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Shortage in "export under ARE 1"

Rajesh Kumar (Assistant Manager) (84 Points)

17 May 2011

Dear Sir,

We have despatched around 20,000 MT of finished product to the near by port for export without payment of excise duty. for this we had filled letter of undertaking with the excise department and ARE 1 were issued regularlly.

However due to loss of moisture the shipping bill and export bill was made for 18,250 MT only.

can the department issue showcause notice for the difference quantity and demand exice duty for the same ?

thank & regards

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6 Replies

U S Sharma (glidor@gmail.com) (21063 Points)
Replied 17 May 2011

you had cleared the goods on ARE-1 on the basis of export bill, right?

how come the both get diff in quantity? shipping bill may get prepared at full quantity and then actual export had to get shorted, but u prepared the documents at short quantity, means you were aware of shortage after clearence from factory.

it indicates malafide intention of clear the taxable goods, pay the duty at the earliest for the shortage, or department may book case of evasion of diverting goods en route .

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Suresh Prasad (www.aubsp.com) (15630 Points)
Replied 17 May 2011

Under Section1 1A (7) the central excise officer, on receipt of information 1 intimation under Section 1 1A(6) shall, (i) not issue any show cause notice in respect of the amount so paid and all proceedings in respect of the said duty shall be deemed to be concluded where it is found by the central excise officer that the amount of duty, interest and penalty as provided under section 1 1A (6) has been fully paid; (ii) the excise officer shall proceed for recovery of such amount if found to be short-paid in the manner specified under Section 1 1A (1) and the period of one year shall be computed from the date of receipt of such information.

NEW Section 11 A of the Central Excise Act

Rajesh Kumar (Assistant Manager) (84 Points)
Replied 17 May 2011

Originally posted by : U S Sharma
	you had cleared the goods on ARE-1 on the basis of export bill, right? how come the both get diff in quantity? shipping bill may get prepared at full quantity and then actual export had to get shorted, but u prepared the documents at short quantity, means you were aware of shortage after clearence from factory. it indicates malafide intention of clear the taxable goods, pay the duty at the earliest for the shortage, or department may book case of evasion of diverting goods en route .

Dear Mr. Sharma

thanks for the reply.

the shortage was due to loss of moisture, and shipping bill was prepared for the net amount.

from what you have stated it appears that we can mention gross amount and the net amount in the shipping bill. please confirm whether we can show shortate in the shipping bill , so that we will follow this in the next export due after one week.

regards

U S Sharma (glidor@gmail.com) (21063 Points)
Replied 17 May 2011

i am unware of the commodity you are dealing in, in such commodities where so huge amount of moisture and evaporation is done, you have to use excise sealing,

are your range officer and department aware that this much 8% materials go vanish in moisture? if yes then you have to clear additional quantity to cover up your consignment where the R/O would allow moisture surplus without payment of duty, under excise seal

in any case the quantity can not be short shipped of what is mentioned in ARE-1, or it would be case of en route diversion of taxable goods, which is evasion in eyes of department.

Shippinng bill (EDI), how did they ascertain the quantity ? it was the declaration of your CHA on the basis of which they prepared the shipping bill, coz they dont have any system to measure your goods prior to customs check point., in this case they had to book shortage in quantity, and allow the short quantity by making correction endorsement on shipping bill.

your invoice / packing list, .........................when it got changed ? if prior to export you changed it............. why not u did informed Range officer regarding shortage of materials due to moisture, and obtained certificate in this regard to get reconsilated at customs port? then the shortage of ARE-1 would not appear.

undertaking as the word produce itself, where the manufacturer is obliged to pay the diff of duty of materials getting short between quantity actually cleared from factory and quantity actually exported.

Indirect taxes should not be handled at par with vat or income tax, as the penalty provisions of indirect taxes are bitter,

in case of any deviation, mistake, error, intimate your Range officer under signed acknowlegemen, so that in case of any trouble next, u can get a safe side that you have intimated the R/O in due time and R/O is aware of situation, this would save you with bitter experience of "facing anti evasion team"

U S Sharma (glidor@gmail.com) (21063 Points)
Replied 18 May 2011

Originally posted by : Rajesh Kumar
	Dear Mr. Sharma thanks for the reply. the shortage was due to loss of moisture, and shipping bill was prepared for the net amount. from what you have stated it appears that we can mention gross amount and the net amount in the shipping bill. please confirm whether we can show shortate in the shipping bill , so that we will follow this in the next export due after one week. regards

Remedy 1

Get in touch with your Range Super, and Clear one consignment under excise sealing procedure, i.e invite Range inspector to inspect and confirm the details of ARE1, he will get the goods checked in his presence( if u iunsist him to do so) and endorse the ARE1,

as the goods are sealed by excise department, customs can not re-inspect the goods and goods would get cleared from customs without inspection.

Remedy 2

Nobody asked you to clear the moisture on payment of duty / under bond, but you were expected in good deed to clear the excisable goods under bond/ on payment of duty.

make an application to Range Superintendent specifying the facts of your trade practice and invite him to get it inspected physically ( export consignment is a good example) then he may at his discretion will fix a % moisture over clearence alongwith your normal clearance which would not be infected with valuation.