
12. How to apply for registration?
On Introduction of VAT, a new dealer shall file an application in the specified
form along with fee as detailed above to the registering authority in whose
jurisdiction, his principal place of business is situated with a sufficiently
stamped self addressed enveloped, with necessary documents required in the
application form.
13. How is the certificate of registration issued?
The registered authority shall acknowledge the receipt of application filed by
the dealer. Thereafter, he shall issue certificate of registration within 30
days from the date of receipt of application. In order to speed up the
process of registration one can utilise the e-services through web sites of the
department www.tnsalestax.com, or www.tnsalestax.gov.in or
www.tnvat.gov.in
14. What is exempted sale?
An exempted sale is a sale on which no tax is levied, and no Input Tax Credit
is allowed.
15. What is zero rated sale?
Zero rate sale is a sale for which no tax is levied but the tax paid on local
purchases is refunded to dealer who effected that sale. The Value Added Tax
Act specified the zero rated sales as:
a) Export Sec.5(1)
b) Sale in the course of export [5 (3) of CST Act, 1956] (ie) Sale to
Exporters
c) Sale to International organizations
d) Sale to SEZ
16. Is there any provision for compounding system of tax under
VAT?
Yes there is. It is available for, on their option:
5
1) The dealers who effects second and subsequent sale in the State.
The Act provides tax not exceeding 1% as notified by Government
on the turnover for the above dealers whose total turnover for a
year is less than Rs. 50 lakhs. Government have notified this
rate as 0.5%
2) The Works contractors may opt to pay at compounded rates at 2%
(civil), 4% (others) instead of paying tax at the rate prescribed for
the goods involved.
3) The hotels, restaurants and sweet stalls may opt to pay tax at
compounded rate prescribed in the Act at slab rates where total
turnover is not less than Rs.10 lakhs but not more than Rs.50
lakhs.
No Input tax credit is allowable to those dealers who have opted
for compounded system.
17. Whether the dealers must maintain detailed accounts under
VAT as in TNGST regime?
The details of accounts to be maintained are available in the Rules
18. Whether dealers paying tax on composition basis have to
maintain detailed accounts ?
Not necessary
(a) The dealers who opted to pay tax on his total turnover not
exceeding Rs. 50 lakhs are to maintain purchase and sales
accounts alone.
(b) The dealers in hotels and restaurants are to maintain purchase and
sales accounts alone.
(c) The works contractors are to maintain the accounts showing the
details of contract and payments received alone.
6
19. How the returns are to be filed?
Every dealer who is liable to pay tax under this Act shall file return on or
before 20th of the succeeding month to Assessing authority in whose
jurisdiction the principal place of business is located along with statement of
purchases and sales effected by him during the month in the Form specified
in Rules.
Every dealer whose taxable turnover in the preceding year is Two hundred
crores of rupees and above shall file return on or before 12th of succeeding
month along with statement of purchases and sales effected by him during
the month.
The returns shall be filed either electronically or by ICR forms. The returns
so filed shall be accompanied with proof of payment.
The category of dealers to file returns either electronically or by ICR
forms may be notified by the Commissioner as per VAT rules.
20. What is the mode of payment of tax ?
(i) by remittance into a State Bank of India or any other bank
authorised by Government from time to time (or)
(ii) by remittance in cash into a Government Treasury or to the
assessing authority or other officer empowered to make the demand or
authorised to make the collection (or)
(iii) by means of a crossed cheque in favour of the assessing authority
drawn on any one of the banks situated within the city / town where office of
the assessing authority is situated (or )
(iv) by means of a crossed demand draft or a banker’s cheque drawn
in favour of the assessing authority (or)
(v) by any other mode as authorised by the Government from time to
time.
7
21. How is the assessment made?
All the assessments are self-assessments as all returns filed are to be
accepted. The dealers need not appear before assessing authority or produce
the accounts for annual assessments. The assessing authority shall accept
the returns filed by the dealer and pass assessment order after the
assessment year is over. The orders shall be served on dealers in the manner
prescribed in Rules.
22. What is self-assessment?
Self determination of tax liability by dealer through periodical returns
prescribed in the Act is called Self-assessment.
23. Will there be any random check of accounts?
Yes. The Commissioner of Commercial Taxes, may select assessments not
exceeding 20% of total self assessments in the State for detailed check of
accounts. The details of such selection shall be placed on notice board in the
assessment circle and in the department websites The accounts which are
selected for detailed check shall be called and checked by assessing
authority. After check, the assessing authority either accept and confirm the
self assessment already passed or revise the assessment.
24. What are inputs?
Input means all purchases by a dealer in the course of his business, including
capital goods. These goods may be meant for re-sale or use in manufacture,
processing of other goods or packing of goods manufactured.
25. What is industrial input?
The industrial inputs are those goods which are notified by Government and
generally go into manufacture of other goods and they are taxable at 4%.
8
26. What is input tax?
Input tax is the amount of tax paid on local purchases by a registered dealer
to another registered dealer.
27. What is output?
Output means sale of goods made by a registered dealer to other registered
dealers and Consumers in the course of his business.
28. What is output tax?
Output tax is tax collected on sale of goods from the buyer. The output tax
is calculated by applying the rate of tax on taxable turnover of these goods.
29. What is Tax invoice?
Tax invoice is popularly known as bill, which should contain details of sale
such as name and address of the purchaser with his TIN, name of goods,
quantity of goods sold, its value etc. and tax rate and amount charged
separately. This invoice / bill is to be issued in duplicate, the original for
purchaser and duplicate to be retained by the selling dealer.
30. What is input tax credit?
Input tax credit is an aggregate total amount of tax paid by a registered
dealer on the total purchases made by him within the State from other
registered dealers (for a particular period.); but not eligible in some cases.
The input tax credit includes the purchase tax paid under Section 12 of the
VAT Act.
The input tax credit can be adjusted against the tax payable by the
purchasing dealer on his sales.
The dealers are not eligible for input tax credit on all inputs. There are
certain restrictions and conditions on eligibility of input tax credit. They are
given in detail under TNVAT Act, 2006.
9
31. How is input tax credit claimed?
Input tax credit shall be claimed only on the basis of original purchase tax
invoice issued by registered selling dealer.
A registered dealer can claim input tax credit on his purchases, if he holds a
valid "Tax Invoice" / bill at the time of furnishing his return to assessing
authority.
32. Whether input tax credit can be claimed , if the original invoice
is lost ?
Yes. It can be claimed on the basis of duplicate / carbon copy of the invoice
obtained from selling dealer.
33. Is this benefit available to the dealers who opt to pay tax at a
Compounded rate?
No.
34. What are the transactions not eligible for input tax credit?
(a) Sale of exempted goods
(b) purchase of goods from outside the State
(c) goods purchased in the course of business, but used for
personal facility of proprietor, partner or director
(d) goods damaged in transit
(e) goods stolen, destroyed or lost
(f) goods sold in the course of inter-state sale without support of C
form
(g) goods transferred to outside the State for sale either by branch
or agent without support of Form F
(h) goods returned
10
35. Can a dealer claim Input Tax Credit for goods sold in Inter-
State trade?
Yes. It can be claimed only when those sales are effected to the Registered
dealers of other State against Form C.
36. Whether claim of input tax credit is on a one to one basis?
No. The tax paid on purchases in a period can be deducted from tax payable
on sale, whether such goods is sold or not during that particular period.
37. Will there be Input Tax Credit for all purchases?
No, It will be available only for local purchases from registered dealers, but
not on goods taken for self-use/given as samples, gifted, lost in theft, fire,
damaged or destroyed/all automobiles including two wheelers, three
wheelers and their spare parts for repair or maintenance, air-conditioning
units, refrigerators.
38. Whether the goods held in closing stock are eligible for input
tax credit?
Yes. A registered dealer is entitled for input tax credit for goods held in
closing stock on the previous date of the commencement of VAT Act 2006.
The goods should have been purchased within one year prior to
commencement of the Act (closing stock relating to purchases locally made
during the period January 2006 to December 2006) from registered dealer –
where tax amount with rate of tax are shown separately in purchase invoices
39. Is there any time-limit to claim the Input Tax Credit?
Yes. In the case of goods held in Closing stock on 31.12.2006,the time-limit
is within 30 days from the date of commencement of the VAT Act, that is,
before 1.2.2007.In the case of other goods it is three years.
11
40. What is the procedure to be adopted to claim input tax credit
for the goods held in closing stock ?
A registered dealer who claims input tax credit for the goods held in closing
stock shall furnish details of inventory with details of input tax paid to the
assessing authority within thirty days from the date of the commencement of
the Act along with Photostat copy of the related purchase invoices / bills in
the prescribed form. The dealer can take the credit and deduct it from tax
payable on sale immediately from January 2007. The dealer shall adjust the
credit within six months. After adjustment, if there is tax credit available,
the same shall lapse to Government, after six months. The assessing
authority, after receipt of inventory and after verification of the genuineness
of the claim shall pass order determining the quantum of input tax credit
eligible for the dealer within 3 months.
41. What is meant by Capital Goods?
Capital goods are, in general, the movable assets like Plant and machinery
used in industry, for manufacture of goods ,but do not mean goods (stockin-
trade) for sale.
42. What are Capital Goods under the VAT Act?
Capital goods†means, –
a) plant, machinery, equipment, apparatus, tools, appliances or
electrical installation for producing, making, extracting or
processing of any goods or for extracting or for bringing about
any change in any substance for the manufacture of final
products;
b) Pollution control, quality control, laboratory and cold storage
equipment;
c) Components spare parts and accessories specified at (a) and (b)
12
above;
d) moulds, dies, jigs and fixtures,
e) refractors and refractory materials,
f) tubes, pipes and fittings thereof; and
g) Storage tanks.
used in the State for the purpose of manufacture, processing, packing or
storing of goods in the course of business excluding civil structures and
such goods as may be notified by the Government.
43. Are capital goods held in closing stock eligible for input tax
Credit ?
No.
44. Will there be Input Tax credit for all Capital Goods?
Yes, but not for all. Goods notified by the Government are not eligible for
Input Tax Credit which are under the negative list and not eligible for the
Capital Goods purchased before 1.1.2007
45. How the Input Tax Credit-has to be claimed and availed for
Capital Goods?
Every registered dealer while submitting monthly returns to the assessing
authority/can claim the Input Tax Credit paid for all local purchases made
from registered dealers on the basis of Original Tax Invoices in those returns
itself for Capital Goods, after the commencement of commercial production.
They can deduct the same from the Output tax, if any, payable on the local
sales or inter-State sales in those monthly returns. In the first year of
commencement of commercial production, 50% of the input tax credit not
exceeding 50% can be availed and the rest in the second or third year. But
13
fees condition is not applicable to parts and accessories. At the end of the
third year, any credit not availed will be lapsed to Government.
46. Is Input Tax credit available for all?
No. Input Tax credit is not available for Capital Goods used for manufacture
of goods which are exempted from tax.
47. Will there be Input Tax credit for Capital Goods used in Lease
or Works Contract?
Yes, but not for the dealers who have opted to pay tax under compounding
system.
48. What is the rate of tax for Capital Goods?
The rate of tax is 4% vide item no.
49. What is reversal of input tax credit?
Reversal of Input Tax Credit means reduction of Input Tax Credit to nullify
input tax credit wrongly claimed and availed.
50. When the input tax credit has to be reversed?
(1) Input tax credit was availed but subsequently the related goods
have been stolen or damaged or destroyed.
(2) Input tax credit was claimed but subsequently it has been detected
that related purchases are from bogus traders (bill traders).
(3) Input tax credit was availed but related goods have been given as
free sample or gift to others.
(4) Input tax credit availed but subsequently the related goods are
used to provide facility to the proprietor / partner / director. of the concern.
14
51. How will the refund be issued to the exporters (dealers who
effect zero rate sale)
The dealer who claims refund due to zero rate sales may file an application in
Form D1 to the assessing authority along with copies of the purchase
invoices of related goods. After verification the assessing authority will issue
refund within 90 days from the date of receipt of application in Form D1.
If the excess amount is not refunded within ninety days, whatever may be
the reason, the assessing authority will issue refund along with interest at
the rate prescribed in the Act. If the dealers, do not claim refund within 180
days from the date of export or before the end of the financial year,
whichever is later, the amount to be refunded shall lapse to Government.
52. Whether there will be any change in appeal procedure to the
earlier TNGST Act?
No. The appeal procedure detailed in Tamil Nadu General Sales Tax Act will
continue in VAT also.
53. Whether deferral and waiver will continue?
Yes, by application for continuance to the Assistant Commissioner concerned.
Waiver unit may opt for deferral on application
54. What will be the role of Enforcement Wing in VAT system?
Enforcement Wing will function as Audit Wing and do detection of wrong
claim of Input Tax Credit under VAT system.
55. What is the remedy when the Assessing Authority makes
provisional order disallowing the Input Tax Credit, on scrutiny
of monthly return(s)?
A revision petition may be filed to the Deputy Commissioner concerned, as in
the TNGST Act, 1959.
15
56. What are the distinct features under the VAT Act?
Self-assessment without conditions, One time registration without renewal,
non-changing TIN irrespective of change of place of business, nonproduction
of accounts annually for the purpose of assessment, simplified low
rate structure, removal of salesmen permit, Input Tax Credit, abolition of
additional levies like SC, AST, RST, self-declaration for Industrial Inputs in
lieu of Form XVII, Input Tax Credit for Capital goods and opening stock, and
refund for exporters (zero rate sellers) are the distinct features under the
VAT Act.
Frequently Asked Questions
1. What is VAT?
VAT is a multi point levy where the tax paid on local purchases from the
registered dealer can be set off against the tax payable on the sale of goods,
other than special goods.
2. How is the method of calculation of determining the tax liability
under the present Sales Tax system different from this
method ?
In the present Sales tax system, tax liability of a dealer for a particular
period is determined using the multiplication method i.e. The taxable
turnover of a dealer for a particular period is multiplied by the rate of tax
applicable to that turnover. In VAT, the method adopted is Input Tax Credit
method as stated above. This is the only difference between the present
Sales Tax system and the VAT.
3. What are the taxes that will be replaced by VAT?
General Sales Tax, Resale Tax, Surcharge, Additional Sales Tax will be
replaced by VAT. The Central Sales Tax Act, 1956 regulating the inter-state
transactions of sale and purchase will continue. The Entry Tax on Vehicles
and Goods will continue.
4. What are rates of tax under VAT?
The rates are 1%, 4% and 12.5% on goods eligible for input tax credit.
5. Is there any special rate of tax other than above 3 rates?
Yes. There are special rates of tax on certain goods which are kept out of
VAT. No input tax credit is allowable for these goods.(e.g) Petrol
2
6. Who are dealers under VAT?
A dealer is a person who purchases, sells, supplies or distributes the goods in
the course of his business for valuable consideration. The VAT Act includes:
(1) Local authority, Company, Hindu undivided family,
Association of persons, Firm
(2) Casual trader, factor, commission agent, delcredere agent,
auctioneer, local branch of the firm or company situated
outside the State
(3) Person who effects transfer of property in goods other than
by way of sale
(4) dealer in hire purchase, works contract, person who
transfers right to use the goods
(5) Dealer in eatables including food and drinks (ie., hotels,
restaurants and sweet stalls).
(6) Port Trust, Railway Administration, Shipping, Transport and
Construction Companies, Air Transport Corporation and
Airlines.
(7) Any person holding permit for transport vehicles
(8) Tamil Nadu State Road Transport Corporation
(9) Customs Department, Insurance Company, Advertising
Agencies
(10) Corporation or Companies of State and Central Governments
7. Who are liable for Registration?
1) Those dealers whose total turnover in respect of purchase and sales
in the State is not less than Rs.10 lakhs for a year are to get
registered under the Act.
2) The other dealers whose total turnover for a year is not less than
Rs.5 lakhs shall get registered.
3) Casual Traders, agent of non-resident dealer and dealers in
jewellery irrespective of quantum of turnover shall obtain
registration.
3
4) Those dealers who intend to commence the business, on option,
may obtain registration.
8. What is the Registration fee?
The registration fee is Rs.500/- for principal place of business and Rs.50/- for
each additional place of business. (Branches, Godowns). No Security Deposit
is necessary for Registration, for dealers. There is no renewal of registration
under VAT and it is permanent till it is cancelled by the Department or on
stoppage of business when reported by the dealer. No security deposit is
necessary for Registration.
9. Who is the registering authority?
Head of the assessment circle in whose jurisdiction the dealer’s principal
place of business is situated.
10. What is TIN?
The registration number allotted to the dealers is popularly known as TIN i.e.
Taxpayer Identification Number. This is a eleven digit number to be quoted
in all VAT transactions and correspondence
11. Whether dealer registered under Tamil Nadu General Sales Tax
Act, 1959 has to apply for TIN ?
All registered dealers under TNGST Act 1959 whose registration is in force
shall be provided with TIN automatically without any fee. But after receipt of
TIN, the dealers have to file application for obtaining certificate of
registration under VAT. Dealers may get TIN, download application and file
the details of the application online in the websites ‘www.tnsalestax.com, or
www.tnsalestax.gov.in or www.tnvat.gov.in to speed up the process of
registration
4
12. How to apply for registration?
On Introduction of VAT, a new dealer shall file an application in the specified
form along with fee as detailed above to the registering authority in whose
jurisdiction, his principal place of business is situated with a sufficiently
stamped self addressed enveloped, with necessary documents required in the
application form.
13. How is the certificate of registration issued?
The registered authority shall acknowledge the receipt of application filed by
the dealer. Thereafter, he shall issue certificate of registration within 30
days from the date of receipt of application. In order to speed up the
process of registration one can utilise the e-services through web sites of the
department www.tnsalestax.com, or www.tnsalestax.gov.in or
www.tnvat.gov.in
14. What is exempted sale?
An exempted sale is a sale on which no tax is levied, and no Input Tax Credit
is allowed.
15. What is zero rated sale?
Zero rate sale is a sale for which no tax is levied but the tax paid on local
purchases is refunded to dealer who effected that sale. The Value Added Tax
Act specified the zero rated sales as:
a) Export Sec.5(1)
b) Sale in the course of export [5 (3) of CST Act, 1956] (ie) Sale to
Exporters
c) Sale to International organizations
d) Sale to SEZ
16. Is there any provision for compounding system of tax under
VAT?
Yes there is. It is available for, on their option:
5
1) The dealers who effects second and subsequent sale in the State.
The Act provides tax not exceeding 1% as notified by Government
on the turnover for the above dealers whose total turnover for a
year is less than Rs. 50 lakhs. Government have notified this
rate as 0.5%
2) The Works contractors may opt to pay at compounded rates at 2%
(civil), 4% (others) instead of paying tax at the rate prescribed for
the goods involved.
3) The hotels, restaurants and sweet stalls may opt to pay tax at
compounded rate prescribed in the Act at slab rates where total
turnover is not less than Rs.10 lakhs but not more than Rs.50
lakhs.
No Input tax credit is allowable to those dealers who have opted
for compounded system.
17. Whether the dealers must maintain detailed accounts under
VAT as in TNGST regime?
The details of accounts to be maintained are available in the Rules
18. Whether dealers paying tax on composition basis have to
maintain detailed accounts ?
Not necessary
(a) The dealers who opted to pay tax on his total turnover not
exceeding Rs. 50 lakhs are to maintain purchase and sales
accounts alone.
(b) The dealers in hotels and restaurants are to maintain purchase and
sales accounts alone.
(c) The works contractors are to maintain the accounts showing the
details of contract and payments received alone.
6
19. How the returns are to be filed?
Every dealer who is liable to pay tax under this Act shall file return on or
before 20th of the succeeding month to Assessing authority in whose
jurisdiction the principal place of business is located along with statement of
purchases and sales effected by him during the month in the Form specified
in Rules.
Every dealer whose taxable turnover in the preceding year is Two hundred
crores of rupees and above shall file return on or before 12th of succeeding
month along with statement of purchases and sales effected by him during
the month.
The returns shall be filed either electronically or by ICR forms. The returns
so filed shall be accompanied with proof of payment.
The category of dealers to file returns either electronically or by ICR
forms may be notified by the Commissioner as per VAT rules.
20. What is the mode of payment of tax ?
(i) by remittance into a State Bank of India or any other bank
authorised by Government from time to time (or)
(ii) by remittance in cash into a Government Treasury or to the
assessing authority or other officer empowered to make the demand or
authorised to make the collection (or)
(iii) by means of a crossed cheque in favour of the assessing authority
drawn on any one of the banks situated within the city / town where office of
the assessing authority is situated (or )
(iv) by means of a crossed demand draft or a banker’s cheque drawn
in favour of the assessing authority (or)
(v) by any other mode as authorised by the Government from time to
time.
7
21. How is the assessment made?
All the assessments are self-assessments as all returns filed are to be
accepted. The dealers need not appear before assessing authority or produce
the accounts for annual assessments. The assessing authority shall accept
the returns filed by the dealer and pass assessment order after the
assessment year is over. The orders shall be served on dealers in the manner
prescribed in Rules.
22. What is self-assessment?
Self determination of tax liability by dealer through periodical returns
prescribed in the Act is called Self-assessment.
23. Will there be any random check of accounts?
Yes. The Commissioner of Commercial Taxes, may select assessments not
exceeding 20% of total self assessments in the State for detailed check of
accounts. The details of such selection shall be placed on notice board in the
assessment circle and in the department websites The accounts which are
selected for detailed check shall be called and checked by assessing
authority. After check, the assessing authority either accept and confirm the
self assessment already passed or revise the assessment.
24. What are inputs?
Input means all purchases by a dealer in the course of his business, including
capital goods. These goods may be meant for re-sale or use in manufacture,
processing of other goods or packing of goods manufactured.
25. What is industrial input?
The industrial inputs are those goods which are notified by Government and
generally go into manufacture of other goods and they are taxable at 4%.
8
26. What is input tax?
Input tax is the amount of tax paid on local purchases by a registered dealer
to another registered dealer.
27. What is output?
Output means sale of goods made by a registered dealer to other registered
dealers and Consumers in the course of his business.
28. What is output tax?
Output tax is tax collected on sale of goods from the buyer. The output tax
is calculated by applying the rate of tax on taxable turnover of these goods.
29. What is Tax invoice?
Tax invoice is popularly known as bill, which should contain details of sale
such as name and address of the purchaser with his TIN, name of goods,
quantity of goods sold, its value etc. and tax rate and amount charged
separately. This invoice / bill is to be issued in duplicate, the original for
purchaser and duplicate to be retained by the selling dealer.
30. What is input tax credit?
Input tax credit is an aggregate total amount of tax paid by a registered
dealer on the total purchases made by him within the State from other
registered dealers (for a particular period.); but not eligible in some cases.
The input tax credit includes the purchase tax paid under Section 12 of the
VAT Act.
The input tax credit can be adjusted against the tax payable by the
purchasing dealer on his sales.
The dealers are not eligible for input tax credit on all inputs. There are
certain restrictions and conditions on eligibility of input tax credit. They are
given in detail under TNVAT Act, 2006.
9
31. How is input tax credit claimed?
Input tax credit shall be claimed only on the basis of original purchase tax
invoice issued by registered selling dealer.
A registered dealer can claim input tax credit on his purchases, if he holds a
valid "Tax Invoice" / bill at the time of furnishing his return to assessing
authority.
32. Whether input tax credit can be claimed , if the original invoice
is lost ?
Yes. It can be claimed on the basis of duplicate / carbon copy of the invoice
obtained from selling dealer.
33. Is this benefit available to the dealers who opt to pay tax at a
Compounded rate?
No.
34. What are the transactions not eligible for input tax credit?
(a) Sale of exempted goods
(b) purchase of goods from outside the State
(c) goods purchased in the course of business, but used for
personal facility of proprietor, partner or director
(d) goods damaged in transit
(e) goods stolen, destroyed or lost
(f) goods sold in the course of inter-state sale without support of C
form
(g) goods transferred to outside the State for sale either by branch
or agent without support of Form F
(h) goods returned
10
35. Can a dealer claim Input Tax Credit for goods sold in Inter-
State trade?
Yes. It can be claimed only when those sales are effected to the Registered
dealers of other State against Form C.
36. Whether claim of input tax credit is on a one to one basis?
No. The tax paid on purchases in a period can be deducted from tax payable
on sale, whether such goods is sold or not during that particular period.
37. Will there be Input Tax Credit for all purchases?
No, It will be available only for local purchases from registered dealers, but
not on goods taken for self-use/given as samples, gifted, lost in theft, fire,
damaged or destroyed/all automobiles including two wheelers, three
wheelers and their spare parts for repair or maintenance, air-conditioning
units, refrigerators.
38. Whether the goods held in closing stock are eligible for input
tax credit?
Yes. A registered dealer is entitled for input tax credit for goods held in
closing stock on the previous date of the commencement of VAT Act 2006.
The goods should have been purchased within one year prior to
commencement of the Act (closing stock relating to purchases locally made
during the period January 2006 to December 2006) from registered dealer –
where tax amount with rate of tax are shown separately in purchase invoices
39. Is there any time-limit to claim the Input Tax Credit?
Yes. In the case of goods held in Closing stock on 31.12.2006,the time-limit
is within 30 days from the date of commencement of the VAT Act, that is,
before 1.2.2007.In the case of other goods it is three years.
11
40. What is the procedure to be adopted to claim input tax credit
for the goods held in closing stock ?
A registered dealer who claims input tax credit for the goods held in closing
stock shall furnish details of inventory with details of input tax paid to the
assessing authority within thirty days from the date of the commencement of
the Act along with Photostat copy of the related purchase invoices / bills in
the prescribed form. The dealer can take the credit and deduct it from tax
payable on sale immediately from January 2007. The dealer shall adjust the
credit within six months. After adjustment, if there is tax credit available,
the same shall lapse to Government, after six months. The assessing
authority, after receipt of inventory and after verification of the genuineness
of the claim shall pass order determining the quantum of input tax credit
eligible for the dealer within 3 months.
41. What is meant by Capital Goods?
Capital goods are, in general, the movable assets like Plant and machinery
used in industry, for manufacture of goods ,but do not mean goods (stockin-
trade) for sale.
42. What are Capital Goods under the VAT Act?
Capital goods†means, –
a) plant, machinery, equipment, apparatus, tools, appliances or
electrical installation for producing, making, extracting or
processing of any goods or for extracting or for bringing about
any change in any substance for the manufacture of final
products;
b) Pollution control, quality control, laboratory and cold storage
equipment;
c) Components spare parts and accessories specified at (a) and (b)
12
above;
d) moulds, dies, jigs and fixtures,
e) refractors and refractory materials,
f) tubes, pipes and fittings thereof; and
g) Storage tanks.
used in the State for the purpose of manufacture, processing, packing or
storing of goods in the course of business excluding civil structures and
such goods as may be notified by the Government.
43. Are capital goods held in closing stock eligible for input tax
Credit ?
No.
44. Will there be Input Tax credit for all Capital Goods?
Yes, but not for all. Goods notified by the Government are not eligible for
Input Tax Credit which are under the negative list and not eligible for the
Capital Goods purchased before 1.1.2007
45. How the Input Tax Credit-has to be claimed and availed for
Capital Goods?
Every registered dealer while submitting monthly returns to the assessing
authority/can claim the Input Tax Credit paid for all local purchases made
from registered dealers on the basis of Original Tax Invoices in those returns
itself for Capital Goods, after the commencement of commercial production.
They can deduct the same from the Output tax, if any, payable on the local
sales or inter-State sales in those monthly returns. In the first year of
commencement of commercial production, 50% of the input tax credit not
exceeding 50% can be availed and the rest in the second or third year. But
13
fees condition is not applicable to parts and accessories. At the end of the
third year, any credit not availed will be lapsed to Government.
46. Is Input Tax credit available for all?
No. Input Tax credit is not available for Capital Goods used for manufacture
of goods which are exempted from tax.
47. Will there be Input Tax credit for Capital Goods used in Lease
or Works Contract?
Yes, but not for the dealers who have opted to pay tax under compounding
system.
48. What is the rate of tax for Capital Goods?
The rate of tax is 4% vide item no.
49. What is reversal of input tax credit?
Reversal of Input Tax Credit means reduction of Input Tax Credit to nullify
input tax credit wrongly claimed and availed.
50. When the input tax credit has to be reversed?
(1) Input tax credit was availed but subsequently the related goods
have been stolen or damaged or destroyed.
(2) Input tax credit was claimed but subsequently it has been detected
that related purchases are from bogus traders (bill traders).
(3) Input tax credit was availed but related goods have been given as
free sample or gift to others.
(4) Input tax credit availed but subsequently the related goods are
used to provide facility to the proprietor / partner / director. of the concern.
14
51. How will the refund be issued to the exporters (dealers who
effect zero rate sale)
The dealer who claims refund due to zero rate sales may file an application in
Form D1 to the assessing authority along with copies of the purchase
invoices of related goods. After verification the assessing authority will issue
refund within 90 days from the date of receipt of application in Form D1.
If the excess amount is not refunded within ninety days, whatever may be
the reason, the assessing authority will issue refund along with interest at
the rate prescribed in the Act. If the dealers, do not claim refund within 180
days from the date of export or before the end of the financial year,
whichever is later, the amount to be refunded shall lapse to Government.
52. Whether there will be any change in appeal procedure to the
earlier TNGST Act?
No. The appeal procedure detailed in Tamil Nadu General Sales Tax Act will
continue in VAT also.
53. Whether deferral and waiver will continue?
Yes, by application for continuance to the Assistant Commissioner concerned.
Waiver unit may opt for deferral on application
54. What will be the role of Enforcement Wing in VAT system?
Enforcement Wing will function as Audit Wing and do detection of wrong
claim of Input Tax Credit under VAT system.
55. What is the remedy when the Assessing Authority makes
provisional order disallowing the Input Tax Credit, on scrutiny
of monthly return(s)?
A revision petition may be filed to the Deputy Commissioner concerned, as in
the TNGST Act, 1959.
15
56. What are the distinct features under the VAT Act?
Self-assessment without conditions, One time registration without renewal,
non-changing TIN irrespective of change of place of business, nonproduction
of accounts annually for the purpose of assessment, simplified low
rate structure, removal of salesmen permit, Input Tax Credit, abolition of
additional levies like SC, AST, RST, self-declaration for Industrial Inputs in
lieu of Form XVII, Input Tax Credit for Capital goods and opening stock, and
refund for exporters (zero rate sellers) are the distinct features under the
VAT Act.
16 September 2009
I) Demand:
Section 11A.
Recovery of duties not levied or not paid or short-levied or short-paid or erroneously refunded: -
Section 11A - Recovery of duties not levied or not paid or short-levied or short-paid or erroneously refunded: - (May 96, May 99, Nov 00, Nov 01, May 02, May 04)
Time Limit for issue of Show Cause Notice in ordinary circumstances:
A) Under Central Excise:
When any duty of excise has not been levied or paid or has been short-levied or short-paid or erroneously refunded, the department has the right to demand such duty by issuing a show cause notice requiring him to show cause why he should not pay the amount specified in the notice. Such a show cause notice must be issued within 1 year from the relevant date.
B) Under Service Tax:
When any service tax has not been levied or paid or has been short-levied or short-paid or erroneously refunded, the department has the right to demand such duty by issuing a show cause notice requiring him to show cause why he should not pay the amount specified in the notice. Such a show cause notice must be issued within 1 year from the relevant date.
C) Under Customs: (May 05)
When any duty has not been levied or has been short-levied or erroneously refunded, or when any interest payable has not been paid, part paid or erroneously refunded, the proper officer may:
(a) in the case of any import made by any individual for his personal use or by government or by any educational, research or charitable institution or hospital, within one year;
(b) in any other case, within 6 months;
from the relevant date, serve notice on the person chargeable with the duty or interest which has not been levied or charged or which has been short-levied or part paid or to whom the refund has erroneously been made, requiring him to show cause why he should not pay the amount specified in the notice.
Where the non-payment, short payment, non-levy or short levy of duty has been due to any fraud, collusion, suppression of facts, mis-statement or misrepresentation:
Where any duty of excise has not been levied or paid or has been short-levied or short-paid or erroneously refunded by reason of fraud, collusion or any willful mis-statement or suppression of facts, or contravention of any of the provisions of this Act or of the rules made thereunder with intent to evade payment of duty, by such person or his agent, the show cause notice can be issued within 5 years from the relevant date.
Determination of final liability & time limit for completion of proceeding:
The Central Excise Officer shall, after considering the representation, if any, made by the person on whom notice is served, determine the amount of duty of excise due from such person (not being in excess of the amount specified in the notice) and thereupon such person shall pay the amount so determined.
Where any notice has been served on a person, the Central Excise Officer:
(a) in case any duty of excise has not been levied or paid or has been short-levied or short-paid or erroneously refunded, by reason of fraud etc., with intent to evade payment of duty, where it is possible to do so, shall determine the amount of such duty, within a period of one year; and
(b) in any other case, where it is possible to do so, shall determine the amount of duty of excise which has not been levied or paid or has been short-levied or short-paid or erroneously refunded, within a period of six months, from the date of service of the notice on the person.
When notice need not be issued - Voluntary payment before service of notice
• Where any duty of excise has not been levied or paid or has been short-levied or short-paid or erroneously refunded, the person, chargeable with the duty, may pay the amount of duty, on the basis of his own ascertainment of such duty or on the basis of duty ascertained by a Central Excise Officer before service of notice on him in respect of the duty, and inform the Central Excise Officer of such payment in writing, who, on receipt of such information shall not serve any notice in respect of the duty so paid.
• The Central Excise Officer may determine the amount of short payment of duty, if any, which in his opinion has not been paid by such person and, then, the Central Excise Officer shall proceed to recover such amount in the manner specified and the period of "one year" shall be counted from the date of receipt of such information of payment.
• However, the benefit of voluntary payment shall not apply in a case where the duty was not levied or was not paid or was short-levied or was short-paid or was erroneously refunded by reason of fraud, collusion or any willful mis-statement or suppression of facts, or contravention of any of the provisions of this Act or of the rules made there under with intent to evade payment of duty.
• All voluntary payments under this provision would attract interest u/s 11AB.
Note:
(i) "Refund" includes rebate of duty of excise on excisable goods exported out of India or on excisable materials used in the manufacture of goods which are exported out of India;
(ii) "Relevant date" under Central Excise: (Nov 97, Nov 00)
Situation Relevant Date
A) In the case of excisable goods on which duty of excise has not been levied or paid or has been short-levied or short-paid:
1. Where a periodical return is to be filed by a manufacturer/ producer/ licensee of a warehouse Date on which such return is so filed
2. Where periodical return is not filed Last date on which such return is to be filed
3. In any other case Date on which the duty is to be paid under this Act
B) Where duty of excise is provisionally assessed Date of adjustment of duty after the final assessment
C) Where duty of excise has been erroneously refunded Date of such refund
(iii) "Relevant date" under Customs: (Nov 96, Nov 98)
Situation Relevant Date
1. Where duty is not levied, or interest is not charged Date on which the proper officer makes an order for the clearance of the goods
2. Where duty is provisionally assessed under Section 18 Date of adjustment of duty after the final assessment
3. Date of adjustment of duty after the final assessment Date of refund
4. In any other case Date of payment of duty or interest
(iv) "Relevant date" under Service Tax:
Situation Relevant Date
A) In case of taxable service in respect of which service tax has escaped assessment or has been under-assessed or has not been paid or has been short-paid:
1. Where a periodical return is to be filed by an assessee Date on which such return is so filed
2. Where periodical return is not filed Last date on which such return is to be filed
3. In any other case Date on which the duty is to be paid under this Act
B) Where service tax is provisionally assessed Date of adjustment of duty after the final assessment
C) Where any sum, relating to service tax, has been erroneously refunded Date of such refund
Explain the provisions of taxable service escaping assessment. (Nov 02)
Refer Section 73 of Finance Act, 1994 mentioned above (Similar to Section 11A of Central Excise Act, 1944)
Question: Issuance of show cause notice within the specified time limit is mandatory requirement to sustain any demand of Central Excise duty. Write a brief note on this statement and explain whether there are any circumstances under Central Excise Act when the issuance of show cause notice is not required? (May 04)
Answer:
A) Issuance of Show Cause Notice- Circumstances: -Refer Section 11A above.
B) Essentials of a valid Demand cum Show Cause Notice -
1. Issue of SCN is mandatory. Any demand without issue of SCN is considered to be violative of the statutory provisions. (Metal Forgings Vs UOI)
2. It must be specific and not vague.
3. It should be in writing containing the grounds for action.
4. It should be issued within the time limit specified by the statute. If the Department fails to issue such notice within the time limit specified by the statute, then the demand becomes time barred.
5. Amount of duty sought to be demanded must be indicated clearly in the notice.
6. The final demand order of the proper officer must not exceed the figure specified in the SCN.
7. SCN may be issued even in cases where the mistake has not been pointed out by earlier by the Department.
8. It should be issued by proper officer (as mentioned below):
Amount of Show Cause Notice
Proper officer who can issue SCN
Less than or equal to Rs.1 Crore SCN to issue over the signature of Commissioner or with his prior approval
More than Rs.1 Crore SCN to issue over with the prior approval of Chief Commissioner.
In Mahindra & Mahindra Vs CCE, it was held that if show cause notice does not indicate basis for demand nor any discussion in adjudication order, the demand is not sustainable.
C) No show cause notice to be served in certain cases: [Section 11A(2B)]
• Where any duty of excise has not been levied or paid or has been short-levied or short-paid or erroneously refunded, the person, chargeable with the duty, may pay the amount of duty, on the basis of his own ascertainment of such duty or on the basis of duty ascertained by a Central Excise Officer before service of notice on him in respect of the duty, and inform the Central Excise Officer of such payment in writing, who, on receipt of such information shall not serve any notice in respect of the duty so paid.
• The Central Excise Officer may determine the amount of short payment of duty, if any, which in his opinion has not been paid by such person and, then, the Central Excise Officer shall proceed to recover such amount in the manner specified and the period of "one year" shall be counted from the date of receipt of such information of payment.
• However, the benefit of voluntary payment shall not apply in a case where the duty was not levied or was not paid or was short-levied or was short-paid or was erroneously refunded by reason of fraud, collusion or any willful mis-statement or suppression of facts, or contravention of any of the provisions of this Act or of the rules made there under with intent to evade payment of duty.
Question: Can demand be raised retrospectively by the Department contrary to approved classification list be raised?
Answer: In the case of Cotspun Ltd., the Supreme Court held that demand contrary to approved classification list or price list shall be prospective from the date of issue of show cause notice. If classification has been approved by the Department, re-classification would be valid only from the date of show cause notice and not earlier.
However, the Finance Act 2000 has retrospectively amended the provisions of Section 11A of the Central Excise Act, 1944 in order to nullify the decision of the Supreme Court in the above case. The SC has held that amendment made retrospectively is a valid piece of law.
Thus, demands contrary to approved classification lists can be raised retrospectively within the time limit as specified u/s 11A of the Central Excise Act, 1944.
Question: ‘Intention to evade payment of duty is not mere failure to pay. It must be something more. The assessee must be aware that duty was leviable and he must have deliberately avoided payment.’ Elucidate. (May 99, Nov 03)
Answer: Mere failure or negligence on the part of assessee in not paying duty does not attract extended period of limitation as prescribed in Section 11A (i.e., 5 years). To attract the provisions of extended period of limitation, the Department must prove that the assessee knew that the goods were liable to duty and the duty was not paid on account of fraud, collusion, willful mis-representation or suppression of facts by the assessee with the intention to evade payment of duty.
In Padmini Products Vs CCE, it has been held by the Supreme Court that if a party bonafide believes in a legal position that no duty is payable and there is scope for such belief and doubt, then penal provision of Section 11A will not apply.
Common Questions about the provisions relating to Demand
Should the department intimate the assessee? It is mandatory for the Department to issue a Show cause notice.
Is it obligatory on the part of the Department to take on record the assessee’s representation? Sub-section (2) makes it mandatory for the officer to consider the representation of the assessee. The officer has to comply with the principals of natural justice.
Can the assessee pay the duty before issue of show cause notice? No show cause notice shall be issued if full duty is paid and intimated to the Department. However it will not apply to cases of fraud etc. If there is still some short payment, the officer can recover within one year of such intimation.
Relevant Cases
a. Mere inaction or failure to do something does not constitute suppression. There must be something positive to prove suppression. CCE V. Chemphar Drugs and Liniments 1989 (40) ELT 276 (SC)/ Padmini Products V. CCE 1989(43) ELT 195(SC).
b. Demand against approved classification the only prospective. CCE V. Cotspun Ltd. 1999 (113) ELT 353 (SC)
c. Extended period cannot be invoked where classification list is approved. Prabhu Steel Industries V. CCE 1997 (95) ELT 164 (SC)
d. Intention to evade payment of duty necessary in addition to proving fraud. Tamil Nadu Housing Board V. CCE 1994 [74] ELT 9 (SC)
e. Proviso to section 11A does not require that notice should be issued within 6 months of the knowledge of the Department. Notice can be issued within 5 years of the relevant date. Nizam Sugar Factory V. CCE 1999 (114) ELT 429(T).
f. Mere change in classification is not sufficient to invoke extended period. Prabhu Steel Industries V. CCE 1997 (95) ELT 164 (SC)
Other effects of NP/SP/NL/SL
Section 11AB - Interest on delayed payment of duty: -
a) Where any duty of excise has not been levied or paid or has been short-levied or short-paid or erroneously refunded, the person who is liable to pay the duty, or has paid the duty, shall, in addition to the duty, be liable to pay interest at such rate not below 10% and not exceeding 36% per annum, as is for the time being fixed by the Central Government, by notification in the Official Gazette.
b) Interest is payable from the first date of the month succeeding the month in which the duty ought to have been paid under this Act, or from the date of such erroneous refund, as the case may be till the date of payment of such duty.
c) In such cases where the duty becomes payable consequent to issue of an order, instruction or direction by the Board under section 37B, and such amount of duty payable is voluntarily paid in full, without reserving any right to appeal against such payment at any subsequent stage, within 45 days from the date of issue of such order, instruction or direction, as the case may be, no interest shall be payable and in other cases the interest shall be payable on the whole of the amount, including the amount already paid.
d) Where the duty determined to be payable is reduced by the Commissioner (Appeals), the Appellate Tribunal or, as the case may be, the court, the interest shall be payable on such reduced amount of duty.
e) Where the duty determined to be payable is increased or further increased by the Commissioner (Appeals), the Appellate Tribunal or, as the case may be, the court, the interest shall be payable on such increased or further increased amount of duty.
Note: The rate notified by the Government at present is 13% p.a.
Section 11AC - Penalty for short-levy or non-levy of duty in certain cases: - (Nov 00, May 02, Nov 02, May 04)
a) Where any duty of excise has not been levied or paid or has been short-levied or short-paid or erroneously refunded by reasons of fraud, collusion or any willful mis-statement or suppression of facts, or contravention of any of the provisions of this Act or of the rules made thereunder with intent to evade payment of duty, the person who is liable to pay duty as determined under Section 11A(2), shall also be liable to pay a penalty equal to the duty so determined.
b) Where such duty, and the interest payable thereon under section 11AB, is paid within 30 days from the date of communication of the order of the Central Excise Officer determining such duty, the amount of penalty liable to be paid by such person under this section shall 25% of the duty so determined.
c) The benefit of reduced penalty under the first proviso shall be available if the amount of penalty so determined has also been paid within the period of 30 days referred to in that proviso.
d) Where the duty determined to be payable is reduced or increased by the Commissioner (Appeals), the Appellate Tribunal or, as the case may be, the court, then, for the purposes of this section, the duty, as reduced or increased, as the case may be, shall be taken into account.
e) Where the duty determined to be payable is increased by the Commissioner (Appeals), the Appellate Tribunal or the court, then the benefit of reduced penalty under the first proviso shall be available, if the amount of duty so increased, the interest payable thereon and 25% of the consequential increase of the penalty have also been paid within 30 days of the communication of the order by which such increase in the duty takes effect.
Penalty under Section 11AC was introduced with effect from 28/9/96. In ELGI Equipment Ltd. Vs. CCE, a question arose as to whether penalty u/s 11AC can be imposed for offences committed earlier to that date. The SC held that the provisions of Sec11AC are prospective in nature. Any irregularity committed prior to introduction of Sec11AC would not attract penalty u/s 11AC.
Comparison between Section 11AC (CE Act), 114A (Customs Act) and 78 of Finance Act, 1994.
Particulars In case of Central Excise In the case of Customs In the case of Service Tax
Situation when penalty payable Duty no levied or paid or short levied or short paid or erroneously refunded by reason of fraud/ collusion/ willful misstatement / suppression of facts/ contravention of any of the provisions or rules made thereunder with intent to evade payment of duty. Duty no levied or short levied or interest not charged or paid or part paid or duty or interest erroneously refunded by reason of collusion/ willful misstatement/ suppression of facts. Service Tax not levied pr paid or short levied or short paid or erroneously refunded by reason of fraud/ collusion/ willful misstatement/suppression of facts/ contravention of any of the provisions or rules made thereunder with intent to evade payment of duty.
Amount of Penalty Payable Penalty equal to the duty so determined Penalty equal to the duty or interest so determined Penalty-Minimum amount not less than the service tax evaded and maximum amount not more than twice the amount of service tax evaded by suppressing taxable service.
II) Adjudication and determination of duty
Power of adjudication: (May o2, Nov 03)
Section 2(a) of the Central Excise Act, 1962 defines the term ‘Adjudicating Authority’ as “any authority competent to pass any order or decision under this Act, but does not include the Central Board of Excise and Customs constituted under the Central Board of Revenue Act, 1963 (54 of 1963), Commissioner of Central Excise (Appeals) or Appellate Tribunal.â€
• Under section 11A, the adjudicating authority has the power to determine the amount of duty short paid or not paid or erroneously refunded.
• Power to order penalty and/or confiscation is exercised by virtue of power vested under section 33.
The monetary limits of officers for passing orders under section 11A and section 33 are same and these are –
Officer Monetary ceiling
Assistant/Deputy Commissioner Upto Rs. 5.00 lacs
Joint Commissioner Above Rs. 5.00 lacs upto Rs. 20.00 lacs
Additional Commissioner Above Rs. 20.00 lacs upto Rs. 50.00 lacs
Commissioner Without limit
Accordingly all the cases relating to classification, valuation, CENVAT Credit, fraud, collusion etc. have to be decided by the proper officer. However, where appellate authority refers the case back for ‘de novo’ adjudication, then those cases shall be adjudicated by the officer which passed the said remand order.
III) Offences & Penalties
Section 9 of Central Excise Act, 1944 - Offences & Penalties: - (Nov 00, May 02)
Offence means any act or omission made punishable by any law for the time being in force. Section 9 provides that the following types of acts will constitute an offence:
1. Contravention of provisions imposing restrictions on storage limits in respect of notified commodities (tobacco) 2. Contravention of rules applicable to registration of persons and transit of excisable goods
3. Evading payment of any duty under the Central Excise Act, 1944
4. Removal of any excisable goods in contravention of the Act or rules made thereunder
5. Acquiring possession or concerning in the transporting, depositing, keeping, concealing, selling of excisable goods with the knowledge or with reason to believe that the goods are liable for confiscation 6. Contravention of Act or rules made thereunder in connection with duty credit and utilisation
7. Failure to supply information required by rules made under the Act or supplying false information 8. Attempting to commit or abetting the commission of an offence pertaining to storage, registration, transit, evasion referred to above.
Punishment:
The punishment for the above offences is as under:
Situation Punishment
In case of an offence relating to any excisable goods, where the duty leviable thereon exceeds Rs.1,00,000 Imprisonment for a term which may extend to 7 years and fine
In any other case Imprisonment for a term which may extend to 3 years or fine or both
Note:
1. Where a person is convicted u/s 9 and is again convicted u/s 9, then he shall be punishable for every second and subsequent offence with imprisonment for a term which may extend to 7yrs and fine.
2. The period of imprisonment cannot be for a term less than 6 months unless special and adequate reasons are recorded in the judgement.
3. The following are not special and adequate reasons:
• Age of the abused. • First time conviction
• Penalty has been ordered or goods have been confiscated under Central Excise Law for the same offence. • Accused is not the principal offender and was merely acting as a carrier of goods or was a secondary party in the commission of the offence.
Section 9A - Certain offences to be non-cognizable: -
Notwithstanding anything contained in the Code of Criminal Procedure, 1898, offences under Section 9 shall be deemed to be non-cognizable within the meaning of that Code.
Penalty Fine
1. Applicable Provisions:
Central Excise Act, 1944: Sec 9, Sec 11AC
Central Excise Rules, 2002: Rule 25,26 & 27
Customs Act, 1962: Sec 112,114,114A, 116 & 117. Applicable Provisions:
Central Excise Act, 1944: Sec 34
Customs Act, 1962: Sec 125
2. Penalty is imposed on assessee/ importer/ exporter for contravention of the provision of the Act. Fine is imposed on confiscated goods in lieu of confiscation. Goods shall be released only on payment of fine.
3. Penalty can be imposed by departmental authorities for offences under the Act. These are quasi judicial authorities. Fine is imposed by Magistrate, who is a judicial authority.
4. The limits of penalty are specified. In case of Central Excise, no limits are specified for fines. However, in case of Customs, the maximum amount which can be imposed as fine is equal to the market value minus the customs duty paid.
Section 9AA – Offences by Companies: - (Nov 98, Nov 02, Nov 04)
(1) Where an offence under this Act has been committed by a company, then:
a) every person who, at the time the offence was committed was in charge of, and was responsible to, the company for the conduct of the business of the company, and
b) the company;
shall be deemed to be guilty of the offence and shall be liable to be proceeded against and punished accordingly:
However, nothing contained in this sub-section shall render any such person liable to any punishment if he proves that the offence was committed without his knowledge or that he had exercised all due diligence to prevent the commission of such offence.
(2) Where an offence under this Act has been committed by a company and it is proved that the offence has been committed with the consent or connivance of, or is attributable to any neglect on the part of, any-
• Director • Secretary
• Manager • Other officer of the company
then such director, manager, secretary or other officer shall also be deemed to be guilty of that offence and shall be liable to be proceeded against and punished accordingly.
Explanation: -
(a) "company" means any body corporate and includes a firm or other association of individuals; and
(b) "director" in relation to a firm means a partner in the firm.
Note: This provision is applicable only to prosecution before court of law and not to adjudication proceedings. This provision cannot be invoked in penalty proceedings before departmental authorities.
A partner of a firm may be vicariously made liable for culpable acts and omissions of the firm. Discuss. (May 97, Nov 00)
Explanation to Section 9AA provides that the expression director in relation to a firm means a partner in the firm. Therefore, provisions of Section 9AA shall equally apply to a partner in a firm.
It has been held in Harwood Garments Vs CCE that in the absence of the officers responsible for the affairs of the company, the company alone cannot be tried for an offence under Section 9(1)(i) of the Central Excise Act where the punishment prescribed is both imprisonment and fine.
IV) Civil & Criminal Proceedings
Principle of “Double Jeopardy†or “Autrefois Convictâ€
Prosecution means an initiation of proceeding of a criminal nature before the court of law or judicial Tribunal in accordance with the statute.
According to Article 20(2) of the Constitution of India “No person shall be prosecuted and punished for the same offence more than once.†The conditions for applicability of this Article enumerated by the Supreme Court in State of Bombay V. Apte AIR 1961 (SC) 578 are as under –
a. There must have been a previous proceeding before a Court of law or judicial Tribunal
b. The person must have been prosecuted in such proceeding.
c. The person must have been punished.
d. The offence in both the proceedings must be same.
e. The subsequent proceeding must be a fresh proceeding and not mere continuation of the previous
Section 9B - Power of Court to publish the name, place of business of convicted person: -
(1) Where any person is convicted under this Act for contravention of any of the provisions thereof, the court convicting the person shall be competent to cause:
a) the name and place of business or residence of such person,
b) nature of the contravention,
c) the fact that the person has been so convicted and
d) such other particulars as the Court may consider to be appropriate in the circumstances of the case;
to be published at the expense of such person, in such newspapers or in such manner as the Court may direct.
(2) No such publication shall be made until the period for preferring an appeal against the orders of the Court has expired without any appeal having been preferred, or where an appeal have been preferred the same has been disposed off.
(3) The expenses of any publication shall be recoverable from the convicted person as if it were a fine imposed by the Court.
Section 9C – Presumption of Culpable mental state: -
1. ‘Culpable mental state’ includes intention, motive, knowledge of a fact, and belief in, or reason to believe, a fact.
2. In any prosecution for an offence under this Act which requires a culpable mental state on the part of the accused, the Court shall presume the existence of such mental state but it shall be a defense for the accused to prove the fact that he had no such mental state with respect to the act charged as an offence in that prosecution.
3. Thus, if a person is prosecuted in the court of law for any offence, the statutory presumption would arise that he knowingly mis-declared the value or fraudulently evaded or attempted to evade duty chargeable under the Act. It is on the accused to prove that he did not have such a state in respect to the act charged which is an offence.
Can penalty be imposed in the absence of mens rea under CEA?
Mens Rea means guilty mind. Normally, penalty is levied if violation is intentional. However, in case of almost all the penalty provisions as given in CEA, 1944 or Customs Act, 1962, penalty is leviable irrespective of the intention of the assessee.
Thus, ‘Mens Rea’ is not an essential condition to be satisfied before imposing penalty. Penalty shall be levied for contravention of the act/rules even if the contravention was without the intention to evade payment of duty. Penalty is a civil obligation and coercive measure to check loss of revenue and unless the statute specifically prescribes the need to establish ‘Mens Rea’ or guilty mind, it would be sufficient enough to prove that a default in complying with the statute has occurred for the purpose of imposing penalty.
Section 9D – Relevancy of Statements under certain circumstances: -
(1) A statement made and signed by a person before any Central Excise Officer of a gazetted rank during the course of any inquiry or proceeding under this Act shall be relevant, for the purpose of proving, in any prosecution for an offence under this Act, the truth of the facts which it contains in the following circumstances:
(a) when the person who made the statement is dead or cannot be found, or is incapable of giving evidence, or is kept out of the way by the adverse party, or whose presence cannot be obtained without an amount of delay or expense which, under the circumstances of the case, the Court considers unreasonable; or
(b) when the person who made the statement is examined as a witness in the case before the Court and the Court is of opinion that, having regard to the circumstances of the case, the statement should be admitted in evidence in the interests of justice.
(2) The above provisions shall, so far as may be, apply in relation to any proceeding under this Act, other than a proceeding before a Court, as they apply in relation to a proceeding before a Court.
Section 132 of Customs Act - False declaration, false documents, etc.
According to section 132 of the Customs Act, 1962 if any person makes, signs or uses, or causes to be made, signed or used, any declaration, statement or document in the transaction of any business relating to the customs, knowing or having reasons to believe that such declaration, statement or document is false in any material particular, shall be punishable with imprisonment for a term which may extend to six months, or with fine or with both.
Section 133 of Customs Act - Obstruction of officer of customs
According to section 133 if any person intentionally obstructs any officer of customs in the exercise of any powers conferred under this Act, such person shall be punishable with imprisonment for a term which may extend to six months or with fine, or with both.
Section 134 of Customs Act -Refusal to be X-rayed
According to section 134 a person shall be punishable with imprisonment for a term which may extend to six months, or with fine, or with both if –
(a) resists or refuses to allow a radiologist to screen or to take X-ray picture of his body in accordance with an order made by a Magistrate under section 103, or
(b) resists of refuses to allow suitable action being taken on the advice and under the supervision of a registered medical practitioner for bringing out goods liable to confiscation secreted inside his body, as provided in section 103,
Section 135 of Customs Act - Evasion of duty or prohibitions
If any person is in relation to any goods in any way knowingly concerned in any fraudulent evasion or attempt at evasion of any duty chargeable thereon or of any prohibition for the time being imposed under this Act or any other law for the time being in force with respect to such goods, or acquires possession of or is in any way concerned in carrying, removing, depositing, harbouring, keeping, concealing, selling or purchasing or in any other manner dealing with any goods which he knows or has reasons to believe are liable to confiscation under section 111, he shall be punishable,
(i) in the case of an offence relating to any of the goods to which section 123 applies and the market price whereof exceeds one lakh of rupees, with imprisonment for a term which may extend to seven years and with fine. It is also to be noted that in the absence of special and adequate reasons to the contrary to be recorded in the judgment of the court, such imprisonment shall not be for less than three years.
(ii) in any other case, with imprisonment for a term which may extend to three years, or with fine, or with both.
It is to be noted that this penalty and fine is in addition to any other action that may be taken under the Act.
If any person convicted of an offence under this section or under sub-section (1)of section 136 (referred below) is again convicted of an offence under this section, then, he shall be punishable for the second and for every subsequent offence with imprisonment for a term which may extend to seven years and with fine and in the absence of special and adequate reasons to the contrary to be recorded in the judgment of the court such imprisonment shall not be for less than one year.
For the aforesaid purposes, the following shall not be considered as special and adequate reasons for awarding a sentence of imprisonment for a term of less than one year, namely:-
i) the fact that the accused has been convicted for the first time for an offence under this Act;
ii) the fact that in any proceeding under this Act, other than a prosecution, the accused has been ordered to pay a penalty or the goods which are the subject matter of such proceedings have been ordered to be confiscated or any other action has been taken against him for the same act which constitutes the offence;
iii) the fact that the accused was not the principal offender and was acting merely as a carrier of goods or otherwise was a secondary party to the commission of the offence;
iv) the age of the accused.
Section 135A of Customs Act – Preparation
If a person makes preparation to export any goods in contravention of the provisions of this Act, and from the circumstances of the case it may be reasonably inferred that if not prevented by circumstances independent of his will, he is determined to carry out his intention to commit the offence, he shall be punishable with imprisonment for a term which may extend to three years, or with fine, or with both.
Section 136 of Customs Act - Offences by officers of Customs
• If any officer of customs enters into or acquiesces in any agreement to do, abstains from doing, permits, conceals or connives at any act or thing whereby any duty of customs leviable on any goods, or any prohibition for the time being in force under this Act or any other law for the time being in force with respect to any goods is or may be evaded, he shall be punishable with imprisonment for a term which may extend to three years or with fine, or with both.
• If any officer of customs,
(a) requires any person to be searched for goods liable to confiscation or any document relating thereto, with out having reason to believe that he has such goods or document secreted about his person; or
(b) arrests any person without having reason to believe that he has been guilty of an offence punishable under section 135; or
(c) searches or authorises any other officer of customs to search any place without having reason to believe that any goods, documents or things of the nature referred to in section 105 are secreted in that place,
he shall punishable with imprisonment for a term which may extend to six months, or with fine which may extend to one thousand rupees, or with both.
• If any officer of customs, except in the discharge in good faith of his duty as such officer or in compliance with any requisition made under any law for the time being in force, discloses any particulars learnt by him in his official capacity in respect of any goods, he shall be punishable with imprisonment for a term which may extend to six months, or with fine which may extend to one thousand rupees, or with both
Section 137 of Customs Act - Cognizance of offences
According to section 137 “(1) No court shall take cognizance of any offence under section l32, section l33, section 134 or section 135, except with the previous sanction of the Commissioner of Customs.
(2) No court shall take cognizance of any offence under section 136,
(a) where the offence is alleged to have been committed by an officer of customs not lower in rank than Assistant Commissioner of Customs or Deputy Commissioner of Customs, except with the previous sanction of the Central Government;
(b) where the offence is alleged to have been committed by an officer of customs lower in rank than Assistant Commissioner of Customs or Deputy Commissioner of Customs, except with the previous sanction of the Commissioner of Customs.
Section 138 of Customs Act - Offences to be tried summarily
According to section 138 of the Customs Act, 1962 “Notwithstanding anything contained in the Code of Criminal Procedure, 1898 (5 of 1898), an offence under this Chapter other than an offence punishable 115[under clause (i) of sub-section (1) of section 135 or under sub-section (2) of that section] may be tried summarily by a magistrate.â€
Refunds & Recovery of dues
Recovery of Dues
Section 11 of the CE Act - Recovery of sums due to Government: - (Nov 2002)
a) In respect of duty and any other sums of any kind payable to the Central Government under any of the provisions of the Central Excise Act or of the rules made thereunder including the amount required to be paid to the credit of Central Government under Section 11D, the officer empowered by the Central Board of Excise and Customs (constituted under the Central Boards of Revenue Act, 1963 to levy such duty or require the payment of such sums) may:
• deduct the amount so payable from any money owing to the person from whom such sums may be recoverable or due which may be in his hands or under his disposal or control, or
• recover the amount by attachment and sale of excisable goods belonging to such person;
b) If the amount payable is not so recovered, he may prepare a certificate signed by him specifying the amount due from the person liable to pay the same and send it to the Collector of the district in which such person resides or conducts his business.
c) The said Collector, on receipt of such certificate, shall proceed to recover from the said person the amount specified therein as if it were an arrear of land revenue. This is called Certification Proceedings.
Note: The person authorized to issue the certificate to the Collector must follow principles of natural justice and accordingly quantify the amount to be recovered.
Question: Once the demand of duty, penalty or any other dues are confirmed finally by the Central Excise authorities, the assessee liable to pay the dues has to pay the amount within the time prescribed. If the assessee fails to pay the above dues, what are the powers given to the Central Excise officers under the CEA and the Customs Act to recover the dues? (Nov 02 Old Syllabus)
Refer Section 11 of CE Act above.
Doctrine of Unjust Enrichment: - (May 96, Nov 97, Nov 99, Nov 00, Nov 02, May 03)
a) It is a well known principle of jurisprudence that no one shall be allowed to enrich himself at the cost of another. One cannot deprive another of something which he is legally entitled to posses, or compel another to pay that which he is not liable to pay. The person so enriched is under a lawful obligation to restore/repay the monies wrongly collected by him or paid to him.
b) Where the manufacturer has charged excise duty to the ultimate consumer, it is clear that he has passed on the burden to the consumer and has already recovered the duty from the consumers.
c) In such cases, refund of excess duty paid will amount to undeserving profit to the manufacturer. It will not be equitable to refund the duty to the manufacturer, as he will get double benefit - first from the consumers (on whom the burden of duty has been passed by the manufacturer) and again from the Department. This is called ‘Unjust Enrichment’. Thus, as per the ‘Doctrine of Unjust Enrichment’, no person should unjustly benefit at the expense of another.
d) Therefore, refund, if any, should be paid to consumer who has borne the burden of duty. However, in the majority of the cases, it is not practical to identify the individual consumer and pay refund to him. At the same time, duty is illegally collected and hence the Government cannot retain it. Thus the refund due to the buyers must be transferred to a consumer welfare fund instead of paying it to the manufacturer as held in Mafatlal Industries Ltd Vs UOI.
e) Accordingly, the Consumer Welfare Fund has been established under Section 12C of the Central Excise Act, 1944. Section 11B provides that refund shall be credited to this fund unless the manufacturer proves that the burden of duty has been borne by him and it has not been passed onto the buyers. The fund may be used for activities of protection and benefit of consumers.
Applicability of Doctrine of Unjust Enrichment
Captive Consumption of Raw Materials (Nov 02) In UOI Vs Solar Pesticides Ltd, it has been held that the burden of duty can be passed on either directly or indirectly. The expression ‘incidence of such duty’ in relation to its being passed onto another person would take within its ambit not only the passing of the duty directly to other person but also cases where it is passed on indirectly.
Thus, the Doctrine of Unjust Enrichment applies to cases of Captive Consumption.
Duty paid on provisional basis (Nov 02) Rule 7 of CE Rules 2002 provides that in case where the duty has been paid on provisional basis and a situation of refund arises, then such a refund will be granted to the manufacturer only if he has not passed the incidence of duty to any other person. Hence, the concept of unjust enrichment is applicable in cases where the goods are cleared under Provisional Assessment.
Bank Guarantees encashed by Department but case finally decided in favour of the assessee (Nov 02) In case the bank guarantee has been encashed by the bank, it cannot be said that the assessee has paid the duty to the Government. Hence, when the refund situation arises, it will not be hit by the doctrine of ‘unjust enrichment’. The Doctrine does not apply in this case.
The doctrine applies only in those cases where the assessee has ‘paid’ the duty and not in cases where the assessee provides a bank guarantee to the Department for differential duty and prefers an appeal.
Duty paid as pre-deposit for filing an appeal (Nov 02) The amount, which has been deposited as a condition of pre-deposit, cannot be considered as duty till the appeal is pending. Thus, if the amount is refunded, it cannot be considered as refund of duty. The Doctrine of Unjust Enrichment will not apply in this case.
Question: Does the doctrine of ‘Unjust Enrichment’ apply to payments under the Service Tax Law? (May 03)
Answer: Refund of service tax will be goverened by the Doctrine of Unjust Enrichment since the provisions of Central Excise Act, 1944 has been made applicable for service tax also as per Section 88 of the Finance Act, 1994.
Refunds
Section 26 of Customs Act: Refund of Export Duty: - (Nov 02, Nov 03)
Any export duty paid on goods exported will be refunded if:
• The goods are re-imported within one year.
• The goods have been returned otherwise than by way of resale, and
Refund claim shall be made within 6 months from the date when the goods are cleared for re-importation by the proper officer.
Section 11B of the CE Act - Claim for refund of duty: - (Nov 97, Nov 00, Nov 04)
(1) Any person claiming refund of any duty of excise may make an application for refund of such duty to the Assistant Commissioner (AC) or Deputy Commissioner (DC) of Central Excise before the expiry of one year from the relevant date in such form and manner as may be prescribed. The application shall be accompanied by such documentary or other evidence as the applicant may furnish to establish that the amount of duty of excise in relation to which such refund is claimed was collected from, or paid by him and the incidence of such duty had not been passed on by him to any other person. The limitation of one year shall not apply where any duty has been paid under protest.
(2) If, on receipt of any such application, the AC or DC is satisfied that the whole or any part of the duty of excise paid by the applicant is refundable, he may make an order accordingly and the amount so determined shall be credited to the Fund.
However, the amount of duty of excise as determined by the AC/DC shall, instead of being credited to the Fund, be paid to the applicant, if such amount is relatable to: -
a) rebate of duty of excise on excisable goods exported out of India or on excisable materials used in the manufacture of goods which are exported out of India;
b) unspent advance deposits lying in balance in the applicant's account current maintained with the Commissioner of Central Excise;
c) refund of credit of duty paid on excisable goods used as inputs in accordance with the rules made, or any notification issued, under the Central Excise Act;
d) the duty of excise paid by the manufacturer, if he had not passed on the incidence of such duty to any other person;
e) the duty of excise borne by the buyer, if he had not passed on the incidence of such duty to any other person;
f) the duty of excise borne by any other such class of applicants as the Central Government may, by notification in the Official Gazette, specify. (No such notification under this clause shall be issued unless in the opinion of the Central Government the incidence of duty has not been passed on by the persons concerned to any other person)
Note: These are the circumstances under which refund of duty would be granted to the assessee instead of being credited to the Consumer Welfare Fund. (May 96, Nov 97, Nov 99, Nov 00, Nov 02, May 03)
(3) Notwithstanding anything to the contrary contained in any judgment, decree, order or direction of the Appellate Tribunal or any Court or in any other provision of this Act or the rules made thereunder or any other law for the time being in force, no refund shall be made except as provided in sub-section (2).
(4) Every notification under Section 11B(2)(f) shall be laid before each House of Parliament and if Parliament makes any modification in the notification or directs that the notification should cease to have effect, the notification shall thereafter have effect only in such modified form or be of no effect, as the case may be, but without prejudice to the validity of anything previously done thereunder.
(5) Any notification issued under Section 11B(2)(f) may be rescinded by the Central Government at any time by notification in the Official Gazette.
Explanation: —For the purposes of this section: -
(A) "refund" includes rebate of duty of excise on excisable goods exported out of India or on excisable materials used in the manufacture of goods which are exported out of India;
(B) "relevant date" means: - (Nov 97)
Situation Relevant Date
1. Goods exported out of India where a refund of excise duty paid is available in respect of the goods themselves or the excisable materials used in the manufacture of such goods:
a) if the goods are exported by sea or air date on which the ship or the aircraft in which such goods are loaded, leaves India
b) if the goods are exported by land date on which such goods pass the frontier
c) if the goods are exported by post date of dispatch of goods by the Post Office concerned to a place outside India
2. Goods returned for being remade, refined, reconditioned, or subjected to any other similar process, in any factory date of entry into the factory for the said purposes
3. Goods to which banderols are required to be affixed if removed for home consumption but not so required when exported outside India, if returned to a factory after having been removed from such factory for export out of India date of entry into the factory
4. Where a manufacturer, who is required to pay a sum for a certain period on the basis of the rate fixed by the Central Government in full discharge of his liability, has made the payment on the basis of such rate for any period but before the expiry of that period such rate is reduced date of such reduction
5. In the case of a person, other than the manufacturer date of purchase of the goods by such person
6. Goods which are exempt from payment of duty by a special order issued under Section 5A(2) date of issue of such order
7. Where duty of excise is paid provisionally date of adjustment of duty after the final assessment thereof
8. In any other case date of payment of duty
Documents required to be produced along with refund claim (in case of Excise): - (Nov 98)
The following are the documents to be produced along with the refund claim:
Case A: Rebate of duty of excise on excisable goods exported out of India or on excisable materials used in the manufacture of goods which are exported out of India:
• Application in the prescribed form
• Original copy of ARE-1
• Duty attested copy of bill of lading/airway bill
• Duty attested copy of shipping bill (export promotion copy)
• Disclaimer certificate (in case where the claimant is other than the exporter)
• Copy of invoice evidencing payment of duty.
Case B: Unspent advance deposits lying in balance in the applicant's account current maintained with the Commissioner of Central Excise:
• Latest abstract received from Central Excise Officer.
• PLA Register
Case C: Refund of credit of duty paid on excisable goods used as inputs in accordance with the rules made, or any notification issued, under the Central Excise Act:
• Relevant extract of CENVAT Register
• Duty attested copy of bill of lading
• Duty attested copy of shipping bill
• Original copy of ARE wherever removal for export takes place under cover of ARE-1
Case D: The duty of excise paid by the manufacturer, if he had not passed on the incidence of such duty to any other person:
• Duplicate invoice issued under Rule 11 of Central Excise Rules, 2002 indicating the amount of duty
• Triplicate copy of the relevant PLA/CENVAT register
• In case the duty is paid under protest, evidence to that effect in terms of the prescribed rules
• Documentary evidence to show that the incidence of duty has not been passed on by the assessee or applicant to any other person
• Copy of the order in original/ order in appeal/ court’s order in pursuance of which the refund claim has been lodged.
Section 27 of Customs Act: Claim for refund of duty: - (Nov 01, Nov 02,May 04)
1) Any person claiming refund of duty together with any interest paid by him on such duty shall make an application for refund to the Assistant Commissioner or Deputy Commissioner of Customs.
2) Time limit for making refund application:
Situation Time limit within which application shall be made
Where the goods have been imported by an individual for his personal use or by the government or by any other educational, research or charitable institution or hospital Within 1 year from the date of payment of duty and interest, if any
In any other case Before the expiry of 6 months from the date of payment of duty and interest, if any
3) The time limit for making application for refund of duty shall not apply where the duty together with interest, if any, had been under protest.
4) The application shall be made in the prescribed format along with the documentary evidence towards payment of duty and interest if any and the grounds for refund of duty.
5) On receipt of such an application, if the AC/DC of Customs is satisfied that the whole or part of the duty paid by the applicant is refundable, then he shall make an order accordingly and the amount shall be credited to the Consumer Welfare Fund.
6) The amount of customs duty and interest, if any, paid on such duty can be paid to the applicant instead of being credited to the fund in the following circumstances:
a) If the importer or exporter paid the duty and interest and has not passed on the incidence of such duty and interest to any other person.
b) If the duty and interest is paid on imports made by an individual for his personal use.
c) If the duty and interest is borne by the buyer and the buyer has not passed on the incidence to any other person.
d) In case the refund is in respect of the export duty as specified in Section 26.
e) In case of drawback of duty payable under Sections 74 & 75.
f) In case the duty and interest is borne by such other class of applicants as the Central Government may by notification in the official gazette.
7. Relevant dates for submission of a refund application: -
Normally, the time limit of six months or one year is computed from the date of payment of duty, however, in following situations, such time limit commences from the following dates:
Situation Relevant Date
In case of goods which are exempt from payment of duty by an ad-hoc exemption order issued under Section 25(2) of the Act Date of issue of such order
Where any duty is paid provisionally under Section 18 of the Act Date of adjustment of duty after the final assessment thereof
In relation to a person, other than the importer Date of purchase of goods by such person
Documents required to be produced along with refund claim (in case of Customs): -
1. Letter of authorization from the importer if the applicant is an agent
2. Triplicate copy of the Bill of Entry/Post Parcel wrapper/Shipping Bill/Baggage receipt or the purchase invoice
3. Duty challan or other document as evidence of duty paid
4. Signed working sheet for the refund claimed
5. Custom attested invoices
6. Custom attested packing list
7. Document for establishing the applicants eligibility to receive refund amount in terms of the proviso to sub-section (2) of section 27 of the Act, including documents for the purposes of section 28C and 28D of the Act.
8. Contract and purchase order
9. Cenvat credit certificate from the Central Excise Authority
10. Short delivery certificate from the custodians
11. Short shipment certificate from the supplier
12. Survey report.
In CCE Vs Flock India Pvt. Ltd., it was held that a refund claim is not maintainable when the assessee did not challenge the assessment order which became final.
Question: State whether the principle of “unjust enrichment†applies to refund of export duty under the Customs Act, 1962. (Nov 04)
Answer: In Commissioner of Customs Vs Ken Agritech Pvt. Ltd., it has been held that the provisions relating to unjust enrichment introduced in Section 27 by way of amendment in the Customs Act could only apply to refund of import duty under the said section. Since refund of export duty is dealt with under Section 26 of the Act and the same has not been amended by the Parliament, the provisions relating to unjust enrichment introduced under Section 27 could not be made applicable to refund of export duty under the said Section 26.
Section 11BB of the CE Act - Interest on delayed refunds: - (Nov 03)
If any duty ordered to be refunded under Section 11B (2) to any applicant is not refunded within 3 months from the date of receipt of application, there shall be paid to that applicant interest at such rate, not below 5% and not exceeding 30% per annum as is for the time being fixed by the Central Government, by notification in the official gazette, on such duty from the date immediately after the expiry of three months from the date of receipt of such application till the date of refund of such duty:
Note: The notified rate at present is 6% p.a.
Section 11C of the CE Act - Power not to recover duty of excise not levied or short levied as a result of general practice: - (May 97, Nov 04)
(1) Notwithstanding anything contained in this Act, if the Central Government is satisfied: -
(a) that a practice was, or is, generally prevalent regarding levy of duty of excise (including non-levy thereof) on any excisable goods; and
(b) that such goods were, or are, liable: -
(i) to duty of excise, in cases where according to the said practice the duty was not, or is not being, levied, or
(ii) to a higher amount of duty of excise than what was, or is being, levied, according to the said practice,
then, the Central Government may, by notification in the Official Gazette, direct that the whole of the duty of excise payable on such goods, or as the case may be, the duty of excise in excess of that payable on such goods, but for the said practice, shall not be required to be paid in respect of the goods on which the duty of excise was not, or is not being, levied, or was, or is being, short-levied, in accordance with the said practice.
(2) Where such a notification has been issued and the manufacturer has paid the whole of the duty of excise or the duty in excess of that payable on such goods, which would not have been paid if the said notification had been in force, shall his claim for refund shall be governed by Section 11B(2).
The person claiming the refund of such duty or excess duty must make an application in this behalf to the AC/DC before the expiry of 6 months from the date of issue of the said notification.
Section 11D of the CE Act - Obligation of the person who has collected excise duty from the buyer to deposit the same with the Central Government: - (Nov 02, May 04)
(1) Notwithstanding anything to the contrary, every person who is liable to pay duty and has collected any amount in excess of duty assessed or determined and paid on any excisable goods under this Act or the rules made thereunder from the buyer of such goods in any manner as representing duty of excise, shall forthwith pay the amount so collected to the credit of the Central Government.
(2) Where any amount is required to be paid to the credit of the Central Government under sub-section (1) and which has not been so paid, the Central Excise Officer may issue a show cause as to why the said amount should not be paid by him to the credit of the Central Government.
(3) The Central Excise Officer shall, after considering the representation, if any, made by the person on whom the notice is served, determine the amount due from such person (not being in excess of the amount specified in the notice) and thereupon such person shall pay the amount so determined.
(4) The amount paid to the credit of the Central Government under Section 11D(1) or (3) shall be adjusted against the duty of excise payable by the person on finalisation of assessment or any other proceeding for determination of the duty of excise relating to the excisable goods.
(5) Where any surplus is left after such adjustment, the amount of such surplus shall either be credited to the Fund or refunded to the person who has borne the incidence of such amount, in accordance with the provisions of section 11B and such person may make an application under that Section in such cases within 6 months from the date of the public notice to be issued by the AC for refund of such surplus amount.
Section 11DD of the CE Act - Interest on the amounts collected in excess of duty: -
a) Where an amount has been collected in excess of the duty assessed or determined or paid on any excisable goods from the buyer of such goods, the person who is liable to pay such amount in terms of Section 11D(3), shall, in addition to the amount, be liable to pay interest at such rate not below 10%, and not exceeding 36% per annum, as is for the time being fixed by the Central Government by the notification in the Official Gazette, from the 1st day of the month succeeding the month in which the amount ought to have been paid under this Act till the date of payment of such amount.
b) Where the amount becomes payable consequent to issue of an order, instruction or direction by the Board under Section 37B, and such amount payable each voluntarily paid in full, without reserving any right to appeal against such payment at any subsequent stage, within 45 days from the date of issue of such order, instruction or direction, as the case may be, no interest shall be payable in other cases the interest shall be payable on the whole amount, including the amount already paid.
c) Where the amount determined under Section 11D(3), is reduced/incrreased by the Commissioner (Appeals), the Appellate Tribunal or the Court, the interest payable thereon shall be on such reduced/increased amount respectively.
Section 12 of the CE Act - Application of the provisions of Customs Act, 1962 to Central Excise Duties: -
Certain provisions of Customs Act are made applicable to Central Excise through notifications published in the Official Gazette by the Central Government: -
Examples of provisions in Customs Act extended to Central Excise:
Section Provision of Customs Act extended to Central Excise
105 Search pf premises
110 Seizure of goods, documents and things
115 Confiscation of Conveyance
118 Confiscation of packages and their contents
119 Confiscation of goods used for concealing smuggled goods
120 Confiscation of smuggled goods in spite of any change in form
121 Confiscation of sale proceeds of smuggled goods
124 SCN to be issued before confiscation
142 Recovery of sums due
150 Sale of goods and application of sale proceeds
Section 12A of the CE Act - Price of goods to indicate the amount of duty paid thereon: -
Notwithstanding anything contained in this Act or any other law for the time being in force, every person who is liable to pay duty of excise on any goods shall, at the time of clearance of the goods, prominently indicate in all the documents relating to assessment, sales invoice, and other like documents, the amount of such duty which will form part of the price at which such goods are to be sold.
Section 12B of the CE Act - Presumption that incidence of duty has been passed on to the buyer: -
Every person who has paid the duty of excise on any goods under this Act shall, unless the contrary is proved by him, be deemed to have passed on the full incidence of such duty to the buyer of such goods.
Section 12C of the CE Act – Consumer Welfare Fund: -
(1) There shall be established by the Central Government a fund, to be called the Consumer Welfare Fund.
(2) There shall be credited to the Fund, in such manner as may be prescribed:
(a) the amount of duty of excise referred to in Section 11B(2) or Section 11C(2) or Section 11D(2);
(b) the amount of duty of customs referred to in Section 27(2) or Section 28A(2), or Section 28B(2) of the Customs Act, 1962;
(c) any income from investment of the amount credited to the Fund and any other monies received by the Central Government for the purposes of this Fund.
Section 12D of the CE Act – Utilization of the Consumer Welfare Fund: -
(1) Any money credited to the Fund shall be utilised by the Central Government for the welfare of the consumers in accordance with such rules as that Government may make in this behalf.
(2) The Central Government shall maintain or, if it thinks fit, specify the authority which shall maintain, proper and separate account and other relevant records in relation to the Fund in such form as may be prescribed in consultation with the Comptroller and Auditor-General of India.
Advance Ruling
Section 23A to Section 23H of the Central Excise Act, 1944 contains the provisions regulating the advance ruling.
Section 23A of CE Act - Definitions: -
(a) “activity†means production or manufacture of goods;
(b) "advance ruling" means the determination, by the authority of a question of law or fact specified in the application regarding the liability to pay duty in relation to an activity proposed to be undertaken, by the applicant; (May 03)
(c) "applicant" means-
(i) a non-resident setting up a joint venture in India in collaboration with a non-resident or a resident; or
(ii) a resident setting up a joint venture in India in collaboration with a non-resident; or
(iii) a wholly owned subsidiary Indian company, of which the holding company is a foreign company, who proposes to undertake any business activity in India and makes application for advance ruling ; (May 03, Nov 04)
(d) "application" means an application made to be Authority under sub-section (1) of section 23C;
(e) "Authority" means the Authority for Advance Rulings constituted under section 28F of the Customs Act, 1962;
(f) “non-residentâ€, “Indian Company†and “foreign company†have the meanings respectively assigned to them in clause (30), (26) and (23A) of Section 2 of the Income-tax Act,1961.
Section 28F of Customs Act – Authority for Advance Rulings: -
(1) The Central Government shall, by notification in the Official Gazette, constitute an authority for giving advance rulings, to be called as "the authority for advance rulings".
(2) The authority shall consist of the following members appointed by the Central Government, namely: -
(a) a Chairperson, who is a retired Judge of the Supreme Court;
(b) an officer of the Indian Customs and Central Excise Service who is qualified to be a member of the Board;
(c) an officer of the Indian legal service who is qualified to be an Additional Secretary to the Government of India.
(3) The salaries and allowances payable to, and the terms and conditions of service of, the members shall be such as the Central Government may by rules determine.
(4) The Central Government shall provide the authority with such officers and staff as may be necessary for the efficient exercise of the powers of the authority under this Act.
(5) The office of the authority shall be located in Delhi.
Section 23B of CE Act - Vacancies, etc., not to invalidate proceedings: -
No proceeding before, or pronouncement of advance ruling by, the Authority shall be questioned or shall be invalid on the ground merely of the existence of any vacancy or defect in the constitution of the Authority.
Section 23C of CE Act - Application for advance ruling: - (Nov 00)
(1) An applicant desirous of obtaining an advance ruling may make an application in such form and in such manner as may be prescribed, stating the question on which the advance ruling is sought.
Matters in which Advance ruling can be obtained:
(2) The question on which the advance ruling is sought shall be in respect of:
Excise (Sec 23C) (May 03) Customs (Sec 28H) Service Tax (Sec 96C) (May 05)
Classification of goods under the Central Excise Tariff Act, 1985 Classification of goods under the Customs Tariff Act, 1975 Classification of any service as a taxable service under Chapter V
Applicability of notification issued u/s 5A(1) having a bearing on the rate of duty Applicability of notification issued u/s 25(1) having a bearing on the rate of duty The valuation of taxable service for charging service tax
Principles to be adopted for determination of value of the goods Principles to be adopted for determination of value of the goods Principles to be adopted for determination of value of services
Applicability of any notification issued under the Act Applicability of any notification issued under the Act
Applicability of any notification issued under the Act
Admissibility of credit of excise duty N.A Admissibility of credit of service tax
(3) The application shall be made in quadruplicate and be accompanied by a fee of two thousand five hundred rupees.
(4) An applicant may withdraw his application within thirty days from the date of the application.
Section 23 D of CE Act - Procedure on receipt of application: -
(1) On receipt of an application, the Authority shall cause a copy thereof to be forwarded to the Commissioner of Central Excise and, if necessary, call upon him to furnish the relevant records.
(2) The Authority may, after examining the application and the records called for, by order, either allow or reject the application: (May 03)
Provided that the Authority shall not allow the application where the question raised in the application is: -
(a) already pending in the applicant's case before any Central Excise Officer ,the Appellate Tribunal or any Court;
(b) the same as in a matter already decided by the Appellate Tribunal or any Court:
No application shall be rejected under this sub-section unless an opportunity has been given to the applicant of being heard:
Where the application is rejected, reasons for such rejection shall be given in the order.
(3) A copy of every order made under sub-section (2) shall be sent to the applicant and to the Commissioner of Central Excise.
(4) Where an application is allowed under sub-section (2), the Authority shall, after examining such further material as may be placed before it by the applicant or obtained by the Authority, pronounce its advance ruling on the question specified in the application.
(5) On a request received from the applicant, the Authority shall, before pronouncing its advance ruling, provide an opportunity to the applicant of being heard, either in person or through a duly authorised representative (as mentioned in Section 35Q).
(6) The Authority shall pronounce its advance ruling in writing within ninety days of the receipt of application.
(7) A copy of the advance ruling pronounced by the Authority, duly signed by the Members and certified in the prescribed manner shall be sent to the applicant and to the Commissioner of Central Excise, as soon as may be, after such pronouncement.
Section 23E of CE Act - Applicability of advance ruling: -
(1) The advance ruling pronounced by the Authority under section 23D shall be binding only-
(a) on the applicant who had sought it ;
(b) in respect of any matter referred to in Section 23C(2);
(c) on the Commissioner of Central Excise, and the Central Excise authorities sub-ordinate to him, in respect of the applicant.
(2) The advance ruling shall be binding as aforesaid unless there is a change in law or facts on the basis of which the advance ruling has been pronounced.
Section 23F of CE Act - Advance ruling to be void in certain circumstances: -
Where the Authority finds, on a representation made to it by the Commissioner of Central Excise or otherwise, that an advance ruling pronounced by it has been obtained by the applicant by fraud or mis-representation of facts, it may, by order, declare such ruling to be void ab initio and thereupon all the provisions of this Act shall apply to the applicant as if such advance ruling had never been made.
Section 23G of CE Act - Powers of Authority: -
(1) The Authority shall, for the purpose of exercising its powers regarding discovery and inspection, enforcing the attendance of any person and examining him on oath, issuing commissions and compelling production of books of account and other records, have all the powers of a civil court under the Code of Civil Procedure, 1908.
(2) The Authority shall be deemed to be a civil court and every proceeding before the Authority shall be deemed to be a judicial proceeding within the meaning of sections 193 and 228, and for the purpose of section 196,of the Indian Penal Code.
Section 23H of CE Act - Procedure of Authority: -
The Authority shall, subject to the provisions of this Chapter, have power to regulate its own procedure in all matters arising out of the exercise of its powers under this act.
Settlement Commission
Section 31 of CE Act - Definitions: -
(a) "assessee" means any person who is liable for payment of excise duty assessed under this Act or any other Act and includes any producer or manufacturer of excisable goods or a registered person under the rules made under this Act, of a private warehouse in which excisable goods are stored
(c)"case" means any proceeding under this Act or any other Act for the levy, assessment and collection of excise duty, or any proceeding by way of appeal or revision in connection with such levy, assessment or collection, which may be pending before a Central Excise Officer or Central Government on the date on which an application under Section 32E(1) is made.
Provided that where any appeal or application for revision has been preferred after the expiry of the period specified for the filing of such appeal or application for revision under this Act and which has not been admitted, such appeal or revision shall not be deemed to be a proceeding pending within the meaning of this clause.
(g)"Settlement Commission" means the Customs and Central Excise Settlement Commission constituted under Section 32.
Section 32 of CE Act - Customs and Central Excise Settlement Commission: -
(1) The Central Government shall, by notification in the Official Gazette, constitute a Commission to be called the Customs and Central Excise Settlement Commission for the settlement of cases under the Central Excise Act and the Customs Act.
(2) The Settlement Commission shall consist of a Chairman and as many Vice-Chairmen and other Members as the Central Government thinks fit and shall function within the Department of the Central Government dealing with customs and central excise matters.
(3) The Chairman, Vice-Chairman and other Members of the Settlement Commission shall be appointed by the Central Government from amongst persons of integrity and outstanding ability, having special knowledge of, and experience in, administration of customs and central excise laws.
Section 32A of CE Act - Jurisdiction and powers of Settlement Commission: -
(1) The jurisdiction, powers and authority of the Settlement Commission may be exercised by Benches thereof.
(2) A Bench shall be presided over by the Chairman or a Vice-Chairman and shall consist of two other Members.
(3) The Bench for which the Chairman is the presiding officer shall be the principal Bench and other Benches shall be known as additional Benches.
(4) The Chairman may authorise the Vice-Chairman or other Member appointed to one Bench to discharge the functions of the Vice-Chairman or other Member of another Bench.
(5) The principal Bench shall sit at Delhi and the Central Government shall, by notification in the Official Gazette, establish additional Benches at such places as it considers necessary.
(6) When one of the persons constituting a Bench is unable to discharge his functions owing to absence, illness or any other cause or in the event of the occurrence of any vacancy either in the office of the presiding officer or in the office of one or the other members of the Bench, the remaining Members may function as the Bench and if the presiding officer of the Bench is not one of the remaining Members, the senior among the remaining Members shall act as the presiding officer of the Bench.
Provided that if at any stage of the hearing of any such case or matter, it appears to the presiding officer that the case or matter is of such a nature that it ought to be heard of by a Bench consisting of three Members, the case or matter may be referred by the presiding officer of such bench to the Chairman for transfer to such Bench as the Chairman may deem fit.
(7) The Chairman may, for the disposal of any particular case, constitute a special Bench consisting of more than three Members.
(8) The special Bench shall sit at a place to be fixed by the Chairman.
Section 32B of CE Act - Vice-Chairman to act as Chairman or to discharge his functions in certain circumstances: -
(1) In the event of the occurrence of any vacancy in the office of the Chairman by reason of his death, resignation or otherwise, the Vice-Chairman shall act as the Chairman until the date on which a new Chairman, appointed to fill such vacancy, enters upon his office.
(2) When the Chairman is unable to discharge his functions owing to absence, illness or any other cause, the Vice-Chairman shall discharge the functions of the Chairman until the date on which the Chairman resumes his duties.
Section 32C of CE Act - Power of Chairman to transfer cases from one Bench to another: -
On the application of the assessee or the Chief Commissioner or Commissioner of Central Excise and after giving notice to them, and after hearing such of them as he may desire to be heard, or-on his own motion without such notice, the Chairman may transfer any case pending before one Bench, for disposal, to another Bench.
Section 32D of CE Act - Decision to be by majority: -
• If the Members of a Bench differ in opinion on any point, the point shall be decided according to the opinion of the majority.
• If the members are equally divided, they shall state the point or points on which they differ, and make a reference to the Chairman.
• The Chairman shall then either hear the point or points himself or refer the case for hearing on such point or points by one or more of the other Members of the Settlement Commission.
• Such point or points shall be decided according to the opinion of the majority of the Members of the Settlement Commission who have heard the case, including those who first heard it.
Section 32E of CE Act - Application for settlement of cases: - (Nov 00, May 04)
An assessee may, at any stage of a case relating to him make an application in such form and in such manner as may be prescribed, and containing:
• a full and true disclosure of his duty liability which has not been disclosed before the Central Excise Officer having jurisdiction,
• the manner in which such liability has been derived,
• the additional amount of excise duty accepted to be payable by him and
• such other particulars as may be prescribed including the particulars of such excisable goods in respect of which he admits short levy on account of misclassification or otherwise of such excisable goods,
to the Settlement Commission to have the case settled and any such application shall be disposed of in the manner hereinafter provided.
No such application shall be made unless: -
(a) the applicant has filed returns showing production, clearance and central excise duty paid in the prescribed manner;
(b) a show cause notice for recovery of duty issued by the Central Excise Officer has been received by the applicant; and
(c) the additional amount of duty accepted by the applicant in his application exceeds Rs.2 lakhs.
No application shall be entertained by the Settlement Commission under this sub-section in cases which are pending with the Appellate Tribunal or any Court.
No application under this sub-section shall be made for the interpretation of the classification of excisable goods under the Central Excise Tariff Act, 1985.
(2) Where any excisable goods, books of account, other documents have been seized under the provisions of this Act or rules made thereunder, the assessee shall not be entitled to make an application before the expiry of 180 days from the date of the seizure.
(3) Every application made shall be accompanied by such fees as may be prescribed.
(4) An application shall not be allowed to be withdrawn by the applicant.
Note: Application for Settlement of cases in the case of Customs (Section 127B): - (May 05)
Any importer, exporter or any other person may, at any stage of a case relating to him make an application in such form and in such manner as may be prescribed, and containing:
• a full and true disclosure of his duty liability which has not been disclosed before the proper officer having jurisdiction,
• the manner in which such liability has been derived,
• the additional amount of customs duty accepted to be payable by him and
• such other particulars as may be prescribed including the particulars of such dutiable goods in respect of which he admits short levy on account of misclassification or otherwise of such excisable goods,
to the Settlement Commission to have the case settled and any such application shall be disposed of in the manner hereinafter provided.
No such application shall be made unless: -
(a) the applicant has filed a bill of entry, or a shipping bill, in respect of import or export of goods;
(b) a show cause notice for recovery of duty issued by the proper officer has been received by the applicant; and
(c) the additional amount of duty accepted by the applicant in his application exceeds Rs.2 lakhs.
No application shall be entertained by the Settlement Commission under this sub-section in cases which are pending with the Appellate Tribunal or any Court.
No application under this sub-section shall be made for the interpretation of the classification of goods under the Customs Tariff Act, 1975.
(2) Where any dutiable goods, books of account, other documents have been seized under the provisions of this Act or rules made thereunder, the assessee shall not be entitled to make an application before the expiry of 180 days from the date of the seizure.
(3) Every application made shall be accompanied by such fees as may be prescribed.
(4) An application shall not be allowed to be withdrawn by the applicant.
Section 32F of CE Act - Procedure on receipt of an application under Section 32E: -
a) On receipt of an application under Section 32E, the Settlement Commission shall call for a report from the Commissioner of Central Excise having jurisdiction and on the basis of the materials contained in such report and having regard to the nature and circumstances of the case or the complexity of the investigation involved therein, the Settlement Commission may, by order, allow the application to be proceeded with or reject the application.
b) An application shall not be rejected under this subsection, unless an opportunity has been given to the applicant of being heard.
c) The Commissioner shall furnish such report within a period of one month of the receipt of the communication from the Settlement Commission, failing which it shall be presumed that the Commissioner has no objection to such application; but he may raise objections at the time of hearing fixed by the Settlement Commission for admission of the application and the date of such hearing shall be communicated by the Settlement Commission to the applicant and the Commissioner within a period not exceeding two months from the date of receipt of such application.
d) A copy of every order shall be sent to the applicant and to the Commissioner having jurisdiction.
e) The applicant shall within 30 days of the receipt of a copy of the order pay the amount of additional duty admitted by him as payable and shall furnish proof of such payment to the Settlement Commission.
f) If the Settlement Commission is satisfied, on an application made in this behalf by the assessee that he is unable for good and sufficient reasons to pay the amount referred to within the time specified, it may extend the time for payment of the amount which remains unpaid or allow payment thereof by installments, if the assessee furnishes adequate security for the payment thereof.
g) Where the additional amount of duty referred to is not paid by the assessee within the time specified or extended period, as the case may be, the Settlement Commission may direct that the amount which remains unpaid, together with simple interest at the rate of 18% per annum or at the rate notified by the CBEC from time to time on the amount remaining unpaid, be recovered, as the sum due to Central Government by the Central Excise Officer having jurisdiction over the assessee in accordance with the provisions of Section 11.
h) Where an application is allowed to be proceeded with, the Settlement Commission may call for the relevant records from the Commissioner having jurisdiction. After examination of such records, if the Settlement Commission is of the opinion that any further inquiry or investigation in the matter is necessary, it may direct the Commissioner (Investigation) to make or cause to be made such further inquiry or investigation and furnish a report on the matters covered by the application and any other matter relating to the case.
i) After examination of the records and the report of the Commissioner, and the report, if any, of the Commissioner (Investigation), and after giving an opportunity to the applicant and to the Commissioner having jurisdiction to be heard, either in person or through a representative duly authorised in this behalf, and after examining such further evidence as may be placed before it or obtained by it, the Settlement Commission may, in accordance with the provisions of this Act, pass such order as it thinks fit.
j) Every order passed shall provide for the terms of settlement including any demand by way of duty, penalty or interest, the manner in which any sums due under the settlement shall be paid and all other matters to make the settlement effective and shall also provide that the settlement shall be void if it is subsequently found by the Settlement Commission that it has been obtained by fraud, or misrepresentation of facts.
k) Where a settlement becomes void, the proceedings with respect to the matters covered by the settlement shall be deemed to have been revived from the stage at which the application was allowed to be proceeded with by the Settlement Commission and the Central Excise Officer having jurisdiction may, notwithstanding anything contained in any other provision of this Act, complete such proceedings at any time before the expiry of two years from the date of the receipt of communication that the settlement became void.
l) Where any such duty payable is not paid by the assessee within 30 days of the receipt of a copy of the order by him, then, whether or not the Settlement Commission has extended the time for payment of such duty or has allowed payment thereof by installments, the assessee shall be liable to pay simple interest at the rate of 18% per annum or at such other rate as notified by the CBEC on the amount remaining unpaid from the date of expiry of the period of thirty days aforesaid.
Section 32G of CE Act - Power to order provisional attachment to protect revenue:
Where, during the pendency of any proceeding before it, the Settlement Commission is of the opinion that for the purpose of protecting the interests of revenue it is necessary so to do, it may, by order, attach provisionally any property belonging to the applicant in the manner as may be prescribed.
Section 32H of CE Act - Power to reopen completed proceedings: -
If the Settlement Commission is of the opinion (the reasons for such opinion to be recorded by it in writing) that, for the proper disposal of the case pending before it, it is necessary or expedient to reopen any proceeding connected with the case but which has been completed under this Act before application for settlement under Section 32E was made, it may, with the concurrence of the applicant, reopen such proceeding and pass such order thereon as it thinks fit.
No proceeding shall be reopened by the Settlement Commission under this section after the expiry of 5 years from the date of application.
Section 32-I of CE Act - Powers and procedure of Settlement Commission: -
(1) The Settlement Commission shall have all the powers which are vested in a Central Excise Officer under this Act or the rules made thereunder.
(2) Where an application made under Section 32E has been allowed to be proceeded with under Section 32F, the Settlement Commission shall, until an order is passed under Section 32F(7), have exclusive jurisdiction to exercise the powers and perform the functions of any Central Excise Officer, under this Act in relation to the case.
(3) In the absence of any express direction by the Settlement Commission to the contrary, nothing in this Chapter shall affect the operation of the provisions of this Act in so far as they relate to any matters other than those before the Settlement Commission.
(4) The Settlement Commission shall have power to regulate its own procedure and the procedure of Benches thereof in all matters arising out of the exercise of its powers, or of the discharge of its functions, including the places at which the Benches shall hold their sittings.
Section 32J of CE Act - Inspection, etc., of reports: -
No person shall be entitled to inspect, or obtain copies of, any report made by any Central Excise Officer to the Settlement Commission; but the Settlement Commission may, in its discretion furnish copies thereof to any such person on an application made to it in this behalf and on payment of the prescribed fee:
Section 32K of CE Act - Power to grant immunity from prosecution and penalty: -
(1) The Settlement Commission may, if it is satisfied that any person who made the application for settlement under Section 32E has co-operated with the Settlement Commission in the proceedings before it and has made a full and true disclosure of his duty liability, grant to such person, subject to such conditions as it may think fit to impose, immunity from prosecution for any offence under this Act or under the Indian Penal Code or under any other Central Act for the time being in force and also either wholly or in part from the imposition of any penalty, fine and interest under this Act, with respect to the case covered by the settlement.
However, no such immunity shall be granted by the Settlement Commission in cases where the proceedings for the prosecution for any such offence have been instituted before the date of receipt of the application under Section 32E.
(2) An immunity granted to a person shall stand withdrawn if such person fails to pay any sum specified in the order of the settlement passed within the time specified or fails to comply with any other condition subject to which the immunity was granted.
(3) An immunity granted to a person may be withdrawn by the Settlement Commission, if it is satisfied that such person had concealed any particular material to the settlement or had given false evidence. Thereupon such person may be tried for the offence with respect to which the immunity was granted or for any other offence of which he appears to have been guilty in connection with the settlement and shall also become liable to the imposition of any penalty under this Act to which such person would have been liable, had no such immunity been granted.
Section 32L of CE Act - Power to send a case back to the Central Excise Officer: -
The Settlement Commission may, if it is of opinion that any person who made an application for settlement under section 32E has not co-operated with the Settlement Commission in the proceedings before it, send the case back to the Central Excise Officer having jurisdiction who shall thereupon dispose of the case in accordance with the provisions of this Act as if no application under Section 32E had been made.
Section 32M of CE Act - Order of settlement to be conclusive: -
Every order of settlement passed under Section 32F(7) shall be conclusive as to the matters stated therein and no matter covered by such order shall, save as otherwise provided, be reopened in any proceeding under this Act or under any other law for the time being in force.
Section 32-0 of CE Act - Bar on subsequent application for settlement in certain cases: -
Where:
a) the order of settlement provides for the imposition of a penalty on the person who made the application under Section 32E for settlement, on the ground of concealment of particulars of his duty liability; or
b) such person is convicted of any offence under this Act in relation to that case after the final order has been passed by the Settlement Commission; or
c) the case of such person is sent back to the Central Excise Officer having jurisdiction by the Settlement Commission under Section 32L,
then, he shall not be entitled to apply for settlement under section 32E in relation to any other matter.
Section 32P of CE Act - Proceedings before Settlement Commission to be judicial proceedings: -
Any proceedings under this Chapter before the Settlement Commission shall be deemed to be a judicial proceeding within the meaning of Sections 193 and 228, and for the purposes of section 196 of the Indian Penal Code.
Section 32PA of CE Act - Certain persons who have filed appeals to the Appellate Tribunal entitled to make applications to the Settlement Commission: -
(1) Any person who has filed an appeal to the Appellate Tribunal under this Act, on or before the 29th February 2000, and which is pending, shall, on withdrawal of such appeal from the Appellate Tribunal, be entitled to make an application to the Settlement Commission to have his case settled under this Chapter.
Provided that no such person shall be entitled to make an application under this section in a case where the Commissioner of Central Excise or any officer on his behalf has, on or before the date on which the Finance Act, 2000 receives the assent of the President, applied to the Appellate Tribunal for the determination of such points arising out of the decision or order specified by the board in its order under Section 35E(1) or filed under Section 35B(2), as the case may be.
(2) Any person referred to in sub-section (1) may make an application to the Appellate Tribunal for permission to withdraw the appeal.
(3) On receipt of an application, the Appellate Tribunal shall grant permission to withdraw the appeal.
(4) Upon withdrawal of the appeal, the proceedings in appeal immediately before such withdrawal shall be deemed to be a proceeding pending before a Central Excise Officer.
(5) An application to the Settlement Commission under this section shall be made within a period of 30 days from the date on which the order of the Appellate Tribunal permitting the withdrawal of the appeal is communicated to the person.
(6) An application made to the Settlement Commission under this section shall be deemed to be an application made under Section 32E(1) and the provisions of this Chapter shall apply accordingly.
(7) Where an application made to the Settlement Commission under this section is not is not entertained by the Settlement Commission, then, the appeal shall be deemed to have been revived before the Appellate Tribunal and the provisions contained in section 35B, section 35C and section 35D shall, so far as may be, apply accordingly.
Section 11A.
Recovery of duties not levied or not paid or short-levied or short-paid or erroneously refunded: -
Section 11A - Recovery of duties not levied or not paid or short-levied or short-paid or erroneously refunded: - (May 96, May 99, Nov 00, Nov 01, May 02, May 04)
Time Limit for issue of Show Cause Notice in ordinary circumstances:
A) Under Central Excise:
When any duty of excise has not been levied or paid or has been short-levied or short-paid or erroneously refunded, the department has the right to demand such duty by issuing a show cause notice requiring him to show cause why he should not pay the amount specified in the notice. Such a show cause notice must be issued within 1 year from the relevant date.
B) Under Service Tax:
When any service tax has not been levied or paid or has been short-levied or short-paid or erroneously refunded, the department has the right to demand such duty by issuing a show cause notice requiring him to show cause why he should not pay the amount specified in the notice. Such a show cause notice must be issued within 1 year from the relevant date.
C) Under Customs: (May 05)
When any duty has not been levied or has been short-levied or erroneously refunded, or when any interest payable has not been paid, part paid or erroneously refunded, the proper officer may:
(a) in the case of any import made by any individual for his personal use or by government or by any educational, research or charitable institution or hospital, within one year;
(b) in any other case, within 6 months;
from the relevant date, serve notice on the person chargeable with the duty or interest which has not been levied or charged or which has been short-levied or part paid or to whom the refund has erroneously been made, requiring him to show cause why he should not pay the amount specified in the notice.
Where the non-payment, short payment, non-levy or short levy of duty has been due to any fraud, collusion, suppression of facts, mis-statement or misrepresentation:
Where any duty of excise has not been levied or paid or has been short-levied or short-paid or erroneously refunded by reason of fraud, collusion or any willful mis-statement or suppression of facts, or contravention of any of the provisions of this Act or of the rules made thereunder with intent to evade payment of duty, by such person or his agent, the show cause notice can be issued within 5 years from the relevant date.
Determination of final liability & time limit for completion of proceeding:
The Central Excise Officer shall, after considering the representation, if any, made by the person on whom notice is served, determine the amount of duty of excise due from such person (not being in excess of the amount specified in the notice) and thereupon such person shall pay the amount so determined.
Where any notice has been served on a person, the Central Excise Officer:
(a) in case any duty of excise has not been levied or paid or has been short-levied or short-paid or erroneously refunded, by reason of fraud etc., with intent to evade payment of duty, where it is possible to do so, shall determine the amount of such duty, within a period of one year; and
(b) in any other case, where it is possible to do so, shall determine the amount of duty of excise which has not been levied or paid or has been short-levied or short-paid or erroneously refunded, within a period of six months, from the date of service of the notice on the person.
When notice need not be issued - Voluntary payment before service of notice
• Where any duty of excise has not been levied or paid or has been short-levied or short-paid or erroneously refunded, the person, chargeable with the duty, may pay the amount of duty, on the basis of his own ascertainment of such duty or on the basis of duty ascertained by a Central Excise Officer before service of notice on him in respect of the duty, and inform the Central Excise Officer of such payment in writing, who, on receipt of such information shall not serve any notice in respect of the duty so paid.
• The Central Excise Officer may determine the amount of short payment of duty, if any, which in his opinion has not been paid by such person and, then, the Central Excise Officer shall proceed to recover such amount in the manner specified and the period of "one year" shall be counted from the date of receipt of such information of payment.
• However, the benefit of voluntary payment shall not apply in a case where the duty was not levied or was not paid or was short-levied or was short-paid or was erroneously refunded by reason of fraud, collusion or any willful mis-statement or suppression of facts, or contravention of any of the provisions of this Act or of the rules made there under with intent to evade payment of duty.
• All voluntary payments under this provision would attract interest u/s 11AB.
Note:
(i) "Refund" includes rebate of duty of excise on excisable goods exported out of India or on excisable materials used in the manufacture of goods which are exported out of India;
(ii) "Relevant date" under Central Excise: (Nov 97, Nov 00)
Situation Relevant Date
A) In the case of excisable goods on which duty of excise has not been levied or paid or has been short-levied or short-paid:
1. Where a periodical return is to be filed by a manufacturer/ producer/ licensee of a warehouse Date on which such return is so filed
2. Where periodical return is not filed Last date on which such return is to be filed
3. In any other case Date on which the duty is to be paid under this Act
B) Where duty of excise is provisionally assessed Date of adjustment of duty after the final assessment
C) Where duty of excise has been erroneously refunded Date of such refund
(iii) "Relevant date" under Customs: (Nov 96, Nov 98)
Situation Relevant Date
1. Where duty is not levied, or interest is not charged Date on which the proper officer makes an order for the clearance of the goods
2. Where duty is provisionally assessed under Section 18 Date of adjustment of duty after the final assessment
3. Date of adjustment of duty after the final assessment Date of refund
4. In any other case Date of payment of duty or interest
(iv) "Relevant date" under Service Tax:
Situation Relevant Date
A) In case of taxable service in respect of which service tax has escaped assessment or has been under-assessed or has not been paid or has been short-paid:
1. Where a periodical return is to be filed by an assessee Date on which such return is so filed
2. Where periodical return is not filed Last date on which such return is to be filed
3. In any other case Date on which the duty is to be paid under this Act
B) Where service tax is provisionally assessed Date of adjustment of duty after the final assessment
C) Where any sum, relating to service tax, has been erroneously refunded Date of such refund
Explain the provisions of taxable service escaping assessment. (Nov 02)
Refer Section 73 of Finance Act, 1994 mentioned above (Similar to Section 11A of Central Excise Act, 1944)
Question: Issuance of show cause notice within the specified time limit is mandatory requirement to sustain any demand of Central Excise duty. Write a brief note on this statement and explain whether there are any circumstances under Central Excise Act when the issuance of show cause notice is not required? (May 04)
Answer:
A) Issuance of Show Cause Notice- Circumstances: -Refer Section 11A above.
B) Essentials of a valid Demand cum Show Cause Notice -
1. Issue of SCN is mandatory. Any demand without issue of SCN is considered to be violative of the statutory provisions. (Metal Forgings Vs UOI)
2. It must be specific and not vague.
3. It should be in writing containing the grounds for action.
4. It should be issued within the time limit specified by the statute. If the Department fails to issue such notice within the time limit specified by the statute, then the demand becomes time barred.
5. Amount of duty sought to be demanded must be indicated clearly in the notice.
6. The final demand order of the proper officer must not exceed the figure specified in the SCN.
7. SCN may be issued even in cases where the mistake has not been pointed out by earlier by the Department.
8. It should be issued by proper officer (as mentioned below):
Amount of Show Cause Notice
Proper officer who can issue SCN
Less than or equal to Rs.1 Crore SCN to issue over the signature of Commissioner or with his prior approval
More than Rs.1 Crore SCN to issue over with the prior approval of Chief Commissioner.
In Mahindra & Mahindra Vs CCE, it was held that if show cause notice does not indicate basis for demand nor any discussion in adjudication order, the demand is not sustainable.
C) No show cause notice to be served in certain cases: [Section 11A(2B)]
• Where any duty of excise has not been levied or paid or has been short-levied or short-paid or erroneously refunded, the person, chargeable with the duty, may pay the amount of duty, on the basis of his own ascertainment of such duty or on the basis of duty ascertained by a Central Excise Officer before service of notice on him in respect of the duty, and inform the Central Excise Officer of such payment in writing, who, on receipt of such information shall not serve any notice in respect of the duty so paid.
• The Central Excise Officer may determine the amount of short payment of duty, if any, which in his opinion has not been paid by such person and, then, the Central Excise Officer shall proceed to recover such amount in the manner specified and the period of "one year" shall be counted from the date of receipt of such information of payment.
• However, the benefit of voluntary payment shall not apply in a case where the duty was not levied or was not paid or was short-levied or was short-paid or was erroneously refunded by reason of fraud, collusion or any willful mis-statement or suppression of facts, or contravention of any of the provisions of this Act or of the rules made there under with intent to evade payment of duty.
Question: Can demand be raised retrospectively by the Department contrary to approved classification list be raised?
Answer: In the case of Cotspun Ltd., the Supreme Court held that demand contrary to approved classification list or price list shall be prospective from the date of issue of show cause notice. If classification has been approved by the Department, re-classification would be valid only from the date of show cause notice and not earlier.
However, the Finance Act 2000 has retrospectively amended the provisions of Section 11A of the Central Excise Act, 1944 in order to nullify the decision of the Supreme Court in the above case. The SC has held that amendment made retrospectively is a valid piece of law.
Thus, demands contrary to approved classification lists can be raised retrospectively within the time limit as specified u/s 11A of the Central Excise Act, 1944.
Question: ‘Intention to evade payment of duty is not mere failure to pay. It must be something more. The assessee must be aware that duty was leviable and he must have deliberately avoided payment.’ Elucidate. (May 99, Nov 03)
Answer: Mere failure or negligence on the part of assessee in not paying duty does not attract extended period of limitation as prescribed in Section 11A (i.e., 5 years). To attract the provisions of extended period of limitation, the Department must prove that the assessee knew that the goods were liable to duty and the duty was not paid on account of fraud, collusion, willful mis-representation or suppression of facts by the assessee with the intention to evade payment of duty.
In Padmini Products Vs CCE, it has been held by the Supreme Court that if a party bonafide believes in a legal position that no duty is payable and there is scope for such belief and doubt, then penal provision of Section 11A will not apply.
Common Questions about the provisions relating to Demand
Should the department intimate the assessee? It is mandatory for the Department to issue a Show cause notice.
Is it obligatory on the part of the Department to take on record the assessee’s representation? Sub-section (2) makes it mandatory for the officer to consider the representation of the assessee. The officer has to comply with the principals of natural justice.
Can the assessee pay the duty before issue of show cause notice? No show cause notice shall be issued if full duty is paid and intimated to the Department. However it will not apply to cases of fraud etc. If there is still some short payment, the officer can recover within one year of such intimation.
Relevant Cases
a. Mere inaction or failure to do something does not constitute suppression. There must be something positive to prove suppression. CCE V. Chemphar Drugs and Liniments 1989 (40) ELT 276 (SC)/ Padmini Products V. CCE 1989(43) ELT 195(SC).
b. Demand against approved classification the only prospective. CCE V. Cotspun Ltd. 1999 (113) ELT 353 (SC)
c. Extended period cannot be invoked where classification list is approved. Prabhu Steel Industries V. CCE 1997 (95) ELT 164 (SC)
d. Intention to evade payment of duty necessary in addition to proving fraud. Tamil Nadu Housing Board V. CCE 1994 [74] ELT 9 (SC)
e. Proviso to section 11A does not require that notice should be issued within 6 months of the knowledge of the Department. Notice can be issued within 5 years of the relevant date. Nizam Sugar Factory V. CCE 1999 (114) ELT 429(T).
f. Mere change in classification is not sufficient to invoke extended period. Prabhu Steel Industries V. CCE 1997 (95) ELT 164 (SC)
Other effects of NP/SP/NL/SL
Section 11AB - Interest on delayed payment of duty: -
a) Where any duty of excise has not been levied or paid or has been short-levied or short-paid or erroneously refunded, the person who is liable to pay the duty, or has paid the duty, shall, in addition to the duty, be liable to pay interest at such rate not below 10% and not exceeding 36% per annum, as is for the time being fixed by the Central Government, by notification in the Official Gazette.
b) Interest is payable from the first date of the month succeeding the month in which the duty ought to have been paid under this Act, or from the date of such erroneous refund, as the case may be till the date of payment of such duty.
c) In such cases where the duty becomes payable consequent to issue of an order, instruction or direction by the Board under section 37B, and such amount of duty payable is voluntarily paid in full, without reserving any right to appeal against such payment at any subsequent stage, within 45 days from the date of issue of such order, instruction or direction, as the case may be, no interest shall be payable and in other cases the interest shall be payable on the whole of the amount, including the amount already paid.
d) Where the duty determined to be payable is reduced by the Commissioner (Appeals), the Appellate Tribunal or, as the case may be, the court, the interest shall be payable on such reduced amount of duty.
e) Where the duty determined to be payable is increased or further increased by the Commissioner (Appeals), the Appellate Tribunal or, as the case may be, the court, the interest shall be payable on such increased or further increased amount of duty.
Note: The rate notified by the Government at present is 13% p.a.
Section 11AC - Penalty for short-levy or non-levy of duty in certain cases: - (Nov 00, May 02, Nov 02, May 04)
a) Where any duty of excise has not been levied or paid or has been short-levied or short-paid or erroneously refunded by reasons of fraud, collusion or any willful mis-statement or suppression of facts, or contravention of any of the provisions of this Act or of the rules made thereunder with intent to evade payment of duty, the person who is liable to pay duty as determined under Section 11A(2), shall also be liable to pay a penalty equal to the duty so determined.
b) Where such duty, and the interest payable thereon under section 11AB, is paid within 30 days from the date of communication of the order of the Central Excise Officer determining such duty, the amount of penalty liable to be paid by such person under this section shall 25% of the duty so determined.
c) The benefit of reduced penalty under the first proviso shall be available if the amount of penalty so determined has also been paid within the period of 30 days referred to in that proviso.
d) Where the duty determined to be payable is reduced or increased by the Commissioner (Appeals), the Appellate Tribunal or, as the case may be, the court, then, for the purposes of this section, the duty, as reduced or increased, as the case may be, shall be taken into account.
e) Where the duty determined to be payable is increased by the Commissioner (Appeals), the Appellate Tribunal or the court, then the benefit of reduced penalty under the first proviso shall be available, if the amount of duty so increased, the interest payable thereon and 25% of the consequential increase of the penalty have also been paid within 30 days of the communication of the order by which such increase in the duty takes effect.
Penalty under Section 11AC was introduced with effect from 28/9/96. In ELGI Equipment Ltd. Vs. CCE, a question arose as to whether penalty u/s 11AC can be imposed for offences committed earlier to that date. The SC held that the provisions of Sec11AC are prospective in nature. Any irregularity committed prior to introduction of Sec11AC would not attract penalty u/s 11AC.
Comparison between Section 11AC (CE Act), 114A (Customs Act) and 78 of Finance Act, 1994.
Particulars In case of Central Excise In the case of Customs In the case of Service Tax
Situation when penalty payable Duty no levied or paid or short levied or short paid or erroneously refunded by reason of fraud/ collusion/ willful misstatement / suppression of facts/ contravention of any of the provisions or rules made thereunder with intent to evade payment of duty. Duty no levied or short levied or interest not charged or paid or part paid or duty or interest erroneously refunded by reason of collusion/ willful misstatement/ suppression of facts. Service Tax not levied pr paid or short levied or short paid or erroneously refunded by reason of fraud/ collusion/ willful misstatement/suppression of facts/ contravention of any of the provisions or rules made thereunder with intent to evade payment of duty.
Amount of Penalty Payable Penalty equal to the duty so determined Penalty equal to the duty or interest so determined Penalty-Minimum amount not less than the service tax evaded and maximum amount not more than twice the amount of service tax evaded by suppressing taxable service.
II) Adjudication and determination of duty
Power of adjudication: (May o2, Nov 03)
Section 2(a) of the Central Excise Act, 1962 defines the term ‘Adjudicating Authority’ as “any authority competent to pass any order or decision under this Act, but does not include the Central Board of Excise and Customs constituted under the Central Board of Revenue Act, 1963 (54 of 1963), Commissioner of Central Excise (Appeals) or Appellate Tribunal.â€
• Under section 11A, the adjudicating authority has the power to determine the amount of duty short paid or not paid or erroneously refunded.
• Power to order penalty and/or confiscation is exercised by virtue of power vested under section 33.
The monetary limits of officers for passing orders under section 11A and section 33 are same and these are –
Officer Monetary ceiling
Assistant/Deputy Commissioner Upto Rs. 5.00 lacs
Joint Commissioner Above Rs. 5.00 lacs upto Rs. 20.00 lacs
Additional Commissioner Above Rs. 20.00 lacs upto Rs. 50.00 lacs
Commissioner Without limit
Accordingly all the cases relating to classification, valuation, CENVAT Credit, fraud, collusion etc. have to be decided by the proper officer. However, where appellate authority refers the case back for ‘de novo’ adjudication, then those cases shall be adjudicated by the officer which passed the said remand order.
III) Offences & Penalties
Section 9 of Central Excise Act, 1944 - Offences & Penalties: - (Nov 00, May 02)
Offence means any act or omission made punishable by any law for the time being in force. Section 9 provides that the following types of acts will constitute an offence:
1. Contravention of provisions imposing restrictions on storage limits in respect of notified commodities (tobacco) 2. Contravention of rules applicable to registration of persons and transit of excisable goods
3. Evading payment of any duty under the Central Excise Act, 1944
4. Removal of any excisable goods in contravention of the Act or rules made thereunder
5. Acquiring possession or concerning in the transporting, depositing, keeping, concealing, selling of excisable goods with the knowledge or with reason to believe that the goods are liable for confiscation 6. Contravention of Act or rules made thereunder in connection with duty credit and utilisation
7. Failure to supply information required by rules made under the Act or supplying false information 8. Attempting to commit or abetting the commission of an offence pertaining to storage, registration, transit, evasion referred to above.
Punishment:
The punishment for the above offences is as under:
Situation Punishment
In case of an offence relating to any excisable goods, where the duty leviable thereon exceeds Rs.1,00,000 Imprisonment for a term which may extend to 7 years and fine
In any other case Imprisonment for a term which may extend to 3 years or fine or both
Note:
1. Where a person is convicted u/s 9 and is again convicted u/s 9, then he shall be punishable for every second and subsequent offence with imprisonment for a term which may extend to 7yrs and fine.
2. The period of imprisonment cannot be for a term less than 6 months unless special and adequate reasons are recorded in the judgement.
3. The following are not special and adequate reasons:
• Age of the abused. • First time conviction
• Penalty has been ordered or goods have been confiscated under Central Excise Law for the same offence. • Accused is not the principal offender and was merely acting as a carrier of goods or was a secondary party in the commission of the offence.
Section 9A - Certain offences to be non-cognizable: -
Notwithstanding anything contained in the Code of Criminal Procedure, 1898, offences under Section 9 shall be deemed to be non-cognizable within the meaning of that Code.
Penalty Fine
1. Applicable Provisions:
Central Excise Act, 1944: Sec 9, Sec 11AC
Central Excise Rules, 2002: Rule 25,26 & 27
Customs Act, 1962: Sec 112,114,114A, 116 & 117. Applicable Provisions:
Central Excise Act, 1944: Sec 34
Customs Act, 1962: Sec 125
2. Penalty is imposed on assessee/ importer/ exporter for contravention of the provision of the Act. Fine is imposed on confiscated goods in lieu of confiscation. Goods shall be released only on payment of fine.
3. Penalty can be imposed by departmental authorities for offences under the Act. These are quasi judicial authorities. Fine is imposed by Magistrate, who is a judicial authority.
4. The limits of penalty are specified. In case of Central Excise, no limits are specified for fines. However, in case of Customs, the maximum amount which can be imposed as fine is equal to the market value minus the customs duty paid.
Section 9AA – Offences by Companies: - (Nov 98, Nov 02, Nov 04)
(1) Where an offence under this Act has been committed by a company, then:
a) every person who, at the time the offence was committed was in charge of, and was responsible to, the company for the conduct of the business of the company, and
b) the company;
shall be deemed to be guilty of the offence and shall be liable to be proceeded against and punished accordingly:
However, nothing contained in this sub-section shall render any such person liable to any punishment if he proves that the offence was committed without his knowledge or that he had exercised all due diligence to prevent the commission of such offence.
(2) Where an offence under this Act has been committed by a company and it is proved that the offence has been committed with the consent or connivance of, or is attributable to any neglect on the part of, any-
• Director • Secretary
• Manager • Other officer of the company
then such director, manager, secretary or other officer shall also be deemed to be guilty of that offence and shall be liable to be proceeded against and punished accordingly.
Explanation: -
(a) "company" means any body corporate and includes a firm or other association of individuals; and
(b) "director" in relation to a firm means a partner in the firm.
Note: This provision is applicable only to prosecution before court of law and not to adjudication proceedings. This provision cannot be invoked in penalty proceedings before departmental authorities.
A partner of a firm may be vicariously made liable for culpable acts and omissions of the firm. Discuss. (May 97, Nov 00)
Explanation to Section 9AA provides that the expression director in relation to a firm means a partner in the firm. Therefore, provisions of Section 9AA shall equally apply to a partner in a firm.
It has been held in Harwood Garments Vs CCE that in the absence of the officers responsible for the affairs of the company, the company alone cannot be tried for an offence under Section 9(1)(i) of the Central Excise Act where the punishment prescribed is both imprisonment and fine.
IV) Civil & Criminal Proceedings
Principle of “Double Jeopardy†or “Autrefois Convictâ€
Prosecution means an initiation of proceeding of a criminal nature before the court of law or judicial Tribunal in accordance with the statute.
According to Article 20(2) of the Constitution of India “No person shall be prosecuted and punished for the same offence more than once.†The conditions for applicability of this Article enumerated by the Supreme Court in State of Bombay V. Apte AIR 1961 (SC) 578 are as under –
a. There must have been a previous proceeding before a Court of law or judicial Tribunal
b. The person must have been prosecuted in such proceeding.
c. The person must have been punished.
d. The offence in both the proceedings must be same.
e. The subsequent proceeding must be a fresh proceeding and not mere continuation of the previous
Section 9B - Power of Court to publish the name, place of business of convicted person: -
(1) Where any person is convicted under this Act for contravention of any of the provisions thereof, the court convicting the person shall be competent to cause:
a) the name and place of business or residence of such person,
b) nature of the contravention,
c) the fact that the person has been so convicted and
d) such other particulars as the Court may consider to be appropriate in the circumstances of the case;
to be published at the expense of such person, in such newspapers or in such manner as the Court may direct.
(2) No such publication shall be made until the period for preferring an appeal against the orders of the Court has expired without any appeal having been preferred, or where an appeal have been preferred the same has been disposed off.
(3) The expenses of any publication shall be recoverable from the convicted person as if it were a fine imposed by the Court.
Section 9C – Presumption of Culpable mental state: -
1. ‘Culpable mental state’ includes intention, motive, knowledge of a fact, and belief in, or reason to believe, a fact.
2. In any prosecution for an offence under this Act which requires a culpable mental state on the part of the accused, the Court shall presume the existence of such mental state but it shall be a defense for the accused to prove the fact that he had no such mental state with respect to the act charged as an offence in that prosecution.
3. Thus, if a person is prosecuted in the court of law for any offence, the statutory presumption would arise that he knowingly mis-declared the value or fraudulently evaded or attempted to evade duty chargeable under the Act. It is on the accused to prove that he did not have such a state in respect to the act charged which is an offence.
Can penalty be imposed in the absence of mens rea under CEA?
Mens Rea means guilty mind. Normally, penalty is levied if violation is intentional. However, in case of almost all the penalty provisions as given in CEA, 1944 or Customs Act, 1962, penalty is leviable irrespective of the intention of the assessee.
Thus, ‘Mens Rea’ is not an essential condition to be satisfied before imposing penalty. Penalty shall be levied for contravention of the act/rules even if the contravention was without the intention to evade payment of duty. Penalty is a civil obligation and coercive measure to check loss of revenue and unless the statute specifically prescribes the need to establish ‘Mens Rea’ or guilty mind, it would be sufficient enough to prove that a default in complying with the statute has occurred for the purpose of imposing penalty.
Section 9D – Relevancy of Statements under certain circumstances: -
(1) A statement made and signed by a person before any Central Excise Officer of a gazetted rank during the course of any inquiry or proceeding under this Act shall be relevant, for the purpose of proving, in any prosecution for an offence under this Act, the truth of the facts which it contains in the following circumstances:
(a) when the person who made the statement is dead or cannot be found, or is incapable of giving evidence, or is kept out of the way by the adverse party, or whose presence cannot be obtained without an amount of delay or expense which, under the circumstances of the case, the Court considers unreasonable; or
(b) when the person who made the statement is examined as a witness in the case before the Court and the Court is of opinion that, having regard to the circumstances of the case, the statement should be admitted in evidence in the interests of justice.
(2) The above provisions shall, so far as may be, apply in relation to any proceeding under this Act, other than a proceeding before a Court, as they apply in relation to a proceeding before a Court.
Section 132 of Customs Act - False declaration, false documents, etc.
According to section 132 of the Customs Act, 1962 if any person makes, signs or uses, or causes to be made, signed or used, any declaration, statement or document in the transaction of any business relating to the customs, knowing or having reasons to believe that such declaration, statement or document is false in any material particular, shall be punishable with imprisonment for a term which may extend to six months, or with fine or with both.
Section 133 of Customs Act - Obstruction of officer of customs
According to section 133 if any person intentionally obstructs any officer of customs in the exercise of any powers conferred under this Act, such person shall be punishable with imprisonment for a term which may extend to six months or with fine, or with both.
Section 134 of Customs Act -Refusal to be X-rayed
According to section 134 a person shall be punishable with imprisonment for a term which may extend to six months, or with fine, or with both if –
(a) resists or refuses to allow a radiologist to screen or to take X-ray picture of his body in accordance with an order made by a Magistrate under section 103, or
(b) resists of refuses to allow suitable action being taken on the advice and under the supervision of a registered medical practitioner for bringing out goods liable to confiscation secreted inside his body, as provided in section 103,
Section 135 of Customs Act - Evasion of duty or prohibitions
If any person is in relation to any goods in any way knowingly concerned in any fraudulent evasion or attempt at evasion of any duty chargeable thereon or of any prohibition for the time being imposed under this Act or any other law for the time being in force with respect to such goods, or acquires possession of or is in any way concerned in carrying, removing, depositing, harbouring, keeping, concealing, selling or purchasing or in any other manner dealing with any goods which he knows or has reasons to believe are liable to confiscation under section 111, he shall be punishable,
(i) in the case of an offence relating to any of the goods to which section 123 applies and the market price whereof exceeds one lakh of rupees, with imprisonment for a term which may extend to seven years and with fine. It is also to be noted that in the absence of special and adequate reasons to the contrary to be recorded in the judgment of the court, such imprisonment shall not be for less than three years.
(ii) in any other case, with imprisonment for a term which may extend to three years, or with fine, or with both.
It is to be noted that this penalty and fine is in addition to any other action that may be taken under the Act.
If any person convicted of an offence under this section or under sub-section (1)of section 136 (referred below) is again convicted of an offence under this section, then, he shall be punishable for the second and for every subsequent offence with imprisonment for a term which may extend to seven years and with fine and in the absence of special and adequate reasons to the contrary to be recorded in the judgment of the court such imprisonment shall not be for less than one year.
For the aforesaid purposes, the following shall not be considered as special and adequate reasons for awarding a sentence of imprisonment for a term of less than one year, namely:-
i) the fact that the accused has been convicted for the first time for an offence under this Act;
ii) the fact that in any proceeding under this Act, other than a prosecution, the accused has been ordered to pay a penalty or the goods which are the subject matter of such proceedings have been ordered to be confiscated or any other action has been taken against him for the same act which constitutes the offence;
iii) the fact that the accused was not the principal offender and was acting merely as a carrier of goods or otherwise was a secondary party to the commission of the offence;
iv) the age of the accused.
Section 135A of Customs Act – Preparation
If a person makes preparation to export any goods in contravention of the provisions of this Act, and from the circumstances of the case it may be reasonably inferred that if not prevented by circumstances independent of his will, he is determined to carry out his intention to commit the offence, he shall be punishable with imprisonment for a term which may extend to three years, or with fine, or with both.
Section 136 of Customs Act - Offences by officers of Customs
• If any officer of customs enters into or acquiesces in any agreement to do, abstains from doing, permits, conceals or connives at any act or thing whereby any duty of customs leviable on any goods, or any prohibition for the time being in force under this Act or any other law for the time being in force with respect to any goods is or may be evaded, he shall be punishable with imprisonment for a term which may extend to three years or with fine, or with both.
• If any officer of customs,
(a) requires any person to be searched for goods liable to confiscation or any document relating thereto, with out having reason to believe that he has such goods or document secreted about his person; or
(b) arrests any person without having reason to believe that he has been guilty of an offence punishable under section 135; or
(c) searches or authorises any other officer of customs to search any place without having reason to believe that any goods, documents or things of the nature referred to in section 105 are secreted in that place,
he shall punishable with imprisonment for a term which may extend to six months, or with fine which may extend to one thousand rupees, or with both.
• If any officer of customs, except in the discharge in good faith of his duty as such officer or in compliance with any requisition made under any law for the time being in force, discloses any particulars learnt by him in his official capacity in respect of any goods, he shall be punishable with imprisonment for a term which may extend to six months, or with fine which may extend to one thousand rupees, or with both
Section 137 of Customs Act - Cognizance of offences
According to section 137 “(1) No court shall take cognizance of any offence under section l32, section l33, section 134 or section 135, except with the previous sanction of the Commissioner of Customs.
(2) No court shall take cognizance of any offence under section 136,
(a) where the offence is alleged to have been committed by an officer of customs not lower in rank than Assistant Commissioner of Customs or Deputy Commissioner of Customs, except with the previous sanction of the Central Government;
(b) where the offence is alleged to have been committed by an officer of customs lower in rank than Assistant Commissioner of Customs or Deputy Commissioner of Customs, except with the previous sanction of the Commissioner of Customs.
Section 138 of Customs Act - Offences to be tried summarily
According to section 138 of the Customs Act, 1962 “Notwithstanding anything contained in the Code of Criminal Procedure, 1898 (5 of 1898), an offence under this Chapter other than an offence punishable 115[under clause (i) of sub-section (1) of section 135 or under sub-section (2) of that section] may be tried summarily by a magistrate.â€
Refunds & Recovery of dues
Recovery of Dues
Section 11 of the CE Act - Recovery of sums due to Government: - (Nov 2002)
a) In respect of duty and any other sums of any kind payable to the Central Government under any of the provisions of the Central Excise Act or of the rules made thereunder including the amount required to be paid to the credit of Central Government under Section 11D, the officer empowered by the Central Board of Excise and Customs (constituted under the Central Boards of Revenue Act, 1963 to levy such duty or require the payment of such sums) may:
• deduct the amount so payable from any money owing to the person from whom such sums may be recoverable or due which may be in his hands or under his disposal or control, or
• recover the amount by attachment and sale of excisable goods belonging to such person;
b) If the amount payable is not so recovered, he may prepare a certificate signed by him specifying the amount due from the person liable to pay the same and send it to the Collector of the district in which such person resides or conducts his business.
c) The said Collector, on receipt of such certificate, shall proceed to recover from the said person the amount specified therein as if it were an arrear of land revenue. This is called Certification Proceedings.
Note: The person authorized to issue the certificate to the Collector must follow principles of natural justice and accordingly quantify the amount to be recovered.
Question: Once the demand of duty, penalty or any other dues are confirmed finally by the Central Excise authorities, the assessee liable to pay the dues has to pay the amount within the time prescribed. If the assessee fails to pay the above dues, what are the powers given to the Central Excise officers under the CEA and the Customs Act to recover the dues? (Nov 02 Old Syllabus)
Refer Section 11 of CE Act above.
Doctrine of Unjust Enrichment: - (May 96, Nov 97, Nov 99, Nov 00, Nov 02, May 03)
a) It is a well known principle of jurisprudence that no one shall be allowed to enrich himself at the cost of another. One cannot deprive another of something which he is legally entitled to posses, or compel another to pay that which he is not liable to pay. The person so enriched is under a lawful obligation to restore/repay the monies wrongly collected by him or paid to him.
b) Where the manufacturer has charged excise duty to the ultimate consumer, it is clear that he has passed on the burden to the consumer and has already recovered the duty from the consumers.
c) In such cases, refund of excess duty paid will amount to undeserving profit to the manufacturer. It will not be equitable to refund the duty to the manufacturer, as he will get double benefit - first from the consumers (on whom the burden of duty has been passed by the manufacturer) and again from the Department. This is called ‘Unjust Enrichment’. Thus, as per the ‘Doctrine of Unjust Enrichment’, no person should unjustly benefit at the expense of another.
d) Therefore, refund, if any, should be paid to consumer who has borne the burden of duty. However, in the majority of the cases, it is not practical to identify the individual consumer and pay refund to him. At the same time, duty is illegally collected and hence the Government cannot retain it. Thus the refund due to the buyers must be transferred to a consumer welfare fund instead of paying it to the manufacturer as held in Mafatlal Industries Ltd Vs UOI.
e) Accordingly, the Consumer Welfare Fund has been established under Section 12C of the Central Excise Act, 1944. Section 11B provides that refund shall be credited to this fund unless the manufacturer proves that the burden of duty has been borne by him and it has not been passed onto the buyers. The fund may be used for activities of protection and benefit of consumers.
Applicability of Doctrine of Unjust Enrichment
Captive Consumption of Raw Materials (Nov 02) In UOI Vs Solar Pesticides Ltd, it has been held that the burden of duty can be passed on either directly or indirectly. The expression ‘incidence of such duty’ in relation to its being passed onto another person would take within its ambit not only the passing of the duty directly to other person but also cases where it is passed on indirectly.
Thus, the Doctrine of Unjust Enrichment applies to cases of Captive Consumption.
Duty paid on provisional basis (Nov 02) Rule 7 of CE Rules 2002 provides that in case where the duty has been paid on provisional basis and a situation of refund arises, then such a refund will be granted to the manufacturer only if he has not passed the incidence of duty to any other person. Hence, the concept of unjust enrichment is applicable in cases where the goods are cleared under Provisional Assessment.
Bank Guarantees encashed by Department but case finally decided in favour of the assessee (Nov 02) In case the bank guarantee has been encashed by the bank, it cannot be said that the assessee has paid the duty to the Government. Hence, when the refund situation arises, it will not be hit by the doctrine of ‘unjust enrichment’. The Doctrine does not apply in this case.
The doctrine applies only in those cases where the assessee has ‘paid’ the duty and not in cases where the assessee provides a bank guarantee to the Department for differential duty and prefers an appeal.
Duty paid as pre-deposit for filing an appeal (Nov 02) The amount, which has been deposited as a condition of pre-deposit, cannot be considered as duty till the appeal is pending. Thus, if the amount is refunded, it cannot be considered as refund of duty. The Doctrine of Unjust Enrichment will not apply in this case.
Question: Does the doctrine of ‘Unjust Enrichment’ apply to payments under the Service Tax Law? (May 03)
Answer: Refund of service tax will be goverened by the Doctrine of Unjust Enrichment since the provisions of Central Excise Act, 1944 has been made applicable for service tax also as per Section 88 of the Finance Act, 1994.
Refunds
Section 26 of Customs Act: Refund of Export Duty: - (Nov 02, Nov 03)
Any export duty paid on goods exported will be refunded if:
• The goods are re-imported within one year.
• The goods have been returned otherwise than by way of resale, and
Refund claim shall be made within 6 months from the date when the goods are cleared for re-importation by the proper officer.
Section 11B of the CE Act - Claim for refund of duty: - (Nov 97, Nov 00, Nov 04)
(1) Any person claiming refund of any duty of excise may make an application for refund of such duty to the Assistant Commissioner (AC) or Deputy Commissioner (DC) of Central Excise before the expiry of one year from the relevant date in such form and manner as may be prescribed. The application shall be accompanied by such documentary or other evidence as the applicant may furnish to establish that the amount of duty of excise in relation to which such refund is claimed was collected from, or paid by him and the incidence of such duty had not been passed on by him to any other person. The limitation of one year shall not apply where any duty has been paid under protest.
(2) If, on receipt of any such application, the AC or DC is satisfied that the whole or any part of the duty of excise paid by the applicant is refundable, he may make an order accordingly and the amount so determined shall be credited to the Fund.
However, the amount of duty of excise as determined by the AC/DC shall, instead of being credited to the Fund, be paid to the applicant, if such amount is relatable to: -
a) rebate of duty of excise on excisable goods exported out of India or on excisable materials used in the manufacture of goods which are exported out of India;
b) unspent advance deposits lying in balance in the applicant's account current maintained with the Commissioner of Central Excise;
c) refund of credit of duty paid on excisable goods used as inputs in accordance with the rules made, or any notification issued, under the Central Excise Act;
d) the duty of excise paid by the manufacturer, if he had not passed on the incidence of such duty to any other person;
e) the duty of excise borne by the buyer, if he had not passed on the incidence of such duty to any other person;
f) the duty of excise borne by any other such class of applicants as the Central Government may, by notification in the Official Gazette, specify. (No such notification under this clause shall be issued unless in the opinion of the Central Government the incidence of duty has not been passed on by the persons concerned to any other person)
Note: These are the circumstances under which refund of duty would be granted to the assessee instead of being credited to the Consumer Welfare Fund. (May 96, Nov 97, Nov 99, Nov 00, Nov 02, May 03)
(3) Notwithstanding anything to the contrary contained in any judgment, decree, order or direction of the Appellate Tribunal or any Court or in any other provision of this Act or the rules made thereunder or any other law for the time being in force, no refund shall be made except as provided in sub-section (2).
(4) Every notification under Section 11B(2)(f) shall be laid before each House of Parliament and if Parliament makes any modification in the notification or directs that the notification should cease to have effect, the notification shall thereafter have effect only in such modified form or be of no effect, as the case may be, but without prejudice to the validity of anything previously done thereunder.
(5) Any notification issued under Section 11B(2)(f) may be rescinded by the Central Government at any time by notification in the Official Gazette.
Explanation: —For the purposes of this section: -
(A) "refund" includes rebate of duty of excise on excisable goods exported out of India or on excisable materials used in the manufacture of goods which are exported out of India;
(B) "relevant date" means: - (Nov 97)
Situation Relevant Date
1. Goods exported out of India where a refund of excise duty paid is available in respect of the goods themselves or the excisable materials used in the manufacture of such goods:
a) if the goods are exported by sea or air date on which the ship or the aircraft in which such goods are loaded, leaves India
b) if the goods are exported by land date on which such goods pass the frontier
c) if the goods are exported by post date of dispatch of goods by the Post Office concerned to a place outside India
2. Goods returned for being remade, refined, reconditioned, or subjected to any other similar process, in any factory date of entry into the factory for the said purposes
3. Goods to which banderols are required to be affixed if removed for home consumption but not so required when exported outside India, if returned to a factory after having been removed from such factory for export out of India date of entry into the factory
4. Where a manufacturer, who is required to pay a sum for a certain period on the basis of the rate fixed by the Central Government in full discharge of his liability, has made the payment on the basis of such rate for any period but before the expiry of that period such rate is reduced date of such reduction
5. In the case of a person, other than the manufacturer date of purchase of the goods by such person
6. Goods which are exempt from payment of duty by a special order issued under Section 5A(2) date of issue of such order
7. Where duty of excise is paid provisionally date of adjustment of duty after the final assessment thereof
8. In any other case date of payment of duty
Documents required to be produced along with refund claim (in case of Excise): - (Nov 98)
The following are the documents to be produced along with the refund claim:
Case A: Rebate of duty of excise on excisable goods exported out of India or on excisable materials used in the manufacture of goods which are exported out of India:
• Application in the prescribed form
• Original copy of ARE-1
• Duty attested copy of bill of lading/airway bill
• Duty attested copy of shipping bill (export promotion copy)
• Disclaimer certificate (in case where the claimant is other than the exporter)
• Copy of invoice evidencing payment of duty.
Case B: Unspent advance deposits lying in balance in the applicant's account current maintained with the Commissioner of Central Excise:
• Latest abstract received from Central Excise Officer.
• PLA Register
Case C: Refund of credit of duty paid on excisable goods used as inputs in accordance with the rules made, or any notification issued, under the Central Excise Act:
• Relevant extract of CENVAT Register
• Duty attested copy of bill of lading
• Duty attested copy of shipping bill
• Original copy of ARE wherever removal for export takes place under cover of ARE-1
Case D: The duty of excise paid by the manufacturer, if he had not passed on the incidence of such duty to any other person:
• Duplicate invoice issued under Rule 11 of Central Excise Rules, 2002 indicating the amount of duty
• Triplicate copy of the relevant PLA/CENVAT register
• In case the duty is paid under protest, evidence to that effect in terms of the prescribed rules
• Documentary evidence to show that the incidence of duty has not been passed on by the assessee or applicant to any other person
• Copy of the order in original/ order in appeal/ court’s order in pursuance of which the refund claim has been lodged.
Section 27 of Customs Act: Claim for refund of duty: - (Nov 01, Nov 02,May 04)
1) Any person claiming refund of duty together with any interest paid by him on such duty shall make an application for refund to the Assistant Commissioner or Deputy Commissioner of Customs.
2) Time limit for making refund application:
Situation Time limit within which application shall be made
Where the goods have been imported by an individual for his personal use or by the government or by any other educational, research or charitable institution or hospital Within 1 year from the date of payment of duty and interest, if any
In any other case Before the expiry of 6 months from the date of payment of duty and interest, if any
3) The time limit for making application for refund of duty shall not apply where the duty together with interest, if any, had been under protest.
4) The application shall be made in the prescribed format along with the documentary evidence towards payment of duty and interest if any and the grounds for refund of duty.
5) On receipt of such an application, if the AC/DC of Customs is satisfied that the whole or part of the duty paid by the applicant is refundable, then he shall make an order accordingly and the amount shall be credited to the Consumer Welfare Fund.
6) The amount of customs duty and interest, if any, paid on such duty can be paid to the applicant instead of being credited to the fund in the following circumstances:
a) If the importer or exporter paid the duty and interest and has not passed on the incidence of such duty and interest to any other person.
b) If the duty and interest is paid on imports made by an individual for his personal use.
c) If the duty and interest is borne by the buyer and the buyer has not passed on the incidence to any other person.
d) In case the refund is in respect of the export duty as specified in Section 26.
e) In case of drawback of duty payable under Sections 74 & 75.
f) In case the duty and interest is borne by such other class of applicants as the Central Government may by notification in the official gazette.
7. Relevant dates for submission of a refund application: -
Normally, the time limit of six months or one year is computed from the date of payment of duty, however, in following situations, such time limit commences from the following dates:
Situation Relevant Date
In case of goods which are exempt from payment of duty by an ad-hoc exemption order issued under Section 25(2) of the Act Date of issue of such order
Where any duty is paid provisionally under Section 18 of the Act Date of adjustment of duty after the final assessment thereof
In relation to a person, other than the importer Date of purchase of goods by such person
Documents required to be produced along with refund claim (in case of Customs): -
1. Letter of authorization from the importer if the applicant is an agent
2. Triplicate copy of the Bill of Entry/Post Parcel wrapper/Shipping Bill/Baggage receipt or the purchase invoice
3. Duty challan or other document as evidence of duty paid
4. Signed working sheet for the refund claimed
5. Custom attested invoices
6. Custom attested packing list
7. Document for establishing the applicants eligibility to receive refund amount in terms of the proviso to sub-section (2) of section 27 of the Act, including documents for the purposes of section 28C and 28D of the Act.
8. Contract and purchase order
9. Cenvat credit certificate from the Central Excise Authority
10. Short delivery certificate from the custodians
11. Short shipment certificate from the supplier
12. Survey report.
In CCE Vs Flock India Pvt. Ltd., it was held that a refund claim is not maintainable when the assessee did not challenge the assessment order which became final.
Question: State whether the principle of “unjust enrichment†applies to refund of export duty under the Customs Act, 1962. (Nov 04)
Answer: In Commissioner of Customs Vs Ken Agritech Pvt. Ltd., it has been held that the provisions relating to unjust enrichment introduced in Section 27 by way of amendment in the Customs Act could only apply to refund of import duty under the said section. Since refund of export duty is dealt with under Section 26 of the Act and the same has not been amended by the Parliament, the provisions relating to unjust enrichment introduced under Section 27 could not be made applicable to refund of export duty under the said Section 26.
Section 11BB of the CE Act - Interest on delayed refunds: - (Nov 03)
If any duty ordered to be refunded under Section 11B (2) to any applicant is not refunded within 3 months from the date of receipt of application, there shall be paid to that applicant interest at such rate, not below 5% and not exceeding 30% per annum as is for the time being fixed by the Central Government, by notification in the official gazette, on such duty from the date immediately after the expiry of three months from the date of receipt of such application till the date of refund of such duty:
Note: The notified rate at present is 6% p.a.
Section 11C of the CE Act - Power not to recover duty of excise not levied or short levied as a result of general practice: - (May 97, Nov 04)
(1) Notwithstanding anything contained in this Act, if the Central Government is satisfied: -
(a) that a practice was, or is, generally prevalent regarding levy of duty of excise (including non-levy thereof) on any excisable goods; and
(b) that such goods were, or are, liable: -
(i) to duty of excise, in cases where according to the said practice the duty was not, or is not being, levied, or
(ii) to a higher amount of duty of excise than what was, or is being, levied, according to the said practice,
then, the Central Government may, by notification in the Official Gazette, direct that the whole of the duty of excise payable on such goods, or as the case may be, the duty of excise in excess of that payable on such goods, but for the said practice, shall not be required to be paid in respect of the goods on which the duty of excise was not, or is not being, levied, or was, or is being, short-levied, in accordance with the said practice.
(2) Where such a notification has been issued and the manufacturer has paid the whole of the duty of excise or the duty in excess of that payable on such goods, which would not have been paid if the said notification had been in force, shall his claim for refund shall be governed by Section 11B(2).
The person claiming the refund of such duty or excess duty must make an application in this behalf to the AC/DC before the expiry of 6 months from the date of issue of the said notification.
Section 11D of the CE Act - Obligation of the person who has collected excise duty from the buyer to deposit the same with the Central Government: - (Nov 02, May 04)
(1) Notwithstanding anything to the contrary, every person who is liable to pay duty and has collected any amount in excess of duty assessed or determined and paid on any excisable goods under this Act or the rules made thereunder from the buyer of such goods in any manner as representing duty of excise, shall forthwith pay the amount so collected to the credit of the Central Government.
(2) Where any amount is required to be paid to the credit of the Central Government under sub-section (1) and which has not been so paid, the Central Excise Officer may issue a show cause as to why the said amount should not be paid by him to the credit of the Central Government.
(3) The Central Excise Officer shall, after considering the representation, if any, made by the person on whom the notice is served, determine the amount due from such person (not being in excess of the amount specified in the notice) and thereupon such person shall pay the amount so determined.
(4) The amount paid to the credit of the Central Government under Section 11D(1) or (3) shall be adjusted against the duty of excise payable by the person on finalisation of assessment or any other proceeding for determination of the duty of excise relating to the excisable goods.
(5) Where any surplus is left after such adjustment, the amount of such surplus shall either be credited to the Fund or refunded to the person who has borne the incidence of such amount, in accordance with the provisions of section 11B and such person may make an application under that Section in such cases within 6 months from the date of the public notice to be issued by the AC for refund of such surplus amount.
Section 11DD of the CE Act - Interest on the amounts collected in excess of duty: -
a) Where an amount has been collected in excess of the duty assessed or determined or paid on any excisable goods from the buyer of such goods, the person who is liable to pay such amount in terms of Section 11D(3), shall, in addition to the amount, be liable to pay interest at such rate not below 10%, and not exceeding 36% per annum, as is for the time being fixed by the Central Government by the notification in the Official Gazette, from the 1st day of the month succeeding the month in which the amount ought to have been paid under this Act till the date of payment of such amount.
b) Where the amount becomes payable consequent to issue of an order, instruction or direction by the Board under Section 37B, and such amount payable each voluntarily paid in full, without reserving any right to appeal against such payment at any subsequent stage, within 45 days from the date of issue of such order, instruction or direction, as the case may be, no interest shall be payable in other cases the interest shall be payable on the whole amount, including the amount already paid.
c) Where the amount determined under Section 11D(3), is reduced/incrreased by the Commissioner (Appeals), the Appellate Tribunal or the Court, the interest payable thereon shall be on such reduced/increased amount respectively.
Section 12 of the CE Act - Application of the provisions of Customs Act, 1962 to Central Excise Duties: -
Certain provisions of Customs Act are made applicable to Central Excise through notifications published in the Official Gazette by the Central Government: -
Examples of provisions in Customs Act extended to Central Excise:
Section Provision of Customs Act extended to Central Excise
105 Search pf premises
110 Seizure of goods, documents and things
115 Confiscation of Conveyance
118 Confiscation of packages and their contents
119 Confiscation of goods used for concealing smuggled goods
120 Confiscation of smuggled goods in spite of any change in form
121 Confiscation of sale proceeds of smuggled goods
124 SCN to be issued before confiscation
142 Recovery of sums due
150 Sale of goods and application of sale proceeds
Section 12A of the CE Act - Price of goods to indicate the amount of duty paid thereon: -
Notwithstanding anything contained in this Act or any other law for the time being in force, every person who is liable to pay duty of excise on any goods shall, at the time of clearance of the goods, prominently indicate in all the documents relating to assessment, sales invoice, and other like documents, the amount of such duty which will form part of the price at which such goods are to be sold.
Section 12B of the CE Act - Presumption that incidence of duty has been passed on to the buyer: -
Every person who has paid the duty of excise on any goods under this Act shall, unless the contrary is proved by him, be deemed to have passed on the full incidence of such duty to the buyer of such goods.
Section 12C of the CE Act – Consumer Welfare Fund: -
(1) There shall be established by the Central Government a fund, to be called the Consumer Welfare Fund.
(2) There shall be credited to the Fund, in such manner as may be prescribed:
(a) the amount of duty of excise referred to in Section 11B(2) or Section 11C(2) or Section 11D(2);
(b) the amount of duty of customs referred to in Section 27(2) or Section 28A(2), or Section 28B(2) of the Customs Act, 1962;
(c) any income from investment of the amount credited to the Fund and any other monies received by the Central Government for the purposes of this Fund.
Section 12D of the CE Act – Utilization of the Consumer Welfare Fund: -
(1) Any money credited to the Fund shall be utilised by the Central Government for the welfare of the consumers in accordance with such rules as that Government may make in this behalf.
(2) The Central Government shall maintain or, if it thinks fit, specify the authority which shall maintain, proper and separate account and other relevant records in relation to the Fund in such form as may be prescribed in consultation with the Comptroller and Auditor-General of India.
Advance Ruling
Section 23A to Section 23H of the Central Excise Act, 1944 contains the provisions regulating the advance ruling.
Section 23A of CE Act - Definitions: -
(a) “activity†means production or manufacture of goods;
(b) "advance ruling" means the determination, by the authority of a question of law or fact specified in the application regarding the liability to pay duty in relation to an activity proposed to be undertaken, by the applicant; (May 03)
(c) "applicant" means-
(i) a non-resident setting up a joint venture in India in collaboration with a non-resident or a resident; or
(ii) a resident setting up a joint venture in India in collaboration with a non-resident; or
(iii) a wholly owned subsidiary Indian company, of which the holding company is a foreign company, who proposes to undertake any business activity in India and makes application for advance ruling ; (May 03, Nov 04)
(d) "application" means an application made to be Authority under sub-section (1) of section 23C;
(e) "Authority" means the Authority for Advance Rulings constituted under section 28F of the Customs Act, 1962;
(f) “non-residentâ€, “Indian Company†and “foreign company†have the meanings respectively assigned to them in clause (30), (26) and (23A) of Section 2 of the Income-tax Act,1961.
Section 28F of Customs Act – Authority for Advance Rulings: -
(1) The Central Government shall, by notification in the Official Gazette, constitute an authority for giving advance rulings, to be called as "the authority for advance rulings".
(2) The authority shall consist of the following members appointed by the Central Government, namely: -
(a) a Chairperson, who is a retired Judge of the Supreme Court;
(b) an officer of the Indian Customs and Central Excise Service who is qualified to be a member of the Board;
(c) an officer of the Indian legal service who is qualified to be an Additional Secretary to the Government of India.
(3) The salaries and allowances payable to, and the terms and conditions of service of, the members shall be such as the Central Government may by rules determine.
(4) The Central Government shall provide the authority with such officers and staff as may be necessary for the efficient exercise of the powers of the authority under this Act.
(5) The office of the authority shall be located in Delhi.
Section 23B of CE Act - Vacancies, etc., not to invalidate proceedings: -
No proceeding before, or pronouncement of advance ruling by, the Authority shall be questioned or shall be invalid on the ground merely of the existence of any vacancy or defect in the constitution of the Authority.
Section 23C of CE Act - Application for advance ruling: - (Nov 00)
(1) An applicant desirous of obtaining an advance ruling may make an application in such form and in such manner as may be prescribed, stating the question on which the advance ruling is sought.
Matters in which Advance ruling can be obtained:
(2) The question on which the advance ruling is sought shall be in respect of:
Excise (Sec 23C) (May 03) Customs (Sec 28H) Service Tax (Sec 96C) (May 05)
Classification of goods under the Central Excise Tariff Act, 1985 Classification of goods under the Customs Tariff Act, 1975 Classification of any service as a taxable service under Chapter V
Applicability of notification issued u/s 5A(1) having a bearing on the rate of duty Applicability of notification issued u/s 25(1) having a bearing on the rate of duty The valuation of taxable service for charging service tax
Principles to be adopted for determination of value of the goods Principles to be adopted for determination of value of the goods Principles to be adopted for determination of value of services
Applicability of any notification issued under the Act Applicability of any notification issued under the Act
Applicability of any notification issued under the Act
Admissibility of credit of excise duty N.A Admissibility of credit of service tax
(3) The application shall be made in quadruplicate and be accompanied by a fee of two thousand five hundred rupees.
(4) An applicant may withdraw his application within thirty days from the date of the application.
Section 23 D of CE Act - Procedure on receipt of application: -
(1) On receipt of an application, the Authority shall cause a copy thereof to be forwarded to the Commissioner of Central Excise and, if necessary, call upon him to furnish the relevant records.
(2) The Authority may, after examining the application and the records called for, by order, either allow or reject the application: (May 03)
Provided that the Authority shall not allow the application where the question raised in the application is: -
(a) already pending in the applicant's case before any Central Excise Officer ,the Appellate Tribunal or any Court;
(b) the same as in a matter already decided by the Appellate Tribunal or any Court:
No application shall be rejected under this sub-section unless an opportunity has been given to the applicant of being heard:
Where the application is rejected, reasons for such rejection shall be given in the order.
(3) A copy of every order made under sub-section (2) shall be sent to the applicant and to the Commissioner of Central Excise.
(4) Where an application is allowed under sub-section (2), the Authority shall, after examining such further material as may be placed before it by the applicant or obtained by the Authority, pronounce its advance ruling on the question specified in the application.
(5) On a request received from the applicant, the Authority shall, before pronouncing its advance ruling, provide an opportunity to the applicant of being heard, either in person or through a duly authorised representative (as mentioned in Section 35Q).
(6) The Authority shall pronounce its advance ruling in writing within ninety days of the receipt of application.
(7) A copy of the advance ruling pronounced by the Authority, duly signed by the Members and certified in the prescribed manner shall be sent to the applicant and to the Commissioner of Central Excise, as soon as may be, after such pronouncement.
Section 23E of CE Act - Applicability of advance ruling: -
(1) The advance ruling pronounced by the Authority under section 23D shall be binding only-
(a) on the applicant who had sought it ;
(b) in respect of any matter referred to in Section 23C(2);
(c) on the Commissioner of Central Excise, and the Central Excise authorities sub-ordinate to him, in respect of the applicant.
(2) The advance ruling shall be binding as aforesaid unless there is a change in law or facts on the basis of which the advance ruling has been pronounced.
Section 23F of CE Act - Advance ruling to be void in certain circumstances: -
Where the Authority finds, on a representation made to it by the Commissioner of Central Excise or otherwise, that an advance ruling pronounced by it has been obtained by the applicant by fraud or mis-representation of facts, it may, by order, declare such ruling to be void ab initio and thereupon all the provisions of this Act shall apply to the applicant as if such advance ruling had never been made.
Section 23G of CE Act - Powers of Authority: -
(1) The Authority shall, for the purpose of exercising its powers regarding discovery and inspection, enforcing the attendance of any person and examining him on oath, issuing commissions and compelling production of books of account and other records, have all the powers of a civil court under the Code of Civil Procedure, 1908.
(2) The Authority shall be deemed to be a civil court and every proceeding before the Authority shall be deemed to be a judicial proceeding within the meaning of sections 193 and 228, and for the purpose of section 196,of the Indian Penal Code.
Section 23H of CE Act - Procedure of Authority: -
The Authority shall, subject to the provisions of this Chapter, have power to regulate its own procedure in all matters arising out of the exercise of its powers under this act.
Settlement Commission
Section 31 of CE Act - Definitions: -
(a) "assessee" means any person who is liable for payment of excise duty assessed under this Act or any other Act and includes any producer or manufacturer of excisable goods or a registered person under the rules made under this Act, of a private warehouse in which excisable goods are stored
(c)"case" means any proceeding under this Act or any other Act for the levy, assessment and collection of excise duty, or any proceeding by way of appeal or revision in connection with such levy, assessment or collection, which may be pending before a Central Excise Officer or Central Government on the date on which an application under Section 32E(1) is made.
Provided that where any appeal or application for revision has been preferred after the expiry of the period specified for the filing of such appeal or application for revision under this Act and which has not been admitted, such appeal or revision shall not be deemed to be a proceeding pending within the meaning of this clause.
(g)"Settlement Commission" means the Customs and Central Excise Settlement Commission constituted under Section 32.
Section 32 of CE Act - Customs and Central Excise Settlement Commission: -
(1) The Central Government shall, by notification in the Official Gazette, constitute a Commission to be called the Customs and Central Excise Settlement Commission for the settlement of cases under the Central Excise Act and the Customs Act.
(2) The Settlement Commission shall consist of a Chairman and as many Vice-Chairmen and other Members as the Central Government thinks fit and shall function within the Department of the Central Government dealing with customs and central excise matters.
(3) The Chairman, Vice-Chairman and other Members of the Settlement Commission shall be appointed by the Central Government from amongst persons of integrity and outstanding ability, having special knowledge of, and experience in, administration of customs and central excise laws.
Section 32A of CE Act - Jurisdiction and powers of Settlement Commission: -
(1) The jurisdiction, powers and authority of the Settlement Commission may be exercised by Benches thereof.
(2) A Bench shall be presided over by the Chairman or a Vice-Chairman and shall consist of two other Members.
(3) The Bench for which the Chairman is the presiding officer shall be the principal Bench and other Benches shall be known as additional Benches.
(4) The Chairman may authorise the Vice-Chairman or other Member appointed to one Bench to discharge the functions of the Vice-Chairman or other Member of another Bench.
(5) The principal Bench shall sit at Delhi and the Central Government shall, by notification in the Official Gazette, establish additional Benches at such places as it considers necessary.
(6) When one of the persons constituting a Bench is unable to discharge his functions owing to absence, illness or any other cause or in the event of the occurrence of any vacancy either in the office of the presiding officer or in the office of one or the other members of the Bench, the remaining Members may function as the Bench and if the presiding officer of the Bench is not one of the remaining Members, the senior among the remaining Members shall act as the presiding officer of the Bench.
Provided that if at any stage of the hearing of any such case or matter, it appears to the presiding officer that the case or matter is of such a nature that it ought to be heard of by a Bench consisting of three Members, the case or matter may be referred by the presiding officer of such bench to the Chairman for transfer to such Bench as the Chairman may deem fit.
(7) The Chairman may, for the disposal of any particular case, constitute a special Bench consisting of more than three Members.
(8) The special Bench shall sit at a place to be fixed by the Chairman.
Section 32B of CE Act - Vice-Chairman to act as Chairman or to discharge his functions in certain circumstances: -
(1) In the event of the occurrence of any vacancy in the office of the Chairman by reason of his death, resignation or otherwise, the Vice-Chairman shall act as the Chairman until the date on which a new Chairman, appointed to fill such vacancy, enters upon his office.
(2) When the Chairman is unable to discharge his functions owing to absence, illness or any other cause, the Vice-Chairman shall discharge the functions of the Chairman until the date on which the Chairman resumes his duties.
Section 32C of CE Act - Power of Chairman to transfer cases from one Bench to another: -
On the application of the assessee or the Chief Commissioner or Commissioner of Central Excise and after giving notice to them, and after hearing such of them as he may desire to be heard, or-on his own motion without such notice, the Chairman may transfer any case pending before one Bench, for disposal, to another Bench.
Section 32D of CE Act - Decision to be by majority: -
• If the Members of a Bench differ in opinion on any point, the point shall be decided according to the opinion of the majority.
• If the members are equally divided, they shall state the point or points on which they differ, and make a reference to the Chairman.
• The Chairman shall then either hear the point or points himself or refer the case for hearing on such point or points by one or more of the other Members of the Settlement Commission.
• Such point or points shall be decided according to the opinion of the majority of the Members of the Settlement Commission who have heard the case, including those who first heard it.
Section 32E of CE Act - Application for settlement of cases: - (Nov 00, May 04)
An assessee may, at any stage of a case relating to him make an application in such form and in such manner as may be prescribed, and containing:
• a full and true disclosure of his duty liability which has not been disclosed before the Central Excise Officer having jurisdiction,
• the manner in which such liability has been derived,
• the additional amount of excise duty accepted to be payable by him and
• such other particulars as may be prescribed including the particulars of such excisable goods in respect of which he admits short levy on account of misclassification or otherwise of such excisable goods,
to the Settlement Commission to have the case settled and any such application shall be disposed of in the manner hereinafter provided.
No such application shall be made unless: -
(a) the applicant has filed returns showing production, clearance and central excise duty paid in the prescribed manner;
(b) a show cause notice for recovery of duty issued by the Central Excise Officer has been received by the applicant; and
(c) the additional amount of duty accepted by the applicant in his application exceeds Rs.2 lakhs.
No application shall be entertained by the Settlement Commission under this sub-section in cases which are pending with the Appellate Tribunal or any Court.
No application under this sub-section shall be made for the interpretation of the classification of excisable goods under the Central Excise Tariff Act, 1985.
(2) Where any excisable goods, books of account, other documents have been seized under the provisions of this Act or rules made thereunder, the assessee shall not be entitled to make an application before the expiry of 180 days from the date of the seizure.
(3) Every application made shall be accompanied by such fees as may be prescribed.
(4) An application shall not be allowed to be withdrawn by the applicant.
Note: Application for Settlement of cases in the case of Customs (Section 127B): - (May 05)
Any importer, exporter or any other person may, at any stage of a case relating to him make an application in such form and in such manner as may be prescribed, and containing:
• a full and true disclosure of his duty liability which has not been disclosed before the proper officer having jurisdiction,
• the manner in which such liability has been derived,
• the additional amount of customs duty accepted to be payable by him and
• such other particulars as may be prescribed including the particulars of such dutiable goods in respect of which he admits short levy on account of misclassification or otherwise of such excisable goods,
to the Settlement Commission to have the case settled and any such application shall be disposed of in the manner hereinafter provided.
No such application shall be made unless: -
(a) the applicant has filed a bill of entry, or a shipping bill, in respect of import or export of goods;
(b) a show cause notice for recovery of duty issued by the proper officer has been received by the applicant; and
(c) the additional amount of duty accepted by the applicant in his application exceeds Rs.2 lakhs.
No application shall be entertained by the Settlement Commission under this sub-section in cases which are pending with the Appellate Tribunal or any Court.
No application under this sub-section shall be made for the interpretation of the classification of goods under the Customs Tariff Act, 1975.
(2) Where any dutiable goods, books of account, other documents have been seized under the provisions of this Act or rules made thereunder, the assessee shall not be entitled to make an application before the expiry of 180 days from the date of the seizure.
(3) Every application made shall be accompanied by such fees as may be prescribed.
(4) An application shall not be allowed to be withdrawn by the applicant.
Section 32F of CE Act - Procedure on receipt of an application under Section 32E: -
a) On receipt of an application under Section 32E, the Settlement Commission shall call for a report from the Commissioner of Central Excise having jurisdiction and on the basis of the materials contained in such report and having regard to the nature and circumstances of the case or the complexity of the investigation involved therein, the Settlement Commission may, by order, allow the application to be proceeded with or reject the application.
b) An application shall not be rejected under this subsection, unless an opportunity has been given to the applicant of being heard.
c) The Commissioner shall furnish such report within a period of one month of the receipt of the communication from the Settlement Commission, failing which it shall be presumed that the Commissioner has no objection to such application; but he may raise objections at the time of hearing fixed by the Settlement Commission for admission of the application and the date of such hearing shall be communicated by the Settlement Commission to the applicant and the Commissioner within a period not exceeding two months from the date of receipt of such application.
d) A copy of every order shall be sent to the applicant and to the Commissioner having jurisdiction.
e) The applicant shall within 30 days of the receipt of a copy of the order pay the amount of additional duty admitted by him as payable and shall furnish proof of such payment to the Settlement Commission.
f) If the Settlement Commission is satisfied, on an application made in this behalf by the assessee that he is unable for good and sufficient reasons to pay the amount referred to within the time specified, it may extend the time for payment of the amount which remains unpaid or allow payment thereof by installments, if the assessee furnishes adequate security for the payment thereof.
g) Where the additional amount of duty referred to is not paid by the assessee within the time specified or extended period, as the case may be, the Settlement Commission may direct that the amount which remains unpaid, together with simple interest at the rate of 18% per annum or at the rate notified by the CBEC from time to time on the amount remaining unpaid, be recovered, as the sum due to Central Government by the Central Excise Officer having jurisdiction over the assessee in accordance with the provisions of Section 11.
h) Where an application is allowed to be proceeded with, the Settlement Commission may call for the relevant records from the Commissioner having jurisdiction. After examination of such records, if the Settlement Commission is of the opinion that any further inquiry or investigation in the matter is necessary, it may direct the Commissioner (Investigation) to make or cause to be made such further inquiry or investigation and furnish a report on the matters covered by the application and any other matter relating to the case.
i) After examination of the records and the report of the Commissioner, and the report, if any, of the Commissioner (Investigation), and after giving an opportunity to the applicant and to the Commissioner having jurisdiction to be heard, either in person or through a representative duly authorised in this behalf, and after examining such further evidence as may be placed before it or obtained by it, the Settlement Commission may, in accordance with the provisions of this Act, pass such order as it thinks fit.
j) Every order passed shall provide for the terms of settlement including any demand by way of duty, penalty or interest, the manner in which any sums due under the settlement shall be paid and all other matters to make the settlement effective and shall also provide that the settlement shall be void if it is subsequently found by the Settlement Commission that it has been obtained by fraud, or misrepresentation of facts.
k) Where a settlement becomes void, the proceedings with respect to the matters covered by the settlement shall be deemed to have been revived from the stage at which the application was allowed to be proceeded with by the Settlement Commission and the Central Excise Officer having jurisdiction may, notwithstanding anything contained in any other provision of this Act, complete such proceedings at any time before the expiry of two years from the date of the receipt of communication that the settlement became void.
l) Where any such duty payable is not paid by the assessee within 30 days of the receipt of a copy of the order by him, then, whether or not the Settlement Commission has extended the time for payment of such duty or has allowed payment thereof by installments, the assessee shall be liable to pay simple interest at the rate of 18% per annum or at such other rate as notified by the CBEC on the amount remaining unpaid from the date of expiry of the period of thirty days aforesaid.
Section 32G of CE Act - Power to order provisional attachment to protect revenue:
Where, during the pendency of any proceeding before it, the Settlement Commission is of the opinion that for the purpose of protecting the interests of revenue it is necessary so to do, it may, by order, attach provisionally any property belonging to the applicant in the manner as may be prescribed.
Section 32H of CE Act - Power to reopen completed proceedings: -
If the Settlement Commission is of the opinion (the reasons for such opinion to be recorded by it in writing) that, for the proper disposal of the case pending before it, it is necessary or expedient to reopen any proceeding connected with the case but which has been completed under this Act before application for settlement under Section 32E was made, it may, with the concurrence of the applicant, reopen such proceeding and pass such order thereon as it thinks fit.
No proceeding shall be reopened by the Settlement Commission under this section after the expiry of 5 years from the date of application.
Section 32-I of CE Act - Powers and procedure of Settlement Commission: -
(1) The Settlement Commission shall have all the powers which are vested in a Central Excise Officer under this Act or the rules made thereunder.
(2) Where an application made under Section 32E has been allowed to be proceeded with under Section 32F, the Settlement Commission shall, until an order is passed under Section 32F(7), have exclusive jurisdiction to exercise the powers and perform the functions of any Central Excise Officer, under this Act in relation to the case.
(3) In the absence of any express direction by the Settlement Commission to the contrary, nothing in this Chapter shall affect the operation of the provisions of this Act in so far as they relate to any matters other than those before the Settlement Commission.
(4) The Settlement Commission shall have power to regulate its own procedure and the procedure of Benches thereof in all matters arising out of the exercise of its powers, or of the discharge of its functions, including the places at which the Benches shall hold their sittings.
Section 32J of CE Act - Inspection, etc., of reports: -
No person shall be entitled to inspect, or obtain copies of, any report made by any Central Excise Officer to the Settlement Commission; but the Settlement Commission may, in its discretion furnish copies thereof to any such person on an application made to it in this behalf and on payment of the prescribed fee:
Section 32K of CE Act - Power to grant immunity from prosecution and penalty: -
(1) The Settlement Commission may, if it is satisfied that any person who made the application for settlement under Section 32E has co-operated with the Settlement Commission in the proceedings before it and has made a full and true disclosure of his duty liability, grant to such person, subject to such conditions as it may think fit to impose, immunity from prosecution for any offence under this Act or under the Indian Penal Code or under any other Central Act for the time being in force and also either wholly or in part from the imposition of any penalty, fine and interest under this Act, with respect to the case covered by the settlement.
However, no such immunity shall be granted by the Settlement Commission in cases where the proceedings for the prosecution for any such offence have been instituted before the date of receipt of the application under Section 32E.
(2) An immunity granted to a person shall stand withdrawn if such person fails to pay any sum specified in the order of the settlement passed within the time specified or fails to comply with any other condition subject to which the immunity was granted.
(3) An immunity granted to a person may be withdrawn by the Settlement Commission, if it is satisfied that such person had concealed any particular material to the settlement or had given false evidence. Thereupon such person may be tried for the offence with respect to which the immunity was granted or for any other offence of which he appears to have been guilty in connection with the settlement and shall also become liable to the imposition of any penalty under this Act to which such person would have been liable, had no such immunity been granted.
Section 32L of CE Act - Power to send a case back to the Central Excise Officer: -
The Settlement Commission may, if it is of opinion that any person who made an application for settlement under section 32E has not co-operated with the Settlement Commission in the proceedings before it, send the case back to the Central Excise Officer having jurisdiction who shall thereupon dispose of the case in accordance with the provisions of this Act as if no application under Section 32E had been made.
Section 32M of CE Act - Order of settlement to be conclusive: -
Every order of settlement passed under Section 32F(7) shall be conclusive as to the matters stated therein and no matter covered by such order shall, save as otherwise provided, be reopened in any proceeding under this Act or under any other law for the time being in force.
Section 32-0 of CE Act - Bar on subsequent application for settlement in certain cases: -
Where:
a) the order of settlement provides for the imposition of a penalty on the person who made the application under Section 32E for settlement, on the ground of concealment of particulars of his duty liability; or
b) such person is convicted of any offence under this Act in relation to that case after the final order has been passed by the Settlement Commission; or
c) the case of such person is sent back to the Central Excise Officer having jurisdiction by the Settlement Commission under Section 32L,
then, he shall not be entitled to apply for settlement under section 32E in relation to any other matter.
Section 32P of CE Act - Proceedings before Settlement Commission to be judicial proceedings: -
Any proceedings under this Chapter before the Settlement Commission shall be deemed to be a judicial proceeding within the meaning of Sections 193 and 228, and for the purposes of section 196 of the Indian Penal Code.
Section 32PA of CE Act - Certain persons who have filed appeals to the Appellate Tribunal entitled to make applications to the Settlement Commission: -
(1) Any person who has filed an appeal to the Appellate Tribunal under this Act, on or before the 29th February 2000, and which is pending, shall, on withdrawal of such appeal from the Appellate Tribunal, be entitled to make an application to the Settlement Commission to have his case settled under this Chapter.
Provided that no such person shall be entitled to make an application under this section in a case where the Commissioner of Central Excise or any officer on his behalf has, on or before the date on which the Finance Act, 2000 receives the assent of the President, applied to the Appellate Tribunal for the determination of such points arising out of the decision or order specified by the board in its order under Section 35E(1) or filed under Section 35B(2), as the case may be.
(2) Any person referred to in sub-section (1) may make an application to the Appellate Tribunal for permission to withdraw the appeal.
(3) On receipt of an application, the Appellate Tribunal shall grant permission to withdraw the appeal.
(4) Upon withdrawal of the appeal, the proceedings in appeal immediately before such withdrawal shall be deemed to be a proceeding pending before a Central Excise Officer.
(5) An application to the Settlement Commission under this section shall be made within a period of 30 days from the date on which the order of the Appellate Tribunal permitting the withdrawal of the appeal is communicated to the person.
(6) An application made to the Settlement Commission under this section shall be deemed to be an application made under Section 32E(1) and the provisions of this Chapter shall apply accordingly.
(7) Where an application made to the Settlement Commission under this section is not is not entertained by the Settlement Commission, then, the appeal shall be deemed to have been revived before the Appellate Tribunal and the provisions contained in section 35B, section 35C and section 35D shall, so far as may be, apply accordingly.
16 September 2009
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