Rapid Revision on Common Topics

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1 Rapid Revision on Common Topics For CA - Final 2nd Floor, MSN Business Centre, #46 Sir Madhavan Nair Road, Mahalingapuram, Chennai Near Kodambakkam Railway Station / Aiyappan Temple Mobile: / info@pinnacleacademy.co 1

2 SHOW CAUSE NOTICE (SCN) Central Excise Act, Customs Act, Finance Act, Section 11A Section If Excise Duty/Customs duty/service tax has not been levied or paid (or) has been Short levied or short paid (or) Erroneously refunded (It may be for any reason) Central excise officer/customs officer shall serve show cause notice Opportunity of personal hearing will be given to the person Demand will be confirmed (i.e. Excise officer/customs officer will determine the duty payable) by issue of order giving reasons What is the time limit for serving show cause notice? Situation Duty of Excise/Duty of Customs/Service tax not levied or not paid or has been short levied or short paid or erroneously refunded For OTHER REASONS Duty of Excise/Duty of Customs/Service tax not levied or not paid or has been short levied or short paid or erroneously refunded In case of fraud; collusion; any wilful mis-statement; suppression of facts; contravention of any provision with an intention to evade payment of Excise duty/customs duty/service tax. Time limit Within 1 year from Relevant date * (18 months in case of service tax) Within 5 years from Relevant date * * The period during which there was any stay by an order of the court or tribunal in respect of payment of such duty shall be EXCLUDED. 2

3 Will the SCN be issued if Duty/Tax is paid before issue of SCN? Amount of Duty/Tax along with the interest* is paid by the assessee before SCN is served to him and intimated in writing to department Either - a) On his own ascertainment or b) As ascertained by the Assessing officer If Duty/Tax along with interest is fully discharged If assessing officer is of the opinion that Duty/Tax along with interest is not fully discharged On receipt of such information, the excise officer shall not serve any SCN The Assessing officer shall proceed to issue a SCN for the amount which falls short within 1 year from the date of receipt of information *Interest in accordance with Sec. 11AA for Excise, Sec. 28AB for Customs and Sec. 75 for Service tax What is the time limit for confirmation of demand? Situation Normal cases (i.e. other than fraud, collusion etc.,) In case of fraud, collusion, wilful mis-statement, suppression of facts, contravention of any provision with an intention to evade payment of duty Time limit Within 6 months from the date of issue of SCN Within 1 year from the date of issue of SCN LAND MARK AND RECENT CASE LAWS: CCE & ST v. Adecco Flexione Workforce Solutions Ltd. (2012) (HC) Issue involved: When service tax and interest is paid before service show cause notice and the same is intimated to department in writing, can the department issue show cause notice thereafter? Decision: The High Court noted that section 73(3) of the Finance Act, 1994 categorically stated that if the payment of service tax and interest has been intimated to the authorities in writing, the authorities should not serve any notice for the amount so paid. The authorities can initiate penal proceedings only against the defaulters who have not paid tax and not against the persons who have paid tax with interest on their own. The High Court observed that if the notices are issued 3

4 Anita Grover v. CCEx (Del.) Vandana Bidyut Chatterjee v. UOI 2013 (Bom.). Chitra Builders Private Ltd. v. Addl. Commr. of CCEx. & ST (2013) (Mad.) Infinity Infotech Parks Ltd. v. UOI (2013) (Cal.) Kemtech International Pvt. Ltd. v. CCus. (2013) (S.C.) Raghunath International Ltd. v. Union of India, contrary to this section, the person who has issued notice should be punishable and not the person to whom it has been issued. Held that the Department has no authority to issue a show cause notice when the tax payer has paid service tax along with interest for delayed payments promptly. Issue Involved: Can the former director of a company be held liable for recovery of customs duties due by the company? Decision: There was no provision in the Customs Act as was found under section 179 of the Income Tax Act, 1961 or under section 18 of the Central Sales Tax Act, 1956 where the dues of a private limited company could be recovered from its directors when the private limited company was under liquidation, in specific circumstances. Since a company was a separate person having a distinct identity, independent from its shareholders and directors, company s dues could not be recovered from the directors and/or individual shareholder of the company. Therefore, former director of a company cannot be held liable for the recovery of the customs dues of such company. Issue Involved Whether the amount collected from assessee by department during search is valid in law? Decision: It is a well settled position in law that no tax can be collected from the assessee, without an appropriate assessment order being passed by the authority concerned and by following the procedures established by law. The High Court elucidated that the amount collected by Department, from the petitioner, during the search conducted, could not be held to be valid in the eye of law Mere contravention of provision of Chapter V or rules framed thereunder does not enable the service tax authorities to invoke the extended period of limitation. The contravention necessarily has to be with the intent to evade payment of service tax to invoke extended period of limitation. The Apex Court elucidated that for the purpose of re-quantification of short-levy of customs duty, the adjudicating authority, following the principles of natural justice, should supply to the assessee all the documents on which it proposed to place reliance. Thereafter the assessee might furnish their explanation thereon and might provide additional evidence, in support of their claim. Issue Involved: Whether DGCEI and ADGCEI are authorized to issue show cause notice? 4

5 (2012) (All.) Decision: Additional Director General, Directorate General of Central Excise Intelligence having been authorized to act as a Commissioner of Central Excise was a Central Excise Officer, within the meaning of section 2(b) of the Central Excise Act, 1944 and was fully authorized to issue the Show Cause Notice. The Court further stated that no such provision had been referred to nor shown which may require approval before issuing the show cause notice of the adjudicating authority/officer. Nanumal Glass When a decision is pronounced in the open court in the presence of Works v. CCEx. the advocate of the assessee, who is the authorized agent Kanpur, (2012) (All.) of the assessee within the meaning of section 37C, the date of pronouncement of order would be deemed to be the date of service Hans steel rolling mill V. CCE 2011 (SC) CCE V. Accrapac P. Ltd (Guj.) Jay Kumar Lohani V. CCE (2012) (MP) Darshan Boardlam Ltd. V. UOI (2013) (Guj) of order. Time limit under sec. 11A is not applicable to recovery of dues under compounded levy scheme as it is a comprehensive scheme separate from normal provisions of Excise Act, 1944 Failure to disclose a fact of manufacture which is required to be disclosed under the applicable regulations does not amount to suppression of facts and does not invoke extended period of limitation. The HC held that there was no legal provision requiring authorities to first adjudicate the notice issued regarding confiscation and, only thereafter, issue show cause notice for recovery of dues and penalty. Any clarification issued by CBEC is binding on the central excise officers who are duty bound to observe and follow such circulars. An assumption cannot be taken that clarifications are only letters and not orders under section 37B. The clarifications shall be binding even though section 37B is referred to in such circular or not. 5

6 CASE STUDIES: 1 A show cause notice demanding customs duty was issued in case of clearances made by 100% Export Oriented Undertaking (EOU) to Domestic Tariff Area (DTA). Is the show-cause notice defective in law? 2 M/s. XYZ, a 100% export oriented undertaking (100% E.O.U. in short) imported DG sets and furnace oil duty free for setting up captive power plant for its power requirements for export production This benefit was available vide an exemptions notification. They used the power so generated for export production but sold surplus power in domestic tariff area. Customs Department has demanded duty on DG sets and furnace oil as surplus power has been sold in domestic tariff area. The notification does not specifically restrict the use of imported goods for manufacture of export goods. Do you think the demand of the Customs Department is valid in law. Yes, the show cause notice issued is defective in law as in respect of clearances made by a 100% EOU to DTA, excise duty is payable but not customs duty. In the absence of a restrictive clause in the notifications that imported goods are to be solely or exclusively used for manufacture of goods for export, there is no violation of any condition of notification, if surplus power generated due to unforeseen exigencies is sold in DTA. Therefore, no duty can be demanded from M/s XYZ for selling the surplus power in DTA for the following reasons: (i) They have used the DG sets and furnace oil imported duty free for generation of power, and (ii) such power generated has been used for manufacturing goods for export, and (iii) Only the surplus power has been sold, as power cannot be stored. 3 Raman Ltd. is engaged in providing the taxable services and has been filing its service tax returns regularly. However, its jurisdictional Commissioner has the reasons to believe that Raman Ltd. has understated the value of its taxable services for the previous year. Can the jurisdictional Commissioner of Central Excise direct such person to get his accounts audited Section 72A(1) of Finance Act, 1994, provides that if the Commissioner of CE has reasons to believe that any person liable to pay service 6

7 by a Chartered Accountant to the extent and for the period as may be specified by him? Discuss briefly. Will your answer be different if Raman Ltd. contends that its accounts for the previous year have been audited under the Income-tax Act, 1961? 4 ABC Ltd. had paid, both the service tax and interest for delayed payment before issue of show cause notice under the Finance Act, Subsequently, the Department initiated penal proceedings against ABC Ltd. for recovery of penalty under section 76 for delayed payment of service tax. Discuss, with the help of a decided case law, if any, whether the penal proceeding initiated by the Department is justified. tax has failed to declare or determine the value of a taxable service correctly, he may direct such person to get his accounts audited by a CA nominated by him, even if the accounts are audited under any other law for the time being in force No, the proceedings initiated by the Department are not justified. The facts of the case are similar to the case of CCE & ST v. Adecco Flexione Workforce Solutions Ltd. 7

8 INTEREST AND PENALTY Central Excise Act, 1944 Customs Act, 1962 Finance Act, 1994 Section 11AB Section 28AB Section 75 When interest shall be payable? What is the Rate of interest? What is the period for which interest payable? When duty becomes payable due to order/instruction issued by CBE&C, what is the interest payable in such case? In case any duty has not been levied or paid or has been short levied or short paid or erroneously refunded. In case of Excise & Customs: 18% p.a In case of Service tax: If value of taxable services provided during FY for which the issue pertains or during PY > 60 lakhs Simple 18% p.a If value of taxable services provided during FY for which the issue pertains or during PY 60 lakhs Simple 15% p.a In case of Excise: FROM The date on which such duty becomes due (i.e. Date of removal of excisable goods) TILL Date of payment of such duty In case of Customs: FROM The first day of the month following the month in which the duty ought to have been paid or from the date of erroneous refund. TILL Date of payment of such duty In case of service tax: FROM First day after due date TO Date of payment of defaulted amount If full amount of such duty is voluntarily paid by assessee within 45 days from the date of issue of such order, instruction or direction, without reserving the right to appeal against such payment then the assessee shall be exempt from the payment of interest even if the duty was due earlier. 8

9 Penalty under Excise, Customs and Service tax General Penalty On account of fraud, collusion etc., Excise - Rule 25, 26 & 27 of Excise Rules, 2002 Customs - Sec. 112 and 114 Service tax - Sec. Sec. 76 & 77 of FA, 1994 Excise - Sec. 11AC Customs - Sec. 114A Service tax - Sec. 78 of FA, 1994 PENALTIES UNDER EXCISE (RULE 25): Nature of offence a) Removing of excisable goods in contravention of Excise rules or notification issued under the rules b) Non accounting of excisable goods manufactured, produced or stored c) Engaging in manufacture, production or storage of excisable goods without applying for registration certificate d) Contravening any provisions of central excise rules or notifications issued under these rules with an intent to evade payment of duty Residual penalty (Rule 27) for breach of any excise rule Penalty Penalty shall be as follows: a) Confiscation of contravening goods b) Penalty upto duty payable on such contravening goods or 2,000 whichever is higher. The penalty shall be imposed on the producer, manufacturer, registered person of a warehouse or a registered dealer committing such contravention. The penalty would be 5,000 plus confiscation of goods in respect of which offence has been committed. PENALTIES UNDER SERVICE TAX: Description Amount Special points Penalty for Non Payment/Late payment of service tax [Sec. 76] Penalty for Non registration or Delayed registration [Sec. 77(1)(a)] Penalty for Contravention of any provisions for which no penalty is 100 for every day or 1% whichever is higher Subject to maximum of 50% of service tax, that assessee has failed to pay. Amount which may extend to 10,000 or 200 for every day whichever is higher. Amount which may extend to 10, is calculated for everyday during which such failure continues. 200 is calculated for everyday during which such failure continues. 9

10 separately provided [Sec. 77(2)] Penalty for Failure to keep, maintain or retain books of account and other documents as required [Sec. 77(1)(b)] Amount which may extend to 10,000 Failure to furnish information called by an officer (or) to produce documents called for (or) to appear before Excise officer when issued with a summon for appearance. [Sec 77(1)(c)] Penalty for failure to pay tax electronically who is required to pay so [Sec. 77(1)(d)] Penalty for issue of incorrect invoice or invoice with incomplete details [Sec.77(1)(e)] [Section 78A] penalty would be leviable if the director, manager, secretary or other officer of the company was in charge of, and was responsible to, the company for the conduct of business of such company at the time of commitment of any of the specified contraventions and was knowingly concerned with such contravention. Amount which may extend to 10,000 or 200 for every day whichever is higher. Amount which may extend to 10,000 Amount which may extend to 10,000 Amount which may extend to Rs. 1,00,000 Rs. 200 is calculated for everyday during which such failure continues. The specified contraventions are: (a) evasion of service tax; or (b) issuance of invoice, bill or, as the case may be, a challan without provision of taxable service in violation of the rules made under the provisions of Chapter V; or (c) availment and utilisation of credit of taxes or duty without actual receipt of taxable service or excisable goods either fully or partially in violation of the rules made under the provisions of Chapter V; or (d) failure to pay any 10

11 amount collected as service tax to the credit of the Central Government beyond a period of six months from the date on which such payment becomes due. PENALTIES IN RESPECT OF IMPROPER IMPORTATION OF GOODS ETC., [SEC. 112] The following persons are liable for penalty under this section. When a person does or omits to do an act due to which the goods are liable for confiscation under Sec. 111 (i.e. Smuggling) When a person acquires the possession of goods or carries, removes or deposits due to which goods are liable for confiscation under Sec. 111 Offence In the case of goods in respect of which any prohibition is in force under this Act/any other law for the time being in force In the case of dutiable goods other thanprohibited goods If Actual value is higher than the value declared in bill of entry If the actual value is higher than the value in declaration given in case of baggage In case the goods are prohibited and value is mis-declared In case the goods are dutiable and value is mis-declared Maximum Penalty Value of the goods or 5,000, whichever is higher Duty sought to be evaded on such goods or 5,000 whichever is the higher Difference between actual value and declared value or 5,000 whichever is higher. a) Value of Goods or b) Difference between actual value and declared value or c) 5,000, whichever is higher a) Duty sought to be evaded on such goods b) Difference between actual value and declared value or c) 5,000, whichever is higher PENALTIES IN RESPECT OF ATTEMPT OF IMPROPER EXPORTATION OF GOODS [SEC. 114] Offence In the case of goods in respect of which any prohibition is in force under this Act/any other law for the time being in force In the case of dutiable goods other thanprohibited goods In case of any other goods Maximum Penalty 3 times the Value of the goods declared by exporter or value as determined under this Act, whichever is higher. Duty sought to be evaded on such goods or 5,000whichever is the higher Value of the goods declared by exporter or value as determined under this Act, whichever is higher. 11

12 PENALTY IN CASE OF SHORT LEVY (OR) NON LEVY (OR) SHORT PAYMENT (OR) ERRONEOUS REFUND (REVISED W.E.F 2011) Central Excise Act, 1944 Customs Act, 1962 Finance Act, 1994 Section 11AC Section 114A 78 When penalty shall be levied? What is the amount of penalty? Where any duty has not been levied (or) paid (or) has been short levied (or) short paid (or) erroneously refunded by reason of fraud, collusion, wilful mis-statement and suppression of facts or contravention of any provisions of the Act or rules with an intent to evade payment of duty. In case of Excise/Service Tax: PENALTY, WHERE DETAILS OF THE TRANSACTIONS ARE AVAILABLE IN THE SPECIFIED RECORDS If Excise duty/service Tax accepted by assessee, in full or in part, is paid along with interest before issue of SCN If Excise duty/service tax is paid within 30 days from the date of communication of order [Note: In case of Service tax penalty is also required to be paid within 30 days] In any other case [The notice has been served and subsequent to that Excise officer is of the opinion that the transactions have been recorded] 1% p.m from the month following the month in which such duty was payable (or) 25% of such Excise duty/service tax, Whichever is LOWER 25% of such Excise Duty/Service tax [The period of 30 days will be extended to 90 days, if the value of taxable service is 60 lakhs] 50% of such Excise duty/service tax PENALTY, WHERE DETAILS OF THE TRANSACTIONS ARE NOT AVAILABLE IN THE SPECIFIED RECORDS Any case 100% of such Excise duty/service tax If the penalty is payable under this section, the provisions of sec. 76 shall not apply In case of Customs: If customs duty accepted by assessee, is 25% of the Duty paid in full or in part along with interest within 30 days of receipt of notice If customs duty along with penalty is 25% of the duty or Interest paid within 30 days from the date of communication of order of the proper officer In any other case 100% of the duty or Interest Where any penalty has been levied under this section, no penalty shall be levied under sec. 112 or sec

13 Special points: Penalty shall be reduced to 25%, if duty, interest and penalty deposited within 30 days from the date of communication of order. If the duty amount is subsequently increased/decreased in appeals, then such benefit will be available only when such increased duty, interest and penalty deposited within 30 days from the date of determination of increased duty. LAND MARK & RECENT CASE LAWS: CCE V. Balaji Trading Co. (2013) (Del.) Issue Involved: In a case where the manufacturer clandestinely removes the goods and stores them with a firm for further sales, can penalty under rule 25 of the Central Excise Rules, 2002 be imposed on such firm? CCEx. v. Delphi Automotive Systems Ltd. (2013) (All.) CCEx. v. Castrol India Ltd. (2012) (Bom.) Decision: penalty under rule 25 could be imposed only on four categories of persons:- (a) producer; (b) manufacturer; (c) registered person of a warehouse; or (d) a registered dealer. Since, the respondents were neither producers nor manufacturers of the said zarda, neither were they the registered persons of a warehouse in which the said zarda had been stored nor were the registered dealers, penalty under rule 25 could not be imposed on the respondents. The Department aggrieved by the said order filed an appeal with High Court wherein it contended that rule 25(1)(c) of the Central Excise Rules, 2002 would not be applicable in the instant case. The High Court elucidated that mens rea (guilty mind) is an essential part for levy of penalty under section 11AC of the Central Excise Act, Where a provision of statute is not clear and there are divergent judicial pronouncements, it cannot be said that there is mens rea on the part of the assessee if he chooses to follow his course of action in the light of one of the judicial pronouncements. When there is liability to pay 25% penalty under section 11AC, within 30 days from the date of communication of order, it would not be open to the appellate authority or court to direct the assesse to pay 25% penalty beyond the stipulated time period. Comment: In such case the normal penalty shall be payable but not reduced penalty of 25% 13

14 CCEx. V. Ratnamani Metals and Tubes Ltd. (2013) (Guj.) Ankleshwar Taluka ONGC Land Loosers Travellers Co. OP. v. C.C.E., Surat-II (2013) (Guj.) CCE V. C.V. Gujrat Narmada Fertilizeers Co. Ltd. (2012) (Guj) It held that an option can also be granted to the assessee to deposit the entire dues along with 25% interest and penalty within a period of 30 days of communication of the order of Tribunal. Note: This case is in contrary with the above mentioned case Issue Involved: In a case where the assessee has acted bona fide, can penalty be imposed for the delay in payment of service tax arising on account of confusion regarding tax liability and divergent views due to conflicting court decisions? Decision: The High Court held that even if the appellants were aware of the levy of service tax and were not paying the amount on the ground of dispute with the ONGC, there could be no justification in levying the penalty in absence of any fraud, misrepresentation, collusion or wilful misstatement or suppression. Moreover, when the entire issue for levying of the tax was debatable, that also would surely provide legitimate ground not to impose the penalty. In case the recovery of unpaid or short paid duty has become time barred, if the manufacturer does not pay it voluntarily, it would not be possible for the department to recover the same. Thus, if he does it voluntarily despite completion of period of limitation, he should not further be saddled with the liability to pay statutory interest. The high court held that the assessee was not required to pay interest in case of voluntary payment of time barred duty before issuance of show cause notice. LIABILITY UNDER INDIRECT TAXES TO BE FIRST CHARGE Central Excise Act, 1944 Customs Act, 1962 Finance Act, 1994 Section 11E Section 142A Section 88 These sections create first charge on the property of a defaulter for recovery of the Central excise duty, Customs duty and Service tax. The above first charge is subject to the provisions of Companies Act, Recovery of Debt due to bank and financial Institution Act Securitisation Act and Reconstruction of Financial Assets and Enforcement of security interest Act After paying the above mentioned dues, the dues under Indirect taxes will have the first charge 14

15 CASE STUDIES: 1 Mohan fails to pay service tax of 15 lakh payable on 5th January, He pays it on 16 January, Determine the penalty under section 76 payable by Mohan in this case. 2 PQR Ltd. was required to deposit service tax of 10,000/- by 5 th May, It actually deposited it on 5 th June, Compute the amount of penalty payable by PQR Ltd. under section 76 of the Finance Act, Naman Ltd. is registered under the Central Excise Act, It has paid the following amounts under the Central Excise Act, 1944: Central excise duty 16,00,000 Amount of interest 1,00,000 In addition, it is liable under the following stautes for the amounts indicated against them: The Recovery of Debts Due to Banks and Financial Institutions Act, 1993 The Securitization and Reconstruction of Financial Assets and the Enforcement of Security Interest Act, ,00,000 2,00,000 The Factories Act, ,00,000 The Customs Act, ,00,000 The company has a property with a realizable value of 20 lakh. What legal remedy, under section 11E of the Central Excise Act, 1944, is available to Central Excise Department for recovery of the aforementioned dues of 17 lakh? 4 M/s Evasions Unlimited, manufactured excisable goods, and cleared them after paying the excise duty on them. Subsequently, the prices of the said goods were revised with retrospective effect paid. Thus, he paid the differential duty, suo motu, to the Department. The Revenue issued a show cause notice demanding interest under section 11AA and penalty under section 11AC. The assessee contended that there was no question of levy of interest and penalty as the payment of differential duty was made by it, suo moto, at the time of issuing supplementary invoices to the customers. Discuss whether the view taken by the Revenue is justifiable. 5 A show cause notice was issued against P on asking him to pay 3,50,000 which was short paid by him with an intent to evade payment of excise duty. The adjudication order confirming the demand was communicated to P on P filed an appeal against the order with the Commissioner of Central Excise (Appeals). The appeal was decided in favour of the revenue. The order of the Commissioner of Central Excise (Appeals) asking P to pay the Amount of penalty = 5,323 Amount of penalty = 5,000 The Department will be able to create first charge of 15 lakh ( 20 lakh - 5 lakh ) for recovery of central excise dues. M/s Evasions Unlimited is liable to pay interest, but not the penalty. No, P Cannot avail the benefit of reduced penalty as benefit of reduced penalty of 25%, will start from the date of adjudication order i.e. 15/11/2011 and the said 15

16 duty, interest under section 11AB and penalty equal to duty demanded under section 11AC was communicated to P on P plans to pay the full duty and interest within 30 days from and avail the benefit of reduced penalty (25% of duty) under the first proviso to section 11AC. Can P avail the benefit of reduced penalty? Discuss. [May 10 CA RTP (old)] period of 30 days expired on 15/12/2011. Refer to case CCEx. v. Castrol India Ltd. (2012) (Bom.) & a contrary case of CCEx. V. Ratnamani Metals and Tubes Ltd. (2013) (Guj.) 6 Determine interest and penalty under section 75 and 76 of Finance Act, 1994 respectively in the following cases (1) Service Tax of Rs. 10 lakhs (e-payment mandatory) for Feb, 2013 was paid on (2) Service Tax Rs.2000 for Feb, 2013 paid on 15 th April, The value of services provided by him during the preceding financial year was Rs. 14 lakhs. (3) Service Tax Rs for July,2012 paid on 30 th September, The value of services provided by him during the preceding financial year was Rs. 60 lakhs. (4) M, as assessee fails to pay service tax of Rs.15 lakhs payable by 6 th January, He pays the amount on 17 th January. What is the penalty payable payable by M? (June 2009) 16

17 REFUND OF DUTY/TAX Procedure under Excise: Refund application should be filed in Form R (in duplicate) along with Original GAR-7 challan/pla/other document through which duty was paid Proof that duty burden has been borne by the assessee and has not been passed to the customer Other documents in support of refund claim E.g. Invoices Stating the reasons thereof for refund claim in a statement/application. Procedure under customs: 17

18 What is the time limit within which Refund claim must be filed? In case of Excise: Refund claim should be lodged within 1 year from Relevant Date. In case of customs: In case of imports by an individual for his Within 1 year from Relevant date personal use or import by government or by any educational, research or charitable institution, hospital In any other case Within 6 months from Relevant date What is the time limit within which the duty must be refunded to the applicant? Within 3 months from the date of application. If not so paid, 6% shall be payable to the assessee. RECOVERY PROCEDURE AGAINST CONFIRMED DEMAND ORDERS 1 The guidelines have been issued by CBEC vide circular no. 967/01/2013 on the basis of decision of SC in the case of CC V. Krishna sales (p) Ltd. (1994). Where commissioner (Appeals) confirms the demand in the order in original Recovery proceedings shall be initiated IMMEDIATELY in the following cases Where Tribunal or High court confirms the demand, with no stay in operation Where no appeal is filed with commissioner (Appeals)/CESTAT Recovery to be initiated after the expiry of statutory period of filing appeal i.e. 60 days/90 Where an appeal is filed with Commissioner (Appeals)/ CESTAT, without a stay application Where an appeal is filed with a stay application with commissioner (Appeals)/ CESTAT days Recovery to be initiated after filing of such appeal, without waiting for the statutory period of filing an appeal to be exhausted. Recovery to be initiated 30 days after filing of appeal, if no stay is granted, otherwise as per the conditions of the stay order 1 Many high courts, including Andhra Pradesh and Madras High court, have granted an interim stay against this circular. 18

19 LAND MARK & RECENT CASES: CCE (A) v. KVR Construction (2012) (Kar.) & Swastik Sanitarywares Ltd. v. UOI (2013) (Guj.). Issue Involved: KVR Construction was a construction company rendering services under category of construction of residential complex service and were paying service tax in accordance with the provisions of the Finance Act, They undertook certain construction work on behalf of a trust and paid service tax accordingly. However, later they filed refund claim for the service tax so paid contending that they were not actually liable to pay service tax as it was exempt. Department also did not dispute the fact that service tax was exempted in the instant case. However, the refund claim was rejected on the ground that same was filed beyond the limitation period provided in section 11B of Central Excise Act. Is assessee eligible to claim refund on service tax paid on construction activity so done by them? CCE v. Flock India Ltd. (2000) (S.C) Decision: Service tax paid mistakenly under construction service although actually exempt, was payment made without authority of law. Mere payment of amount would not make it service tax payable by the assessee. The High Court opined that once there was lack of authority to collect such service tax from the assessee, it would not give authority to the Department to retain such amount and validate it. Further, provisions of section 11B of the Central Excise Act, 1944 apply only to a claim of refund of excise duty/service tax, and could not be extended to any other amounts collected without authority of law. Consequently, such amount is repayable to the assessee by the Department. Where an adjudicating authority has passed an order which is appealable under the statute and the party aggrieved did not choose to exercise the statutory right of filing an appeal it is not open to the party to question the correctness of the order of the adjudicating authority subsequently by filing a claim for refund. If this position is accepted then the provisions for adjudication and appeal in the Act and the Rules will lose their relevance and the entire exercise will be rendered redundant. Vishnu M Harlalka v. Union of India (2013) (Bom) Issue Involved: Whether any interest is payable on delayed refund of sale proceeds of auction of seized goods after adjustment of expenses and charges in terms of section 150 of the Customs Act, 1962? 19

20 Decision: The High Court held that Department cannot plead that the Customs Act, 1962 provides for the payment of interest only in respect of refund of duty and interest and hence, the assessee would not be entitled to interest on the balance of the sale proceeds which were directed to be paid by the Settlement Commission. The High Court clarified that acceptance of such a submission would mean that despite an order of the competent authority directing the Department to grant a refund, the Department can wait for an inordinately long period to grant the refund. The High Court directed the Department to pay interest from the date of approval of proposal for sanctioning the refund. Commissioner of C. Ex., Mumbai-III v. Tikitar Industries, (2012) (S.C.) Ranbaxy Laboratories Ltd. V. UOI 2011 (SC) CCE V. Techno rubber Industries P. Ltd (Kar.) CCE V. Gem properties P. Ltd (Kar.) Issue Involved: The assessee was a manufacturer of the Bitulux Insulation Board known as TikkiExjo Filler. The TikkiExjo Filler was obtained by the process of bituminization of the insulation board. The adjudicating authority concluding that the above process amounts to manufacture, levied excise duty on it. Aggrieved by the order, the assessee carried an appeal before the Commissioner (Appeals), who accepted the assessee s stand and held that the above process did not amount to manufacture. Department did not appeal against it and the above order of the appellate authority attained finality. In the meantime, the Revenue issued several demand notices to the assessee directing the assessee to pay the duty, but for a time period different from the period covered in the said appeal. Decision: The Supreme Court held that since the Revenue had not questioned the correctness or otherwise of the findings on the conclusion reached by the first appellate authority, it might not be open for the Revenue to contend this issue further by issuing the impugned show cause notices on the same issue for further periods. Interest under sec. 11BB becomes payable on the expiry of a period of 3 months from the date of receipt of the application for refund [But not from the date of order of refund] The assessee is eligible to get refund on the basis of debit note issued by the buyer, as the excess amount paid by assessee to department is not passed to buyer. When the assessee has paid excess duty and included it in the cost of production, it is a case of unjust enrichment and refund shall not be granted unless otherwise assessee proves that duty paid is not included in the cost of production. [Mere loss in the financial year is not proof] 20

21 CCus. Chennai V. BPL Ltd (Mad.) Aman Medical products V. CCus, Delhi 2010 (Del.) Narayan Nambiar Meloths V. CCus 2010 (Ker.) Only CA certificate is not valid to substantiate refund claim as the said certificate is mere evidence acknowledging certain facts. Refund is available to the importer is he has paid higher duty by filing bill of entry even though the payment is not in pursuance of an assessment order. Refund is available on the basis of attested copy of GAR-7 challan also [No need to file original GAR-7 challan] CASE STUDIES: 1 M/s. HIL imports copper concentrate from different suppliers. At the time of import, the seller issues a provisional invoice and the goods are provisionally assessed under section 18 of the Customs Act, 1962 based on the invoice. When the final invoice is raised, based on the price prevalent in the London Metal Exchange on a predetermined date based on the covenant in the contract between the buyer and seller, the assessments are finalized on such invoices. M/s HIL has filed a refund claim arising out of the finalization of the bill of entry by the authorities. The department, however, has rejected the refund claim on the grounds of unjust enrichment. Discuss whether the action of the department is correct in law? 2 Malhotra Ltd. imported certain parts of a machine and filed a Bill of Entry. Malhotra Ltd. paid a higher duty in ignorance of a notification which allowed him payment of duty at a concessional rate. Later Malhotra Ltd filed a refund claim under section 27 of the Customs Act,1962 by producing a certificate issued by a Chartered Accountant (CA) to establish that the amount of duty in relation to which such refund is claimed, has not been passed on by him to any other person. The refund claim was rejected by the department as there was no other evidence (like balance sheet, ledged accounts, sales invoices prior to or after import etc.) other than the certificate issued by CA. Discuss with reference to decided case law, if any, whether the stand taken by the Department is correct in law. 3 Naveen Constructions was a construction company rendering services under the category of construction of residential complex service and was paying the service tax in accordance with the Finance Act, They undertook certain construction work on behalf of a trust and paid the service tax. The Department s action will be correct if M/s HIL does not produce any evidence of bearing the burden of duty. Yes, the Department s plea is justified in law. The facts of the given case are similar to the case of CCus., Chennai v. BPL Ltd The certificate issued by the Chartered Accountant was merely a piece of evidence acknowledging certain facts. No, the Department is not justified in rejecting the refund claim. The facts of the given 21

22 However, later they filed refund claim for the service tax so paid contending that they were not actually liable to pay service tax as it was exempt. Although Department did not dispute the fact that service tax was exempted in the instant case, it nevertheless rejected the refund claim on the ground that the refund application filed by the assessee was beyond the limitation period as stated in section 11B of the Central Excise Act, Is the Department correct in rejecting the refund claim? Substantiate your answer with the help of a decided case law, if any. 4 Duty demand of 10 lakh was made in terms of an order in original dated against XYZ Ltd. with interest as applicable on the ground of clandestine removal of the products manufactured by the assessee in the month of June, Penalty equal to duty demanded was also imposed. On an appeal filed by XYZ Ltd., the Commissioner (Appeals) required it to deposit an amount of 5 lakh as pre-deposit which was duly deposited on The case against XYZ Ltd. was finally decided and duty demand of 3,20,000 was confirmed and penalty was set aside on XYZ Ltd. filed a refund claim on Refund was sanctioned on Calculate the amount of refund admissible. 5 M/s MM & Co., a machinery manufacturer, effected clearances from its factory with effect from by payment of duty under protest and had also filed an appeal against the order for payment of duty. On , one of its customers M/s BB & Co. purchased the machines from M/s MM & Co. On , the appeal filed by M/s MM & Co. was decided in favour of M/s MM & Co. Pursuant to the said order in the appeal filed by M/s MM & Co., its customer M/s BB & Co. filed a refund claim on claiming refund of duty suffered by M/s BB & Co. This claim for refund of duty was rejected by the department on the ground of unjust enrichment as well as on the ground of limitation. Explain briefly with reference to section 11B of the Central Excise Act, 1944 whether the action of the department is correct in law. 6 Deputy Commissioner of Central Excise passes an adjudication order classifying the goods manufactured by MTZ under heading and charges 10% ad valorem. MTZ pays the duty without challenging the adjudication order. After 4 months they realise that partial exemption under a notification was available to goods manufactured by them. They file a claim for refund of duty paid in excess on the ground that benefit of exemption can be claimed at any time Are MTZ entitled to the refund of duty claimed in time? (Note : Presume that principle of unjust enrichment does not case are similar to the case of CCE (A) v. KVR Construction Total Refund admissible = 1,82,101 Since the refund claim filed by M/s. BB & Co., the purchaser, was not within a period of one year from the date of purchase, being , the same is barred by period of limitation. Thus, the Department s action is correct in law. MTZ cannot claim refund by filing a claim for the same. The facts of the case is similar to the case of CCE v. Flock India Ltd. (S.C) 22

23 apply). 7 M/s. Export & Sons filed a claim for rebate of central excise duty between April and May, The Assistant Commissioner, vide order dated rejected the claim. On appeal, the Commissioner (Appeals) allowed the rebate claims vide order dated The rebate claims were sanctioned to M/s. Export & Sons within three months of receipt of order of the Commissioner (Appeals). However, on account of delay in payment of rebate, M/s Export & Sons filed a claim for interest under section 11BB of the Act on the contention that interest liability commences from the date of expiry of 3 months from the date of receipt of application for refund. The Assistant Commissioner, relying upon the Explanation to section 11BB of the Central Excise Act, rejected the claim for interest filed by M/s. Export & Sons. The Assistant Commissioner was of the view that interest liability will arise only from the date of expiry of 3 months from the date on which the order of refund is made and not from the date of receipt of application of refund. Examine, with the help of decided case, whether the rejection of interest for delayed sanction of rebate claims is justified. The rejection of interest by the Assistant Commissioner for delayed sanction of rebate claims is not justified. The facts of the case are similar to the case of Ranbaxy Laboratories Ltd. v. UOI (2011) (SC) 23

24 APPEALS What is the time limit for filing appeal? Appeal to Commissioner (Appeals) CESTAT Time limit Within 60 days (3 months in case of Service tax) after the receipt of adjudication order Within 3 months after the receipt of adjudication order What is departmental appeal/review? The adjudicating authority is a quasi-judicial authority when it passes adjudication order. Hence the order cannot be straight away annulled (declared to be no longer valid) by any authority higher to him. 24

25 However if the higher authority is of the opinion that the order is not proper, it can order for its review by higher appellate authority (i.e. Commissioner (Appeals) or CESTAT). This is known as departmental appeal or review. What is the time limit for departmental appeal/review? Appeal to Commissioner (Appeals) CESTAT Time limit Within 3 months from the decision or order of adjudicating authority Within 3 months from the communication of order of commissioner 25

26 LAND MARK & RECENT CASE LAWS: Khanapur Taluka Coop. Shipping Mills Ltd. v. CCEx. (2013) (Bom.) Issue Involved: The assessee filed a writ petition to the High Court challenging the correctness of the order-in-original. It further contended that although the appeal filed by it had been dismissed by the appellate authorities on the ground that same had been time-barred, it was entitled to challenge the correctness of the order-in-original in a writ petition. Decision: The High Court referred to the case of Raj Chemicals v. UOI 2013 (Bom.) wherein it held that where the appeal filed against the order-in-original was dismissed as time-barred, the High Court in exercise of writ jurisdiction could neither direct the appellate authority to condone the delay nor interfere with the order passed by the adjudicating authority. Consequently, it refused to entertain the writ petition in the instant case. Texcellence Overseas v. Union of India (2013) (Guj.) Facts of the case: The petitioner was granted a refund by way of order-inoriginal and the same was also upheld by the CESTAT. However, a fresh show cause notice was issued on the ground that refund was erroneously granted. The show cause notice, this time was adjudicated in favour of the Department. The petitioner challenged this order before Commissioner (Appeals) five months after the said order was passed. As per section 35 of the Central Excise Act, 1944, an appeal needs to be filed with the Commissioner (Appeals) within 60 days from the date of the communication of the order sought to be appealed against. However, the Commissioner (Appeals) is empowered to condone the delay for a period of 30 days if he is satisfied with the sufficiency of the cause of the delay. Therefore, the Commissioner (Appeals) and Tribunal (when the matter was brought before it) rejected the appeal on the grounds of limitation as the same was filed beyond three months from the date of the impugned order. Decision: The High Court opined that since the total length of delay was very small and the case had extremely good ground on merits to sustain, its non interference at that stage would cause gross injustice to the petitioner. Thus, the High Court, by invoking its extraordinary jurisdiction, quashed the order which held that refund was 26

27 erroneously granted. The High Court held that such powers are required to be exercised very sparingly and in extraordinary circumstances in appropriate cases, where otherwise the Court would fail in its duty if such powers are not invoked. Principle laid down by High court for the present case: The High Court has extraordinary powers to interfere in appropriate cases even while upholding the contention that there is statutory limitation to which delay can be condoned by the authorities. If an aggrieved person knocks the door of the High Court seeking redressal under writ jurisdiction to obviate extraordinary hardship and injustice, such plea can be entertained even beyond the period of limitation. Habib Agro Industries v. CCEx. (2013) (Kar.) Margara Industries Ltd. v. Commr. of C. Ex. & Cus. (Appeals) (2013) (All.) Note: Gujrat HC has taken a contrary view from the above mentioned case. Facts of the case: The application for filing appeal to CESTAT was filed with a delay of 45 days. The reason for the delay was that the authorised representative who dealt with the case had gone abroad for about a month. On his return, his mother had expired. After attending obsequies, the appeal was filed. However, the Tribunal dismissed the said application holding that there was no sufficient cause shown for condonation of delay. Decision: The High Court observed that there did not appear to be any deliberate latches or neglect on the part of the authorised representative to file the appeal. It held that the reason for delay in filing appeal to CESTAT, that the person dealing with the case went on a foreign trip and on his return his mother expired, could not be considered as unreasonable for condonation of delay. Delay in filing appeal to CESTAT can be condoned if it is on account of the mistake of counsel 27

28 Rishiroop Polymers Pvt. Ltd. v. Designated Authority (2013) (Bom.) KSJ Metal Impex (P) Ltd (2013) (Mad.) Issue Involved: Can a writ petition 2 be filed against an order passed by the CESTAT under section 9C of the Customs Tariff Act, 1975? Decision: Writ petitions should not be entertained by the High Court under Article 226 of the Constitution of India when alternate remedies are available under the relevant statute. Courts have held that where a hierarchy of appeals is provided under the relevant statues, taxpayers must exhaust the statutory remedies before resorting to writ jurisdiction. Writs are usually considered to be extraordinary remedies which are permitted only when there is no other adequate remedy, such as an appeal. In other words, a writ can be filed to contest a point that cannot be raised in an appeal. Since, writ petitions are heard more quickly than appeals, the same are preferred by the assessees to secure a speedy review of some issue when the matter is urgent. The High Court, therefore, held that it would not be appropriate for the company to exercise the jurisdiction under Article 226 of the Constitution, since an alternate remedy by way of an appeal was available in accordance with law. The High Court thus, dismissed the petition leaving it open to the assessee to take recourse to the appellate remedy. Interest will be payable in case of refund of special CVD under sec. 3(5) of CTA, provided such refund is not granted within time as prescribed under sec. 27A of the Act 2 A writ petition is a filing that a party makes with an appeals court in order to secure a speedy review of some issue. A writ petition is essentially a court petition for extraordinary review, asking a court to intervene in a lower court s decision. The most common writ petitions are writs of mandamus and writs of prohibition. Writs of mandamus ask an appellate court to issue a court order requiring that a lower court do something, while a writ of prohibition asks the court to prohibit a lower court from doing or enforcing something. A writ of certiorari is a writ sent to the highest appellate court. A writ of certiorari seeks Supreme Court review and decision in a case that has exhausted its appeals and is otherwise at the end of the line. 28

29 Raja Mechanical Co. (P) Ltd., (2012) (S.C.) Issue Involved: Whether doctrine of merger 3 is applicable when appeal is dismissed on the grounds of limitation and not on merits? Decision: The Supreme Court held that since the Revenue had not questioned the correctness or otherwise of the findings on the conclusion reached by the first appellate authority, it might not be open for the Revenue to contend this issue further by issuing the impugned show cause notices on the same issue for further periods. The Court observed that if for any reason an appeal is dismissed on the ground of limitation and not on merits, that order (order of adjudicating authority) would not merge with the orders passed by the first appellate authority. The Apex Court opined that the High Court was justified in rejecting the request made by the assessee for directing the Revenue to state the case and also the question of law for its consideration and decision. In view of the above discussion, Supreme Court rejected the appeal. Commissioner of Central Excise v. Rajendra Narayan 2012 (281) E.L.T. 38 (Del.) Facts of the Case: The respondent-assessees were carrying on construction of the Delhi Metro. They had manufactured pre-fabricated components, which have been used in the construction of the Delhi Metro. The assessee claimed exemption from payment of duty under 3 DOCTRINE OF MERGER: The doctrine of merger is neither a doctrine of constitutional law nor a doctrine which is recognized statutorily. It is the fusion or absorption of a lesser right with a greater right; or merger of the order of lower appellate authority [e.g. Commissioner (Appeals]) with the order of a higher appellate authority [e.g. CESTAT]. Since, there cannot be more than one operative order governing the same subject-matter at one and the same time, the judgment of a lower appellate authority, if subjected to an examination by the higher appellate authority, ceases to have existence in the eye of law and is treated as being superseded by the judgment of the higher appellate authority. In other words, the judgment of the lower appellate authority loses its identity by its merger with the judgment of the higher appellate authority. However, the doctrine of merger cannot be applied universally. It cannot be said that wherever there are two orders, one by the lower appellate authority and the other by a higher appellate authority, passed in an appeal or revision, there is a fusion or merger of two orders irrespective of the subject-matter of the appellate or revision order and the scope of the appeal or revision contemplated by the particular statute. The application of the doctrine depends on the nature of the appellate or revision order in each case and the scope of the statutory provisions. 29

30 Notification No. 1/2011-C.E. dated which exempts the goods covered under specified chapter headings for a specified period, manufactured at the site of construction for use in construction work at such site. The Department contended that the respondent-assessees were not entitled to claim the exemption as said goods were not manufactured at the site of the construction for use in the construction work at the site. Thakker Shipping P. Ltd. (2012) (S.C.) Decision: The Court noted that Delhi Metro Rail Corporation Ltd. had contracted and called upon the respondent-assessee to construct pre-fabricated components of different segments to be used in elevated viaducts etc. For the purpose of pre-fabricating the components a specific casting yard, premises was allotted by Delhi Metro Rail Corporation Ltd. The said casting yard constituted the construction site. From the said construction site, components had been moved to different locations where elevated viaducts of the tunnel were being constructed. The Court held that keeping in view the facts of the case and that the construction was done virtually all over Delhi and construction sites were interconnected, practically prefabrication was done on construction site only. Therefore, it allowed the appeal in the favour of the respondent- assessee. Section129A(5): The Appellate Tribunal may admit an appeal or permit the filing of a memorandum of cross-objections after the expiry of the relevant period referred to in sub-section (3) or subsection (4), if it is satisfied that there was sufficient cause for not presenting it within that period. Section 129D(4): Where in pursuance of an order under subsection (1) or sub-section (2), the adjudicating authority or any officer of customs authorised in this behalf by the Commissioner of Customs, makes an application to the Appellate Tribunal or the Commissioner (Appeals) within a period of one month from the date of communication of the order under sub-section (1) or sub-section (2) to the adjudicating authority, such application shall be heard by the Appellate Tribunal or the Commissioner (Appeals), as the case may be, as if such application were an appeal made against the decision or order of the adjudicating authority and the provisions of this Act regarding appeals, including the provisions of section 129A(4) shall, so far as may be, apply to such application. 30

31 Issue Involved: The question which arose for consideration before this Court was whether it was competent for the Tribunal to invoke section 129A(5) where an application under section 129D(4) had not been made by the Commissioner within the prescribed time and to condone the delay in making such application if it was satisfied that there was sufficient cause for not presenting it within that period. Mihani Network V. CC&CCE (2012) (MP) Decision: The High Court observed that Parliament intended that entire section 129A, as far as applicable, should be supplemental to section 129D(4). For the sake of brevity, instead of repeating what had been provided in section 129A as regards the appeals to the Tribunal, it had been provided that the applications made by the Commissioner under section 129D(4) should be heard as if they were appeals made against the decision or order of the adjudicating authority and the provisions relating to the appeals to the Tribunal would apply in so far as they might be applicable. The expression, including the provisions of section 129A(4) was by way of clarification and had been so said expressly to remove any doubt about the applicability of the provision relating to cross objections to the applications made under section 129D(4) otherwise it could have been inferred that provisions relating to appeals to the Tribunal had been made applicable and not the cross objections. The use of expression so far as may be was to bring general provisions relating to the appeals to Tribunal into section 129D(4). Consequentially, section 129A(5) also stood incorporated in section 129D(4) by way of legal fiction and must be given effect to. In other words, if the Tribunal was satisfied that there was sufficient cause for not presenting the application under section 129D(4) within prescribed period, it might condone the delay in making such application and hear the same. In light of the above discussion, the High Court ruled that the Tribunal was competent to invoke section 129A(5) where an application under section 129D(4) had not been made within the prescribed time and condone the delay in making such application if it was satisfied that there was sufficient cause for not presenting it within that period. There is no legal provision which provides for condoning the delay in filing the appeal on a condition of depositing 50% of tax amount. Delay in filing appeal is condoned or refused depending upon the sufficiency of cause for delay. If the party is found to be prevented by a sufficient cause to the satisfaction of the appellate 31

32 CCE V. RDC concrete (India) P. Ltd (SC) CCE V. Gujchem Distillers 2011 (Bom) Ccus. V. Trilux Electronics 2010 (Kar.) CCE & ST V. Volvo India Ltd (Kar.) Nanumal Glass works V. CCE, Kanpur (2012) (Allahabad) authority/tribunal, the delay is condoned and if not found to be prevented by sufficient cause, the delay is not condoned. While hearing the application for rectification of mistake by the CESTAT, the arguments not accepted earlier cannot be accepted (i.e. re-appreciation of evidence not possible), as re-appreciation of mistake cannot be said to be rectification of mistake apparent on record. CESTAT cannot dispose of the appeal on a new ground which was not laid before the adjudicating authority. CESTAT should remand the matter back to the adjudicating authority. If an order was passed by CESTAT based on consent (decision subject to certain events to be fulfilled), the revenue could not pursue an appeal against such order in a higher forum. High court has no jurisdiction to adjudicate the case relating to rate of service tax and value of taxable services. Such appeal lies with supreme court, which alone has exclusive jurisdiction to decide the said question. When a decision is pronounced in the open court in the presence of the advocate of the assessee, who is the authorized agent of the assessee, the date of pronouncement of order would be deemed to be the date of service of order. What is the procedure for filing appeal to tribunal? Note: 1. Furnishing of PAN by the appellant has been made mandatory. 2. In case where PAN is not available and the appellant is having UID (unique identification), the same is required to be furnished. 32

33 3. Furnishing of IEC (Import Export Code) has been made mandatory in the appeal form for customs. 4. Tribunal may at its discretion, refuse to admit an appeal if the duty involved or difference of duty involved or penalty involved is less than Rs. 50,00, However, appeal cannot be refused if the issue pertains to valuation or rate of duty 6. CESTAT can admit an appeal filed by the assessee after the expiry of the statutory period for filing the same i.e. 4 months if it is satisfied that there was sufficient cause for not presenting it within that period. 7. The memorandum of cross objections should be filed within 45 days from the date of receipt of such notice from the CESTAT 8. Tribunal has no powers to review its orders. However, Tribunal can pass order for rectifying mistake apparent from the records within 6 months of passing of order. Procedure for filing departmental appeal with CESTAT under sec. 35B(2) of CE Act, 1944 and 129A(2) of Customs Act, 1962: The appeal or application shall be filed in quadruplicate accompanied by an equal number of copies of the decision or order (one of which at least shall be a certified copy) Time limit for disposal of appeal: The Appellate Tribunal shall, where it is possible to do so, hear and decide every appeal within a period of 3 years from the date on which such appeal is filed: Provided that where an order of stay is made in any proceeding relating to an appeal filed under sub-section (1) of section 35B, the Appellate Tribunal shall dispose of the appeal within a period of 180 days from the date of such order: Provided further that if such appeal is not disposed of within the period specified in the first proviso, the stay order shall, on the expiry of that period, stand vacated. CESTAT has been empowered to grant stay by another 185 days 4 : (i) On an application made in this behalf by a party and (ii) On being satisfied that the delay in disposing of appeal is not attributable to such party. 4 W.e.f In case the appeal is not disposed of within the total period of 365 days from the date of stay order, the stay order shall, on the expiry of 365 days, stand vacated. 33

34 CASE STUDIES: 1 The Committee of Commissioners of Customs is empowered under the Customs Act, 1962 to direct the filing of an appeal before the Appellate Tribunal in certain cases while in certain others, the Committee of Chief Commissioners may direct an application to be filed before the Appellate Tribunal for determination of such points arising out of the decision or order as may be specified by the said Committee. Write a brief note on the powers of the Committee of Commissioners /Committee of Chief Commissioners of Customs bringing out the difference in the exercise of such powers 2 M imported second-hand machinery from Singapore and claimed that the machinery was fully exempt from payment of customs duty under a Notification. However, the Assistant Commissioner of Customs, the authority in original, passed an order-in-original holding that the machinery imported by M was classifiable under a different heading and chargeable to customs duty. Consequently, M had to furnish the bank guarantee for the duty payable under that heading in order to release the machinery. Subsequently, the Assistant Commissioner of Customs ordered to encash the bank guarantee executed by M to realise the customs duty. No sooner the aforesaid order-in-original was issued to M, the Customs Department invoked the bank guarantee by sending an intimation- cum-request to the Bank to pay to them the amount of bank guarantee. M contended that the order of the Assistant Commissioner was an appelable order and since the statutory period of filing an appeal was yet to expire, the Department s action was not correct. Do you think the stand taken by the Customs Department is tenable in law? Discuss. 3 Rishabh Internationals Ltd. (RIL) was engaged in providing certain services on which it did not pay any service tax. As per RIL, said services were not liable to service tax. However, Department issued a show cause notice to RIL demanding service tax alongwith interest worth 5,45,000 on the same. Committee of Commissioners of Customs may direct the proper officer to file appeal on its behalf to CESTAT. This is a regular appeal to be filed within 3 months. Committee of Chief Commissioners of Customs may, by order, direct such Commissioner or any other Commissioner to file review application to CESTAT. This is to be filed within 4 months it was not proper on the part of the Department to encash the bank guarantee before the expiry of the statutory period provided for filing appeal. In the given case also, M had a statutory right to file an appeal and get the pre-deposit waived. The stand taken by the department is not teneable in law Fee = 5,000 where the amount of service tax and interest demanded and 34

35 An appeal was filed to the Commissioner of Central Excise (Appeals) which passed an order confirming the demand on RIL. RIL, being aggrieved by the order of the Commissioner of Central Excise (Appeals), decided to file an appeal to the CESTAT against such order. You are required to determine the amount of the filing fees to be paid by RIL for filing the appeal to CESTAT. 4 M/s Raj Fibres had filed an appeal to the High Court on August 11, 2013 under section 35G of the Central Excise Act, 1944 aggrieved by an order passed by the Appellate Tribunal. The order appealed against was received by the assessee on January 1, The High Court dismissed the appeal petition on the ground that the same had been filed beyond the period prescribed for filing an appeal under section 35G i.e. 180 days. Examine whether the High Court was empowered to condone the delay in the said case. 5 Bhavya Limited (BL) cleared the goods to Chandi Enterprises (CE) after making payment of excise 14% in the month of March although the rate of duty on the said goods had been reduced to 12% in the Union Budget of that year. However, CE refused to pay the higher duty paid by BL by mistake and subsequently raised a debit note. BL applied for the refund of excess excise duty paid of 4,80,000 which was rejected by the Department on the ground that a debit note could not form the basis for refund. An appeal was filed to the Commissioner of Central Excise (Appeals) which passed an order accepting RIL s refund claim. You are required to examine whether, in the instant case, Revenue being aggrieved by the order of the Commissioner of Central Excise (Appeals) can file an appeal to the CESTAT against such order. penalty levied by any Central Excise Officer in the case to which the appeal relates is more than 5,00,000, but not exceeding 50,00,000. High Court can condone delay in filing appeal after the expiry of 180 days if sufficient cause is shown Revenue cannot file an appeal to CESTAT against the order passed by the Commissioner of Central Excise (Appeals) 35

36 SETTLEMENT COMMISSION It is a mechanism for speedy settlement of cases involving high revenue stakes. [This is similar to what is constituted under Income tax Act, 1961] The cases shall be settled and dues shall be paid without going through adjudication stages. The proceeding before settlement commission is deemed to be judicial proceedings for the purpose of IPC. Settlement Commission is constituted by Central Government and shall consist of one Chairman, Vice-Chairmen and other members as the Central Government may think fit. There is no scheme for settlement of cases under the service tax law. The notice shall be given, asking the assessee to explain as to why the application made by him should be allowed to be proceeded with. When the commissioner does not furnish the report within the period of 30 days from the date of communication made to him, settlement commission shall proceed further in the matter without the report of the commissioner. Having received report from the commissioner, if the settlement commission is of the opinion that any further inquiry or investigation is necessary, it may direct the commissioner (investigation) within 15 days from the date of receipt of report to make such further inquiry or investigation. The commissioner (Investigation) should furnish the report of such enquiry within 90 days from the date of receipt of communication from settlement commission. Before passing an order, an opportunity of being heard must be given to the applicant and the commissioner of excise. 36

37 LAND MARK & RECENT CASE LAWS: CCus.v. Ashok Kumar Jain (2013) (Del.) Saurashtra Cement Ltd. v. CCus. (2013) (Guj.) Settlement Commission have jurisdiction over baggage cases also. Section 127B enumerates the kinds of cases which could not be entertained by the Settlement Commission. Had the intention of the Parliament been to exclude adjudication by Customs Authorities in respect of baggage claim from the purview of the Commission s jurisdiction, such intention would have been more clearly manifested as it had been mentioned in provisos to section 127B(1). Issue Involved: Can a writ petition be filed with High court or supreme court on the decision of settlement commission? Ashwani Tobacco Co. Pvt. Ltd. v. UOI (2010) (Del.) Sanghvi Reconditioners Pvt. Ltd. V. UOI (2010) (SC) Decision: While examining the scope of judicial review in relation to a decision of Settlement Commission, the High Court noted that although the decision of Settlement Commission is final, finality clause would not exclude the jurisdiction of the High Court under Article 226 of the Constitution (writ petition to a High Court) or that of the Supreme Court under Articles 32 or 136 of the Constitution (writ petition or special leave petition to Supreme Court). The Court would ordinarily interfere if the Settlement Commission has acted without jurisdiction vested in it or its decision is wholly arbitrary or perverse or mala fide or is against the principles of natural justice or when such decision is ultra vires the Act or the same is based on irrelevant considerations. The order of settlement made by the Settlement Commission is distinct from the adjudication order made by the Central Excise Officer. Once the petitioner has adopted the course of settlement, he has to be governed by the provisions of Chapter V. Therefore, the benefit under the proviso to section 11AC, which could have been availed when the matter of determination of duty was before a Central Excise Officer did not attract to the cases of a settlement, undertaken under the provisions of Chapter-V of the Act. The Apex Court held that the application to settlement commission under section 127B of the Customs Act, 1962 is maintainable only if the duty liability is disclosed. The disclosure contemplated is in the nature of voluntary disclosure of concealed additional customs duty. The Court further opined that having opted to get their customs duty liability settled by the Settlement Commission, the appellant could not be permitted to dissect the Settlement Commission's order with a view to accept what is favourable to them and reject what is not. 37

38 RR Builders vs. CCE (2008) (HC) Mars Thereputics and Chem. Ltd. vs. CCESettlement Commission 2008 (HC) Re: Sadik Sadruddin Chunara (Sett.Comm) (2006) Commr of Customs v. Mahesh Raj (2006) (HC) UOI V. K. Amishkumar Trading P. Ltd. (2011) (HC) Icon Industries V. UOI (2011) (HC) J.R.B Engineering works V. Settlement commission (2012) (HC) Once there is a requirement prescribed by the statute by way of a qualifying condition it is not possible to admit applications which do not fulfil the requirements stipulated. An application can be admitted and proceeded with only when Settlement Commission is satisfied that applicant has made a full and true disclosure. The onus is on applicant to make a full and true disclosure of duty liability and the manner in which same is arrived at. The Person who is absconding and never appeared before the investigating agency cannot be prevented from making an application before Settlement Commission. Smugglers, habitual offenders & unscrupulous elements cannot be offered protection under the settlement scheme. It covers cases only where there is no deliberate/intended desire on part of the importer to evade/avoid payment of duty. There can be no application before settlement commission without show cause notice having been issued to the assessee. Thus, if the assessee has himself waived the requirement of issuing a SCN, he cannot, thereafter file an application before the settlement commission. By waiving the issuance of notice upon him, the assessee himself moves out of the jurisdiction of settlement commission. - An application can be filed only if the applicant has filed returns showing production, clearance and central excise duty paid in the prescribed manner. - A consolidated return covering more than one period cannot be considered as return filed in prescribed manner. - Hence, the settlement commission can reject the application in such case. When an applicant has neither registered with the excise department nor has filed any declaration or return during the relevant period, the condition specified in the provisions of sec. 32E has not complied with ash therefore, the settlement commission was not maintainable at all. CASE STUDIES: 1 Briefly explain whether the following statements are correct with reference to the Central Excise Act, (i) Time limit for passing of the settlement order in terms of Section 32F(6) is nine months from the last day of the month in which the application was made and no extension of this period is permissible. (ii) An assessee cannot apply for settlement more than once. (i) Incorrect, the period can be further extended by 3 months (ii) Incorrect 38

39 2 The assessee s premise was searched by the Anti Evasion wing of the Excise Department. A show cause notice was issued alleging that the assessee had cleared goods without the cover of duty paid invoice and without accounting the same in the stock register. The assessee was required to pay the duty demanded with interest. The assessee filed an application before the Settlement Commission to put an end to the litigation and buy peace. The application was dismissed by the Settlement Commission on the ground that the petitioner had not made a true and full disclosure of his duty liability and the manner in which same was arrived at was also not correct. The assessee's contention is that Department is yet to substantiate the allegations made in the show cause notice and further the obligation to make truthful disclosure of duty liability would arise only after the application was admitted and not before that. Thus, the dismissal order is not correct in law. Briefly discuss, with the help of decided case law, whether the action of the Settlement Commission is correct in law. 3 M/S Jagannath got its unit Jagannath Internationals Limited (JIL) registered after few days of the search conducted in its unit. Thereafter, it filed a consolidated return with the Department for the period prior to search. After that, it filed a settlement application in respect of the proceedings issued by the Commissioner. The Settlement Commission opined that the units were registered only after the search was conducted and prior to that there was no registration and no returns as mandated by clause (a) of first proviso to section 32E(1) of the Central Excise Act, 1944 were filed. Consequently, the Commission rejected the settlement application on the ground that the application did not conform to the parameters as stipulated under section 32E(1) of the Act. Explain, with the help of a decided case law, whether the rejection order passed by Settlement Commission is valid in law? 4 50 lakh drawback was paid to M/s. Sun Export Ltd. Subsequently the Commissioner of Customs issued a show cause notice for recovery of the erroneously paid drawback. M/s. Sun Export Ltd. filed an application for settlement of case before the Settlement Commission. The Commissioner disputed the jurisdiction of the Settlement Commission by contending that recovery of drawback did not involve levy, assessment and collection of customs duty as envisaged under section 127A(b) of the Customs Act. Discuss with the help of decided case whether the stand taken by the Commissioner is correct. The dismissal order is valid in law. The facts of the case are similar to the case of Mars Therapeutics & Chem. Ltd (2008)(HC) Yes, the rejection order passed by Settlement Commission is valid in law. The facts of the given case are similar to case of Icon Industries (2011) (HC) No, the stand taken by the Commissioner is not correct. duty drawback or claim for duty drawback is nothing but a claim for refund of duty may be as per the statutory scheme framed by the Government of India or in exercise of statutory powers under the provisions of the Act 39

40 5 Discuss the correctness of the following (i) Mr. A s case is pending in appeal before commissioner (Appeals). Since the appeal is pending, Mr. A wants to file an application to the settlement commission. (ii) Mr. B has not paid duty on excisable goods valuing 20 lakhs (AV). His case is pending before the adjudicating authority. Mr. B wants to file an application to the settlement commission. The rate of excise duty is 14%, Education cess 2% and SHEC is 1%. (iii) Mr. X filed an application before the settlement commission on 1/7/2012. The commission passed an order in respect of such application on 1/5/2013 See below for the answer Answer to Question No. 5: (i) (ii) (iii) Incorrect: Only the proceedings pending before an adjudicating authority comes within the meaning of Case. Since commissioner (Appeals) is not adjudicating authority, proceeding pending before him will not be regarded as case for the purpose of settlement. Incorrect: For filing the application before settlement commission, the amount of additional duty accepted by the applicant must exceed 3 lakhs. Since, in this case, the amount of excise duty payable by Mr. B is 14.42% of 20 lakhs = 2,88,400 which is less than 3 lakhs, Mr. B cannot file an application before the settlement commission. Incorrect: The settlement commission must pass the final order within 9 months from the last day of the month in which the application was made. The aforesaid period of 9 months may, for reasons to be recorded in writing, be extended by the settlement commission for a further period not exceeding 3 months. Assuming that the said delay forms part of an extension of time-limit by the settlement commission, the order is well within the extended time limit. 40

41 ADVANCE RULING Central Excise Act, 1944 Customs Act, 1962 Finance Act, 1994 Section 23A Section 28E Section 96A Who can make application for Advance ruling? Any public sector company (MEANS any corporation established by or under any central, state or provincial Act or a Government company) Resident public limited companies. (Public limited company as defined under sec. 3 of Companies Act, 1956) A Non-resident/ Resident setting up a joint venture in India in collaboration with a Non resident/ resident A wholly owned subsidiary Indian company, of which Holding is a foreign company A Joint venture in India A resident falling within any such class or category of persons, as specified by central government. 41