CEACT1944

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CHAPTER-I

THE CENTRAL EXCISE ACT, 1944

S.1 : Short Tile, Extent and Commencement : The name of this Act is

Central Excise Act, 1944. It comes into force on 28-2-1944. It extends to the

whole of India. It has been extended further upto the designated areas in the

Continental Shelf and Exclusive Economic Zone, i.e. upto 200 nautical miles

in the sea.

S.2 : Definitions:

2(a) : Adjudicating Authority(AA) : He is a Central Excise Officer(CEO).

His functions are quasi judicial in character. Functions assigned under the

Act are performed by all the CEOs. But they cannot take a decision or pass

an order. The power to take decision and pass orders is vested in the AA.

The power of the AA rises with his status starting from Assistant

Commissioner(AC) and ending with Chief Commissioner(CCCE).

The following are not AAs :-

(1) Commissioner of Central Excise(Appeals)

(2) Central Board of Excise and Customs

(3) Customs, Excise and Service Tax Appellate Tribunal.

2(b) : Central Excise Officer(CEO) : This person is equivalent to Proper

Officer in Customs Act. The term covers CCCE, CCE, Addl.CCE, J.C, D.C,

A.C or any other person of Central Excise Department invested by the Board

to perform certain functions under Central Excise Act.

2( c) : Curing : This is a process that amounts to manufacture and hence

curers are liable to pay Excise Duty(e.g.) Coffee Curers. The term curing

includes – (i) Wilting (slow drying-green tea leaves are wilted by exposing

them to fan wind continuously for 3 or 4 days. Even tobacco leaves re

wilted.) (ii) Drying.[By applying heat/By exposure to sunlight] (iii)

Fermenting.(Coir, Jute, etc.)[By keeping under water]

2(d) : Excisable Goods : Laddoos made by the Balaji Temple at Tirupathi

are (fast) movable and (easily) marketable. They are by all means “Goods”;

but they do not attract Excise Duty(ED). Why? Because they are not

excisable goods.


What are Excisable Goods? : They are goods that find place in Central

Excise Tariff (Schedule I). Salt is also excisable goods. It finds place in the

Tariff. Laddoos do not find place in Central Excise Tariff and hence they

don not attract ED.

Goods : Excise Act defines “excisable goods”; but does not define

“goods”! How can we understand “excisable goods” without understanding

what goods are? Let us see how the courts looked at goods?

Why does a person manufacture goods? To make money. How to make

money? By selling the goods. How to sell them? By marketing them. How

to market? By moving them to market.

It has thus been established by judicial pronouncement that ‘Goods’ under

excise law should be movable and marketable. Both the conditions should be

satisfied. Is actual sale necessary? No! The article should be capable of being

sold to consumers.

Explanation to 2(d) :”Goods includes any article, material or substance

which is capable of being bought and sold for a consideration and such goods

shall be deemed to be marketable”.

To sum up, excisable goods should possess three characteristics-

(1) Mobility; (2) Marketability; (3) Excisability

2(e) : Factory : Factory covers any premises. It is not necessary that the

premises should be registered as a factory in the Factories Act. It may be

even a house.

Precincts also are included. Factory building is the premises wherein

manufacture takes place. The factory building is encircled by a big

compound wall, running to miles in big factories. The area enclosed by the

compound wall is called precinct. Factory covers premises as well as

precincts. Therefore even the canteen, cycle stand and recreation club

located inside the compound wall fall under factory.

It is a place wherein excisable goods, other than salt, are manufactured.

Normally factory is a place of manufacture of goods. But in Central Excise

law the place of manufacture gets recognition as “factory” only if it is

engaged in the manufacture of excisable goods. If the goods manufactured

are non-excisable goods, then the premises cannot be called “Factory” under

CE Act.


Any place wherein any manufacturing process connected with the production

of excisable goods is being carried on or is ordinarily carried on also falls

under “factory” The process should be a manufacturing process. It should

have nexus with the production of excisable goods.

According to CE Rules 9, the place of manufacture viz., Factory need

registration u/s 6 of CE Act. The Registration is not owner-wise; it is factory-

wise. If the machines are planted in different places (within different

Compounds) then each is a factory and there should be separate RC for each

factory.

2(ee) : Fund : Fund means Consumer Welfare Fund created u/s 12-C of

Central Excise Act. Refunds of Customs Duty, Central Excise Duty and

Service tax not payable to applicants, are credited to the fund. Money in the

consumer welfare fund is used for the welfare of consumers only.

2(f) : Manufacture : Excise Duty is leviable on the manufacture of

excisable goods. What is manufacture ? The law gives an inclusive definition

for the term manufacture and not a specific definition.

Manufacture needs a process. Without a process manufacture is not

possible., But every process need not necessarily result in manufacture.

(Processing is different from manufacturing). There should be inputs(raw

materials). They should be subjected to processing. As a result a new

product quite different from the inputs should be obtained. The finished

product must have a distinct name, character and use quite different from the

inputs.

Main product comes under manufacture. By Product comes under

production. For excisability purposes manufacture or production is the

criterion. Main product or by-product makes no difference.


CHAPTER – II

LEVY AND COLLECTION OF DUTY

S.3 : Charging Section :

S.3(1) : Charging Provisions : Excise duty is levied on all excisable goods

manufactured or produced in India. All the goods mentioned in Schedule I

to CETA suffer a duty called “Cenvat”. Some of them fine mention in

Schedule II to CETA. They attract a duty called SED(Special Excise Duty).

Schedule II goods suffer Cenvat as well as SED. The goods manufactured in

SEZ are excluded from the levy. They may be called excluded excisable

goods. The duty so levied is collected at the time of removal (CE Rule 4) at

the rates prevalent then (CE Rule 5). Tariff rates are spelt out by CE Tariff.

Proviso to S. 3(1) : Excisable goods manufactured in 100% Export Oriented

Undertaking, Electronic Hardware Trade Park, Software Trade Park, and

Bio-Technology Park attract excise duty. But on removal to DTA(Domestic

Tariff Area) Excise Duty is payable as per Customs Tariff. Valuation shall be

as per Customs Act. If there are varying Customs rates, then the highest rate

shall be applied.

S. 3(1A) : Government Goods : Excisable goods manufactured by or for

Government (Union/State) are not excluded from the levy. Government

goods suffer duty on par with non-Government goods.

S.3(2) : Tariff Value : For certain goods Tariff value is fixed and notified by

the Central Government based on their Wholesale Trade Price. Tariff value

will change in accordance with fluctuations in the WST price. For same

goods, Tariff value may vary depending upon the class of goods. Further, for

the same class of goods also, Tariff value may vary on the basis of the class of

manufacturers/buyers.

S.3A : Production Capacity based levy : (By compulsion & not by option)

New provision introduced through Finance Act 2008 w.e.f 10.5.2008.

Applicable to certain goods notified by Central Government.

Duty is payable on the basis of annual production capacity.

Duty payable shall be notified by Central Government.

Removal of goods, actual production of goods, etc., have no relevance.

Duty is payable on a fixed monthly basis, whether produced/removed or not

Annual Production capacity shall be determined by the Assistant/Deputy

Commissioner.

Not applicable to goods manufacture in EOU.


The new provision is mandatory and not optional.

If the factory remains closed for a continuous period of 15 days or more, duty

calculated shall be proportionately reduced.

S.4 : Valuation :

S.4(1) : Applicability : This section has applicability where Excise Duty is

levied on advalorem basis. i.e on the basis of value.

4.4(1)(a) : Transaction Value :

Assessable value = Transaction Value = Invoice Price.

Every removal shall be accompanied by an excise invoice. The invoice price

shall constitute the value for the removal. There can be as many assessable

values as there are invoices.

What is Transaction Value ?

First of all there must be a sale of the goods manufactured by the assessee. If

there is no sale, then there is no transaction value and S.4(1)(a) does not

apply.

The sale should be for the delivery of goods at the time and place of removal.

i.e. the goods should be delivered to the buyer at the time of sale and the

delivery should take place at the place of removal(TPR). In case of delivery

at some other time and place, then S.4(1)(a) has no application. For purpose

of valuation the price at the time of removal is the criterion. Hike or drop in

price after the removal is not at all relevant.

The buyer should not be a person related to the assessee. Buyer and assessee

should be unrelated persons(URP). If they are Related Persons this

provision does not apply.

In the sale, price and price alone should be the sole consideration (PSC). If

there is any other consideration, again the transaction gets out of S.4(1)(a).

Transaction Value = Sale + Delivery + TPR + URP + PSC. All the conditions

should be fulfilled. No relaxation.

S.4(1)(b) : Valuation Rules : In the following situations, transaction value

will not be taken into consideration in the valuation of goods. Instead the

goods will be valued as per Central Excise Valuation Rules, 2000.


The goods have not been sold i.e. there was removal of goods from the

factory; but the removal was not in the course of sale.

Examples : 1. Consignment Transaction from principal to agent. 2. Depot

transfer 3. Removal as sample 4. The removal from factory is on account of

sale; but one or more of the conditions prescribed for transaction value have

not been fulfill.

4(1) Explanation : The includibility/excludability of ED, Sales Tax, etc., in

the Sale price is sought to be clarified through this explanation.

Cum duty Sale Price charged by the assessee=Price actually paid to him by

the buyer. Price paid by the buyer includes ED; but excludes ST.

Additional consideration flowing from the buyer to the seller are also to be

added to original sale price. Therefore the invoice value shall always include

ED.

4(2) AV=Tariff Value : The Government may fix tariff value for certain

goods based on the market trend in wholesale trade. In respect of such

goods, their tariff value constitutes their assessable value.

AV=Tariff Value.

4(3) Definitions :

4(3)(a) : Assessee : Assessee means the person liable to pay the duty of

excise under this Act. Whoever has ED liability is the assessee. The word

assessee includes his agent also. The following are assesses:

1. Manufacturers (Machines, cars etc)

2. Producer (By-products)

3. Processor(Process amounting to manufacture)

4. Curer(Coffee Curer)

5. Storer(Warehouse keeper)

6. Procurer(Khandasari molasses)

7. Trader(availing Cenvat)

8. EHTP/EOU etc (Removals to DTA)

9. Miners (Raising Coal by human effort)


4(3)(b) : Related Person :The assessee and the buyer shall be deemed to be

related persons under the following Circumstances :-

1. They are inter-connected undertakings (ICUs)

2. They are relatives

3. The buyer is relative-cum-distributor of the assessee

4. The buyer is the sub-distributor of the relative-cum-distributor

referred to above

5. They have mutual interest in the business of one other – directly or

indirectly.

What are Inter Connected Undertakings ?

Undertakings which are inter-connected are said to be ICUs by S.2(g) of the

Monopolies and Restrictive Trade Practises Act, 1956(MRTP Act).

ICU under MRTP Act = RP in C.E Act

Relative under Companies Act = Related person under C.E.Act

Distributor + Relative = Related Person

Sub-distributor of Relative-cum-Distributor=Related Person

Mutuality of business interest=Related Person

4(3)( c) : Place of Removal : ED, attracted at the time of manufacture, is

payable at the time of removal from the place of removal. The assessable

value is the transaction value charged for the delivery of goods at this place.

What is this place? It is the place from where excisable goods are removed

after paying duty thereon.

Three places have been recognized in this regard. They are -

(i) Factory (or any place or premises) of production or manufacture of

excisable goods

(ii) Bonded Warehouse (or any other place of premises) wherein

excisable goods have been permitted to be deposited without

payment of duty. (Goods can move from factory to bonded

warehouse without paying duty. Duty is to be paid when goods

leave the bonded warehouse).

Transaction value may be invoice price ex-factory or ex-warehouse. The

latter will be more owing to addition of transport charges from factory to

warehouse and storage charges in the warehouse.

(iii) Depot/Premises of Consignment Agent/Any other place or premises

from where goods are to be sold after clearance from factory.


4(3)(cc) : Time of Removal : This is a new provision with effect from 14-

5-2003 necessitated by making the Depot also the “place of Removal”.

Therefore this provision applies to removals from factory to depot only. For

those goods, the time of removal shall be deemed to be the time at which they

are cleared from the factory.

Pay duty at the rate prevalent on the date of removal from the factory

Pay duty on the Normal Transaction Value at the depot on that date.

4(3)(d) : Transaction Value:

Components of “Transaction Value”

1. Price actually paid or payable

- May be cash invoice or credit invoice

- Paid or not, does not matter

- i.e. Invoice price, that forms the base

Plus

2. Any additional amount that the buyer is liable to pay to the

assessee(seller) in connection with the sale

- May be payable before, during or after sale

- Payment should pertain to sale only.

Plus

3. Any amount charged by the buyer to the seller towards advertising,

publicity, marketing, warranty, etc

- i.e., Expenses incurred by the buyer on behalf of the

assessee(Seller)

- includes provision made for such expenses.

Minus

4. Taxes and Duties paid or payable on the goods by the assessee


S. 4-A : Valuation of Excisable goods with reference to Retail Sale Price

Categories Properties

1 Movable; Marketable and Excisable. Not sold in packages to

the consumers S.4-A does not apply.

2 Excisable goods. Sold in packages to consumers. No need to

declare retail sale price on the package. Not covered by

Standards of Weight and Measures Act, 1976. S.4-A has no

application.

3. Excisable goods. Sold in packages to consumers. Covered

by Standards of Weights and Measures Act, 1976. But not

specified in Schedule III - they fall outside the scope of S.4-A

4. Excisable goods. Sold in packages. Covered by SWM Act/

Rules. RSP is marked on the package by statutory

compulsions. Among them, certain goods (about 100 items)

have been notified in Schedule III - They fall u/s 4-A for

purpose of valuation.

4-A(1) RSP based Valuation : The goods under category 4 above are to be

valued in accordance with sub-section(2). If the manufacturer marks the

retail sale price voluntarily, though there is no statutory requirement to do so,

then S.4-A will not apply to such goods.

Examples of goods u/s 4-A : Chocolates, Pan Masala, Tooth Powder, Tooth

Paste, Footwear, Glazed Tiles, etc.

4-A(2) : Assessable Value = Retail Sale Price – Abatements

4-A(3) : Basis for abatement : The marked RSP will naturally include

duty, tax, packing, forwarding, etc. They have to be removed. The

abatement covers those items only. Taking into account these factors,

abatement is notified by Government in terms of percentages.

4-A(4) : Offences and Punishment : Following are offences :-

Offences :-

(a) Removal of goods from factory

(i) without declaring RSP on the package or

(ii) declaring RSP which is not real

(b) Tampering with, obliterating or altering RSP after the

removal of goods.


Punishment :-

1. The goods are liable for confiscation and 2. RSP shall be

determined in the prescribed manner and adopted for purposes of

valuation. This means the assessee shall lose the goods and also pay

(differential) duty on them.

4-A Explanation 1 : What is RSP? RSP is the MRP [maximum retail price]

at which the packaged goods may be sold to Ultimate Consumer.

What are all the other things includible in MRP ? All taxes local or

otherwise, Freight/Transport charges, commission payable to dealers,

Advertisement, Delivery, Packing Forwarding and the like charges.

4-A Explanation 2(a) : If one package carries more than one RSP, then the

maximum price shall be the assessable value i.e. highest price

4-A Explanation 2(b) : If the RSP declared on the package at the time of

clearance of goods from the factory is altered to increase the RSP, then the

altered RSP shall be deemed to be the RSP.

4-A Explanation 2(c) : If different MRPs are marked on different packages

for sale in different areas, then each such price is AV for the respective area.

MRP provisions do not any more apply to packaged commodities meant for

Industrial and institutional consumers. Vide Rule 2-A(b) of Standard Weights

and Measurement Rules, as amended w.e.f. 14-1-2007. Therefore, the

question of applying Section 4-A does not hereafter apply, where the buyer is

from industry/institution.

S.5 : Remission of duty on goods found deficient in quantity

ED is attracted the moment excisable goods are manufactured. But the duty

liability may be discharged at the time of removal. But the liability to be

discharged is for the entire quantity manufactured an NOT limited to the

quantity removed.

S. 5(1) Remission for natural loss : Central Government is empowered to

make rules for the remission of duty. Normally Parliament(I Estate) levies

duty and the duty so levied is to be collected by the Executive Government

(Second Estate). Through this section the power to grant remission is given

to Central Government.


Remission : For natural deficiencies in quantity/upto prescribed limits/ on

proof from the assessee/ At the discretion of CEO.

S 5-A : Power to Grant Exemption From duty of Excise : Through this

section Parliament empowers the Central Government (Executive

Government – Second Estate) to reduce duty. This is a delegated legislative

power.

S. 5-A(1) : By General Notification :

If the Central Government is satisfied that it is necessary in public interest to

grant exemption from duty generally (i.e general exemption to all. No

restriction is sought to be imposed) through notification published in the

Official Gazette(This is the official communication machinery for

Government) either absolutely i.e unconditionally or subject to conditions i.e.

conditionally, the conditions shall be specified in the exemption notification

the fulfillment of the condition may be before clearance or after clearance,

the exemption may be made applicable to goods of any specified description,

the exemption may be whole i.e. 100% Duty becomes NIL or the exemption

may be part also i.e effective rate is less than tariff rate.

5-A(1) Proviso : Exemption notification issued by Central Government u/s 5-

A (1) are applicable to excisable goods manufactured in DTA. Goods

manufactured in EOU, EHTP, STP and BTP cannot enjoy the exemption

unless they are also covered by the notification.

5-A(1A) : Absolute full exemption is compulsory : On the excisable goods

that are exempted fully and absolutely by a notification u/s 5-A(1), the

assessee shall not pay duty. In other words, he has to enjoy the exemption

compulsorily. He has no choice. In the case of conditional exemption the

choice, however, rests with the assessee.

5-A(2) By Special Order : [Popularly called “Ad hoc exemption”]

If the Central Government is satisfied that it is necessary in public interest to

exempt from payment of duty(exemption is always 100%. No need to pay

any duty) then exemption may be granted by special order (not by

notification in Gazette) in each case (not generally) under exceptional

circumstances to be stated in each special order[No need to indicate such

circumstances in notification u/s 5-A(1)]

5-A(2A) : Explanation to exemption notifications : Exemption

Notifications/orders issued with the best of intentions are misinterpreted and


unintended benefits sought to be derived. The Central Government has been

empowered to clarify the scope/applicability of any exemption

notification/order. T/L for the issue of the clarificatory explanation is one

year from the date of original notification/order. The notification issuing

such an explanation will have effect from the date on which the original

notification/order was brought into force. The explanation shall be deemed

to have been part of notification/order.

5-A(3) : Levy and exemption in different forms : Exemption notifications

u/s 5-A(1) or exemption order u/s 5-A(2) need not be in the same method or

form as that of statutory duty as per tariff. One may be on advalorem basis

and the other at specific rate. Because of such variance, if the concessional

rate of duty u/s 5-A overshoots the tariff rate(statutory rate) then the former

shall be restricted the latter.

5-A(4) : Continuance of old Notifications/orders : All old exemption

notifications/orders issued under Rule 8 of CE Rules, 1944 shall continue to

be in force.

5-A(5)&(6) : Publication of Notification before the effective date :

Exemption notification issued u/s 5-A (1) and (2A) comes into force on a date

later than the date of issue or on the very date of issue, as intended by Central

Government. In such a case, the notification shall be published and offered

for sale on or before the date from which it comes into force.

Laying Before Parliament : Every delegating authority would like to ensure

that the powers delegated to subordinates are properly used by them.

Central Government(Second Estate) is subordinate to the Parliament. Hence

Central Government is required u/s 38 to lay inter alia the following before

Parliament :-

Every exemption notification issued u/s 5-A(1)

Every special exemption order issued u/s 5-A(2) other than an order relating

to goods of strategic, secret, individual or personal nature.

It may be seen from the negative list above, that in respect of exemption

orders u/s 5-A(2), those in favour of institutions for charitable purposes alone

are to be placed before Parliament. Placement is soon after issue an before

both the House of Parliament, while in session

Placement is for a period of thirty days. The period of 30 days may be

comprised in one session or in two or more successive sessions.

Modifications or Nullifications of exemption notification/order by Parliament

will have prospective effect only. Past cases need not be reopened.


Exemption notification/order gains statutory status because of placement

before parliament.

S. 5B Non-Reversal of Credit

An assessee takes cenvat credit on Inputs, capital goods, input services, does

some process and pays duty on the final product. Later, the court holds that

the said process is not manufacture and therefore duty is not payable on the

Final product. In the absence of duty on final product, the credit already

taken on Inputs, capital goods and input services needs reversal. However,

this section empowers Central Government to order

- non reversal of credit by the manufacturer, if he has not obtained refund of

ED paid on Final product

- and also non-reversal of credit taken by the buyer of the said Final product.

S 6 : Registration : Every person handling excisable goods in any of the

following manners needs registration mandatorily :-

i) Production, Manufacture, any process of production or manufacture of

excisable goods.

ii) Purchase/sale of excisable goods in wholesale trade – on own account or as

agent or broker.

iii) Storage of excisable goods

S 7 : Omitted

S 8 : Restriction on possession of excisable goods : From such date as may

be specified in this behalf by the Central Government by notification in the

Official Gazette, no person shall, except as provided by rules made under this

Act, have in his possession any goods specified in the Second Schedule in

excess of such quantity as may be prescribed for the purposes of this section

as the maximum amount of such goods or of any variety of such goods which

may be possessed at any one time by such a person.

S 9 : Offences And Penalties:

S. 9(1) : Offences : The offences are Evasion of payment of duty, Removal of

excisable goods in contravention of Act/Rules, Handling in any manner like

transporting, keeping, buying, selling etc., of excisable goods likely to be

confiscated, Misuse of Cenvat credit, Failure to supply information and

Attempting or Abetting in offences.


Punishment (first time conviction):

Offence with a duty effect of

More than Rs One Lakh - Imprisonment upto a maximum of 7 years

and fine (minimum imprisonment=Six months)

Upto Rs One Lakh – Imprisonment for not more than three years or

fine or both (No minimum period of imprisonment)

9(2) : Punishment(Subsequent Offences) :

Irrespective of money value – Imprisonment upto 7 years and fine

(minimum imprisonment = Six months)

9(3) : Minimum imprisonment - Less than six months. When ? The

minimum imprisonment period shall be less than six months for special and

adequate reasons. The following shall not be treated as special and adequate

reasons in this regard.

1. First time offence

2. Sufferance of punishment for the second time for the same act under

CE ACT

3. Accused is not the principal offender

4. Age of the accused.

In other words, these four reasons, do not qualify for imprisonment for less

than six months.(Negative provisions)

S. 9-A : Non-Cognizable offences :

9-A(1) : Offences under Central Excise Law are non-cognizable under

Cr.PC (Criminal Procedure Code). That means, action under Cr.PC will be

taken by the police at the instance of C.E department only.

9-A(2) : Any offence under Chapter II (S.3 to S.12 – Levy and Collection of

duty) may be compounded by the Chief Commissioner of Central Excise,

either before/after prosecution on payment of the prescribed compounding

amount and in the prescribed manner of compounding.


9-A(2) – Proviso : Compounding facility is not available in the following

cases:

1. Offences under Section 9(1)(a) to (c) [(d) excluded] already compounded

in any case.

2. Offences under the Narcotic Drugs and Psychotropic Substances Act,

1985.

3. Offences exceeding Rs one crore already compounded

4. Court conviction cases.

S. 9-AA : Offences By Companies : For the offences committed not only the

company but also the directors and offers will be held responsible. They will

also be booked if they have involvement in the offences committed by their

organsiations.

S. 9-B : Power of Court to Publish Name, Place of Business, ETC., of

persons convicted under the Act : Particulars of persons convicted under

the Central Excise Act, 1944 may be published in newspapers at the cost of

the offenders.

S. 9-C : Culpable Mental State : In all cases of prosecution the Court will

presume existence of culpable mental state on the part of the person charged

with any offence. It is upto the defence counsel of the accused to prove

otherwise. A fact is said to be proved only when the Court believes it to exist

beyond reasonable doubt and not merely when its existence is established by a

preponderance of probability.

S. 9-D : Relevancy of Statements under Certain Circumstances : A

statement made by a person before a Central Excise Officer (Gazetted Rank)

shall be relevant if the said person is dead, missing, incapable, etc. The

statement made shall be admitted as evidence in the interest of justice.

S. 10 : Forfeiture By Courts : The court trying a case under Central Excise

Act may order forfeiture of goods, package, conveyances, receptacles,

manufacturing implements etc to Government, if it is satisfied than an offence

has been committed under CE Act/Rules.

S.11 : Recovery of Sums due to Government :

1. Excise duty due,

2. Any Sum due under CE Act/Rules

3. ED creditable to Government u/s 11-D, i.e excess collection of ED by the

assessee and


4. Amount settled and penalty levied by the Settlement Commission (S.32-N)

may be recovered as follows :-

- By setting off the Owings of the assessee against the sums owed by the

Government (say refund, interest, rebate, drawback).

- By sale of excisable goods (Not other goods and also not fixed assets)

belonging to the assessee.

- By Revenue Recovery Act action (RR Act action). Another name for

this is Certificate Action. The Commissioner of Central Excise will

issue a certificate to the District Revenue Collector of the district in

which the assessee resides or does business. The latter will collect it as

though it is an arrear of land revenue. The Revenue Collector will do

“Japthi” and collect the money.

S. 11 : Proviso : Owings of the assessee can be recovered from his

successor also by selling the excisable goods, materials, preparations, plants,

machineries, vessels, utensils, implements and articles in the custody or

possession of the latter, after obtaining the written approval of the CCE.

Even the successor to business cannot escape the liability of his predecessor.

S. 11-A : Recovery of Duties not levied or not paid or short levied or short

paid or Erroneously Refunded :

This is the opposite to S.11-B. Provision for refund of Excess Duty paid is

made in S. 11-B. Provision for recovery of duty short paid is made to S. 11-A.

S. 11-A(1) : Issue of SCN : The provocation for the issue of SCN arises –

(i) When duty has not been levied, (ii) when duty has not been paid, (iii) when

duty has been short levied, (iv) when duty has been short paid, and (v) when

duty has been erroneously refunded.

Such Non-levy/Non-payment/short levy/short payment/erroneous refund may

be on the basis of approval/acceptance/assessment, relating to TR or AV by

the CEO or not.

T/L for issue of SCN is one year from the relevant date.

S. 11-A(1) : Proviso : T/L for issue of SCN is five years from the relevant

date in the case of frauds/collusion/willful misstatement of facts/willful

suppression of facts/contravention of Act/Rules, with an intent to evade

payment of duty by the assessee or his agent.


S. 11-A(1) : Explanation : Extension of times by Court stay order

Period for which court has stayed the issue of SCN, will be excluded in

computing the SCN period of one year/five years. T/L for issue of SCN gets

correspondingly extended.

S. 11-A(1A) : Option to fraudulent cases

In fraudulent cases the assessee may pay

1. Duty as per SCN in full or in parts as may be accepted by him plus

2. Interest u/s 11-AB, i.e. @18% thereon plus

3. Penalty equal to 25% of SCN amount or 25% of accepted amount within

thirty days of receipt of SCN

Benefit :- Reduction in penalty and avoidance of litigation.

S. 11-A(2) : Adjudication Orders : The representation received in

response to SCN may be disposed of by the adjudicating authority in the

following manner :-

Representation fully acceptable - SCN to be dropped

Representation fully not acceptable - Duty to be determined and demanded

Representation partly OK and Partly not OK:-

OK portion - SCN to be dropped

Not OK portion - Duty to be determined and demanded.

The duty demanded cannot be more than the SCN amount. If the duty

determined exceeds the SCN amount, demand is issued for the SCN amount

and a fresh SCN issued for the amount determined in excess of the SCN

amount.

S. 11-A(2) : Provisos 1 and 2 : Benefit to S.11-A(1A) optees

1. SCN amount paid in full :-

- SCN dropped

- But no escape from penal provisions (S.9, 9A and 9AA).

2. SCN amount paid in part :-

The balance payable along with interest due shall be determined by the

CEO. Balance is limited to SCN amount minus amount paid in part.


S. 11-A(2A) : T/L for adjudication : This provision is to hasten the

adjudication process and get the duty due determined expeditiously wherever

it is possible.

T/L FIXED

(a) Fraudulent Cases - One year from the date of issue of SCN

(b) Other Cases - Six months from the date of issue of SCN

S. 11-A(2B) : Payment before SCN : This provision is for enabling the

assessee to pay the duty short levied, etc., suo motu without waiting for the

issue of SCN. The assessee can calculate the amount himself or get it

calculated by the CEO. Thereafter he has to inform the fact of payment to

the CEO. On receipt of such information, the CEO will not issue SCN on the

assessee.

S.11-A(2B) : Proviso : Correction to the determination of short levy, etc., by

the assessee : If the amount paid suo motu by the assessee u/s 11-A(2B) is

found short by the CEO, then the latter can issue SCN within the time-limit

of one year from the date of receipt of information u/s 11-A(2B).

11-A(2B) : Explanation 1 : This facility of paying duty short levied, not

levied, etc., suo motu by the assessee is not available to fraudlent cases. They

have to wait necessarily for the SCN from the department.

11-A(2B) : Explanation 2 : The assessee paying the duty short levied suo

motu cannot avoid payment of interest. He has to pay the normal interest

along with his suo motu payment of duty due.

11-A(2B) : Explanation 3 : No penalty shall be imposed under any

provision, if party comes forward suo motu to pay duty originally paid short.

11-A(3) : Definitions :

(i) Refund includes CE Rule 18 Export Rebate. (Rebate is treated as

refund for regulatory purposes)

Relevant date for rebate = Date of payment of rebate (For counting

SCN period)

(ii) What is the relevant date to count one year/Five-year period for

issuing SCN?

Date of filing of return (if filed)

Last date for filing of return (if not filed)


Date of payment of duty (in other cases)

Date of adjustment of final duty ( Provisional Assessment cases)

Date of refund(Erroneous refund cases)

S.11-AB : Interest:

11-AB(1) : Interest accrues on the duty paid short u/s 11-A(2) (as

determined by the AA) or u/s 11-A(2B) (suo motu payment as determined by

the assessee or the department). Rate of interest is 18% p.a. Interest is

payable from the first day of the month succeeding the month in which the

duty ought to have been paid [Non/Short levy, Non/Short payment cases] and

from the date of refund [Erroneous Refund cases] till the date of payment of

duty.

11-AB(1) Proviso : S. 37-B empowers Board to issue instructions to

Commissioners regarding classification, levy etc., for the purposes of ensuring

uniformity. Based on these powers the Board issues instructions to

Commissioners. If the duty payable as per Board’s instructions is paid

voluntarily without reserving any right to appeal in future, within forty-five

days from the date of issue of Board’s instructions, then no interest is

payable. In other cases, interest is payable on the whole amount, including

the amount already paid.

11-AB : Explanation 1: Where the duty determined u/s 11-A(2) has been

reduced by the appellate authority interest is payable on such reduced

amount of duty.

11-AB : Explanation 2 : Where the duty determined u/s 11-A(2) has been

increased or further increased by the appellate authority, interest is payable

on such increased or further increased amount of duty.

S. 11-AC : Penalty For Short levy or non-levy in certain cases :

Duty short levied, not levied etc., shall be demanded by the CEO u/s 11-A(2),

after SCN action u/s 11-A(1). In suppression cases (T/L for SCN is 5 years)

the assessee has to pay penalty equal to the demand amount u/s 11-A(2).

Penalty = Duty sought to be evaded on Penalty is additional to duty

11-AC Proviso 1 : If the amount demanded u/s 11-A(2) and the interest

thereon u/s 11-AB are paid within 30 days from the date of communication of

demand, the penalty u/s 11-AC shall be get abated to 25% (Reduction is

statutory. No need for separate orders)


11-AC Proviso 2 : The benefit of reduction in penalty is available if the

penalty (@ 25%) is also paid within 30 days along with the amount of duty

u/s 11-A(2) and the amount of interest u/s 11-AB.

11-AC Proviso 3 : If the demand u/s 11-A(2) is increased or decreased by an

appellate forum, the penalty will also be increased or decreased accordingly.

11-AC Proviso 4 : In case of increase in duty by an appellate forum, the

penalty will consequently get increased. The reduction in penalty to 25% is

permissible if the entire duty at the enhanced level, the interest thereon as

also 25% of the consequential increase of penalty are all paid within 30 days

from the date of communication of the orders for enhanced duty.

S 11-B : Claim for refund of duty paid in excess and interest thereon :

11-B(1) : Application for refund of ED as also the interest paid thereon is to

be made to AC/DC in Form R within one year from the relevant date with

documentary proof (including sale invoice referred to in S.12-A) for payment

of duty by the applicant (Manufacture) (Positive Proof), for collection from

the applicant(Traders) (Positive proof) and for not passing on the duty to

customer (negative proof).

11-B(1) : Proviso 2 : If the duty has been originally paid under protest by the

manufacturer, then the T/L of one year does not apply. The protesting

manufacturer can claim refund at any time. He is not bound by S.11-B(1)

T/L.

11-B(2) : If the AC/DC is satisfied about the claim, he shall pass the refund

order an the amount shall be credited to the Consumer Welfare Fund.

11-B(2) Proviso 1 : The refund amount will not be credited to Consumer

Welfare Fund, if it relates to –

(a) Rebate of ED on exports under CE Rule 18;

(b) Unspent money in Personal Ledger Account(PLA – Account Current);

(c ) Refund of CENVAT credit on inputs;

(d) Duty and interest paid on such duty paid by the manufacturer an not

passed on;

(e) Duty and interest paid on such duty borne by the buyer and not passed

on;

(f) Notified person, who have borne duty but not passed on (No Organization

has been recognized in this regard.)


11-B(2) : Proviso 2 : Notification u/s 11-B(2) proviso(f) will be issued only if

Government is satisfied that the notified person has not passed on the

incidence of duty.

11-B(3) : Refund through court order : The provisions contained in S.11-

B(2) are applicable to refunds arising out of orders passed by appellate for a.

In other words, the appellant will get the refund money won in the Court, of

only he has not passed on the duty.

11-B (4) : Parliamentary approval of proviso (f) notification:

Notification u/s 11-B(2) provision (f) shall be laid before both the House of

Parliament.

- if it is in session, soon after issue of notification

- if not, within seven days of its reassembly

Central Government shall seek the approval of Parliament within Fifteen

days from the date of placement before parliament.

Modifications or cancellation of proviso (f) notification by the Parliament

shall have only prospective effect. Past cases need not reopened.

11-B(5) : Rescinding Powers : Central Government has been empowered to

rescind any proviso(f) notification including the ones modified or approved

by Parliament.

11-B : Explanation :

(A) “Refund” includes Rule 18 export Rebate. (Rebate is treated as refund

for regulatory purposes)

(B) Relevant date : Refund should be claimed within one year from the

relevant date.

What is the Relevant date?

Rebate :

(a) For claiming Rule 18 export rebate –

(i) Export by Sea/air :- D/o Vessel/aircraft leaving India

(ii) Export by land:- D/o vehicle passing through frontier

(iii) Export by post :- D/o dispatch by the Post Office to a place outside

India.

Refund :

(b) and (c) : Not relevant now

(d) Reduction of duty under “Compounded Levy Scheme (CE Rule 15):-

D/o Reduction in duty.

(e) Assessee, other than manufacturer, i.e First/Second Stage Dealers :-

D/o Purchase of goods


(ea) Exemption by a special order u/s 5-A(2) :- D/o exemption order

(eb) Provisional Assessment cases (CE Rule 7 ) :- D/o adjustment of duty

after final assessment

(ec) Refund arising out of Court Orders :- D/o Court Orders

(f) All other cases : - D/o payment of duty.

S. 11-BB Interest : If the refund ordered u/s 11-B(2) is not paid within three

months from the date of receipt of refund application by AC/DC u/s 11-

B(1),the department shall ay interest at 6%

11-BB Explanation : The court order granting refund of duty is deemed to

be an order passed by the AA u/s 11-B(2) for the purpose of this section .

What does it man? It means the even in the case of refunds arising out of the

orders of the CCE(Appeals), Tribunals, courts etc., interest accrues after

three months from the date of receipt of refund application made before the

AC/DC u/s 11-B(1).

S. 11-C : Power not to recover Duty of Excise not levied or short levied as a

result of general practice :

11-C(1) : If on account of a wrong understanding of the law both by the

manufacturer and the CEO, a mistake has occurred in assessment resulting

in short levy over a period, then Central Government is empowered to order

that short levy need not be recovered.

11-C(2) : In case manufacturer paid the differential duty despite

Government notification u/s 11-C(1), then he can get refund u/s 11-B(2), i.e if

he has not passed on the duty to his customer. [The principle of unjust

enrichment holds good for such refunds also]

11-C(2) : Proviso : For refund u/s 11-C(2) he must apply in the manner

prescribed by S.11-B(1) within Six months from the date of notification u/s

11-C(1).

S. 11-D : Duties of Excise Collected From the Buyer to be Deposited with

the Central Government:

11-D(1) : Depositing : Duty collected from the buyer in excess of duty

assessed, determined or paid shall forthwith be paid to the credit of Central

Government.

11-D(2) SCN : If the excess collection is not credited to Central Government,

the department may issue SCN calling for the payment of excess collection.


11-D(3) : Adjudication : After getting reply the AA shall determine the

amount due. This amount shall not be more than SCN amount. The

amount so determined shall be paid. If not paid, CEO may take coercive

recovery action u/s 11.

11-D(4) : Adjustment : This amount shall be adjusted against the duty

finally assessed.

11-D(5) : Refund : Any surplus left after adjustment against duty finally

assessed shall be refunded or credited to Consumer Welfare Fund in

accordance with S.11B. T/L to apply for refund is six months from the date

of issue of Public Notice by the AC for the refund of such surplus amount

(Normal T/L for refund is one year; but here the T/L is Six months only).

S. 11-DD : Interest on the amounts collected in excess of the Duty :

11-DD(1) : Along with the deposit of duty collected in excess interest is

payable @ 15% from the first day of the month succeeding the month in

which the amount ought to have been paid till the date of such payment.

11-DD(1) Proviso : However, interest is not payable under the following

circumstances :-

The amount has become payable consequent to issue of Board’s direction u/s

37-B. The assessee pays the amount in fully voluntarily within forty five days

from the date of Board’s direction u/s 37-B. He does not reserve any right of

appeal against such payment at any subsequent stage. If not, interest is

payable for voluntary payments made with reference to Board’s direction u/s

37-B also.

11-DD : Explanation 1 : If the amount is reduced by any appellate forum,

interest will be on such reduced amount.

11-DD : Explanation 2 : If the amount is increased by any appellate forum,

interest will be on such increased amount.

11-DDA : Attachment of Property : Pending finalization of SCN u/s 11A/

11D, the CEO may with the approval of CCE, provisionally attach the

property of assessee for six months[Extension upto two years by CCCE].

If the assessee has gone to Settlement Commission, the extended period of two

years shall be exclusive of the period between the date of application to

Settlement Commission and date of admission order or rejection order by the

Settlement Commission.


S.12 Application of the Provisions of Customs Act to CE Duties : Certain

provisions of Customs ACT are made applicable to CE through notification

published in the Official Gazette by Central Government e.g search, seizure,

confiscation, etc.

CHAPTER II-A

INDICATING AMOUNT OF DUTY IN THE PRICE OF GOODS, ETC.,

FOR PURPOSE OF REFUND AND CREDITING CERTAIN AMOUNTS

TO THE FUND

S.12 – A : Price of goods to indicate the amount of duty paid thereon:

In all documents relating to assessment, sales invoice, etc., the duty element

contained in the price should be indicated prominently by the person liable to

pay duty (assessee).

S. 12-B : Presumption that the incidence of duty has been passed on :

The incidence of duty paid shall be deemed to have been passed on to the

buyer of goods unless the contrary is proved.

S.12-C : Consumer Welfare Fund :

1. The Consumer Welfare Fund is to be established by the Central

Government. The fund is common for Customs, Excise and Service

Tax.

2. The following amount will be credited to the Fund

(a) Refunds under CE Act:

(i) S.11-B(Normal);

(ii) S.11-C(General Practice); an

(iii) S.11-D (Depositing Collection)

(aa) Finance Act 1994 (Service Tax)

(i) S.83(Normal);

(ii) S.83(General Practice); and

(iii) S.73(A)(6)(Depositing Collection)

(b) Refunds under Customs Act:

(i) S.27 (Normal);


(ii) S.28-A(General Practice); and

(iii) S.28-B(Depositing Collections).

( c) Income generated by the investments of the amount credited to

the Fund and any other moneys receive by the Central Government

for the purpose of this Fund.

(c) S.73(A) (6) of Finance Act, 1994(Depositing Service Tax

Collections)

S.12-D : Utilization of the Fund: The Fund will be used by the Central

Government for the welfare of consumers. There are rules to regulate the

usage. The accounts of the Fund are to be maintained in the format

prescribed by C&AG of India.

Documents

CEACT1944