1

Rapid Revision on Common Topics For CA Final (Nov 2014 Exams)

By

THARUN RAJB.Com, ACMA

[2]

SHOW CAUSE NOTICE (SCN) Central Excise Act,

1944 Customs Act,

1962 Finance Act,

1994 Section 11A Section 28 73

What is the time limit for serving show cause notice?

Situation Time limit

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

Within 1 year from „Relevant

date‟* (18 months in case of service

tax)

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.

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.

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

[3] © Tharun Raj

Will the SCN be issued if Duty/Tax is paid before issue of SCN?

*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 Time limit

Normal cases (i.e. other than fraud, collusion etc.,) Within 6 months from the date of issue of SCN

In case of fraud, collusion, wilful mis-statement,

suppression of facts, contravention of any provision with an intention to evade payment of duty

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 ifthe payment of service tax and interest has been intimated to the authorities in writing, theauthorities should not serve any notice for the amount so paid.

The authorities can initiatepenal proceedings only against the defaulters who have not paid tax and not against thepersons

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

If Duty/Tax along with interest is fully discharged

On receipt of such information, the excise officer shall not serve

any SCN

If assessing officer is of the opinion that Duty/Tax along with interest is not fully

discharged

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

Either - a) On his own ascertainment or

b) As ascertained by the Assessing officer

[4]

who have paid tax with interest on their own.

The High Court observed that if thenotices are issued contrary to this section, the person who has issued notice should bepunishable and not the person to whom it has been issued.

Held thatthe Department has no authority to issue a show cause notice when the tax payer has paidservice tax along with interest for delayed payments promptly.

Anita Grover v. CCEx. 2013 (Del.) Vandana Bidyut Chatterjee v. UOI 2013 (Bom.).

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 ofthe 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 theprivate limited company was under liquidation, in specific circumstances.

Since acompany was a separate person having a distinct identity, independent from itsshareholders and directors, company‟s dues could not be recovered from the directorsand/or individual shareholder of the company.

Therefore, formerdirector of a company cannot be held liable for the recovery of the customs dues of suchcompany.

Chitra Builders Private Ltd. v. Addl. Commr. of CCEx. & ST (2013) (Mad.)

Issue Involved Whether the amount collected from assessee by department during search is valid in law? Decision:

It is a well settled position in lawthat no tax can be collected from the assessee, without an appropriate assessment orderbeing passed by the authority concerned and by following the procedures established bylaw.

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 eyeof law

Infinity Infotech Parks Ltd. v. UOI (2013) (Cal.)

Mere contravention of provision of Chapter V or rules framedthereunder does not enable the service tax authorities to invoke the extended period oflimitation. The contravention necessarily has to be with the intent to evade payment ofservice tax to invoke extended period of limitation.

Kemtech International Pvt. Ltd. v. CCus. (2013) (S.C.)

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, shouldsupply to the assessee all the documents on which it proposed to place reliance. Thereafter the assessee might furnish their explanation thereon and might provideadditional evidence, in support of their claim.

Raghunath International Ltd. v.

Issue Involved: Whether DGCEI and ADGCEI are authorized to issue show cause

[5] © Tharun Raj

Union of India, (2012) (All.)

notice? Decision:

Additional Director General, Directorate General of Central Excise Intelligence having been authorized to act as aCommissioner of Central Excise was a Central Excise Officer, within the meaning ofsection 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 whichmay require approval before issuing the show cause notice of the adjudicatingauthority/officer.

Nanumal Glass Works v. CCEx. Kanpur, (2012) (All.)

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 within the meaning of section 37C, the date of pronouncement of order would be deemed to be the date of service of order.

Hans steel rolling mill V. CCE 2011 (SC)

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

CCE V. Accrapac P. Ltd. 2010 (Guj.)

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.

Jay Kumar Lohani V. CCE (2012) (MP)

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.

Darshan Boardlam Ltd. V. UOI (2013) (Guj)

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.

[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?

Ans: 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.

2 M/s. XYZ, a 100% export oriented undertaking (100% E.O.U. in short) imported DG sets andfurnace oil duty free for setting up captive power plant for its power requirements for exportproduction This benefit was available vide an exemptions notification. They used the power sogenerated 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 hasbeen sold in domestic tariff area. The notification does not specifically restrict the use ofimported goods for manufacture of export goods. Do you think the demand of the Customs Department is valid in law.

Ans: In the absence of a restrictive clause in the notifications that imported goodsare to be solely or exclusively used for manufacture of goods for export, there is no violation ofany condition of notification, if surplus power generated due to unforeseen exigencies is soldin 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 thejurisdictional Commissioner of Central Excise direct such person to get his accounts audited

Ans: 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

[7] © Tharun Raj

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 yearhave been audited under the Income-tax Act, 1961?

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

4 ABC Ltd. had paid, both the service tax and interest for delayed payment before issue of show cause notice under the Finance Act, 1994. Subsequently, the Department initiated penalproceedings against ABC Ltd. for recovery of penalty under section 76 for delayed payment ofservice tax. Discuss, with the help of a decided case law, if any, whether the penal proceeding initiated bythe Department is justified.

Ans: 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.

[8]

INTEREST AND PENALTY Central Excise Act, 1944 Customs Act, 1962 Finance Act,

1994 Section 11AA Section 28AB Section 75

When interest shall be payable?

In case any duty has not been levied or paid or has been short levied or short paid or erroneously refunded.

What is the Rate of interest?

In case of Excise & Customs: Interest @ 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 int. @ 18% p.a If value of taxable services provided during FY for which the issue pertains or during PY ≤ 60 lakhs Simple int. @ 15% p.a

What is the period for which interest payable?

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

When duty becomes payable due to order/Instruction issued by CBE&C, what is the interest payable in such case?

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.

[9] © Tharun Raj

PENALTIES UNDER EXCISE (RULE 25): Nature of offence Penalty

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

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.

Residual penalty (Rule 27) for breach of any excise rule

The penalty would be ₹ 5,000 plus confiscation of goods in respect of which offence has been committed.

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 Maximum Penalty 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

Value of the goods or ₹5,000, whichever is higher

In the case of dutiable goods other thanprohibited goods

Duty sought to be evaded on such goods or ₹5,000 whichever is the higher

If Actual value is higher than the value Difference between actual value and declared

Penalty under Excise, Customs and Service tax

General Penalty

Excise - Rule 25, 26 & 27 of Excise Rules, 2002

Customs - Sec. 112 and 114

Service tax - Sec. Sec. 76 & 77 of FA, 1994

On account of fraud, collusion etc.,

Excise - Sec. 11AC

Customs - Sec. 114A

Service tax - Sec. 78 of FA, 1994

[10]

declared in bill of entry If the actual value is higher than the value in declaration given in case of baggage

value or ₹5,000 whichever is higher.

In case the goods are prohibited and value is mis-declared

a) Value of Goods or b) Difference between actual value and declared value or c) ₹5,000, whichever is higher

In case the goods are dutiable and value is mis-declared

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 Maximum Penalty 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

3 times the Value of the goods declared by exporter or value as determined under this Act, whichever is higher.

In the case of dutiable goods other thanprohibited goods

Duty sought to be evaded on such goods or ₹5,000whichever is the higher

In case of any other goods Value of the goods declared by exporter or value as determined under this Act, whichever is higher.

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?

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.

What is the amount of penalty?

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

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

If Excise duty/Service tax is paid within 30 days from the date of communication of order [Note: In case of Service tax

25% of such Excise Duty/Service tax [The period of 30 days will be

[11] © Tharun Raj

penalty is also required to be paid within 30 days]

extended to 90 days, if the value of taxable service is ≤ 60 lakhs]

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]

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 paid in full or in part along with interest within 30 days of receipt of notice

25% of the Duty

If customs duty along with penalty is paid within 30 days from the date of communication of order of the proper officer

25% of the duty or Interest

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. 114

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? 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.

[12]

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.

CCEx. v. Delphi Automotive Systems Ltd. (2013) (All.)

The High Court elucidated that mens rea (guilty mind) is an essential part for levy of penalty under section 11ACof the Central Excise Act, 1944. Where a provision of statuteis 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.

CCEx. v. Castrol India Ltd. (2012) (Bom.)

When there is liability to pay 25% penalty under section 11AC, within 30 days from thedate of communication of order, it would not be open to the appellate authority orcourt 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 of25%

CCEx. V. Ratnamani Metals and Tubes Ltd. (2013) (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

CCE V. C.V. Gujrat Narmada Fertilizeers Co. Ltd. (2012) (Guj)

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

[13] © Tharun Raj

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]

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:

[15] © Tharun Raj

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 personal use or import by government or by any educational, research or charitable institution, hospital

Within 1 year from „Relevant date‟

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, interest @ 6% shall be payable to the assessee.

RECOVERY PROCEDURE AGAINST CONFIRMED DEMAND ORDERS1 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

Where Tribunal or High court confirms the demand, with no stay in operation

Recovery proceedings shall be initiated IMMEDIATELY in the following cases

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 days

Where an appeal is filed with Commissioner (Appeals)/ CESTAT, without a stay application

Recovery to be initiated after filing of such appeal, without waiting for the statutory period of filing an appeal to be exhausted.

Where an appeal is filed with a stay application with commissioner (Appeals)/ CESTAT

Recovery to be initiated 30 days after filing of appeal, if no stay is granted, otherwise as per the conditions of the stay order

1Many high courts, including Andhra Pradesh and Madras High court, have granted an interim stay against this circular.

[16]

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, 1994.

They undertook certain construction work on behalf of a trust and paid service tax accordingly. However, laterthey 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 thatservice 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?

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 ofrefund 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.

CCE v. Flock India Ltd. (2000) (S.C)

Where an adjudicating authority has passed an order which is appealableunder the statute and the party aggrieved did not choose to exercise the statutory right of filingan appeal it is not open to the party to question the correctness of the order of theadjudicating authority subsequently by filing a claim for refund. If this position is acceptedthen the provisions for adjudication and appeal in the Act and the Rules will lose theirrelevance 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 ofseized goods after adjustment of expenses and charges in terms of section 150 of the Customs Act, 1962?

[17] © Tharun Raj

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 interestand hence, the assessee would not be entitled to interest on the balance of the saleproceeds which were directed to be paid by the Settlement Commission.

The High Courtclarified that acceptance of such a submission would mean that despite an order of thecompetent authority directing the Department to grant a refund, the Department can waitfor an inordinately long period to grant the refund.

The High Court directed theDepartment to pay interest from the date of approval of proposal for sanctioning therefund.

Ranbaxy

Laboratories Ltd.

V. UOI 2011 (SC)

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]

CCE V. Techno

rubber Industries

P. Ltd. 2011 (Kar.)

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.

CCE V. Gem

properties P. Ltd.

2010 (Kar.)

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]

Aman Medical

products V. CCus,

Delhi 2010 (Del.)

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.

Narayan Nambiar

Meloths V. CCus

2010 (Ker.)

Refund is available on the basis of attested copy of GAR-7 challan also

[No need to file original GAR-7 challan]

ICMC Corporation

Ltd. V. CESTAT

(2014) (Mad.)

In case of suo motu availment of CENVAT credit which was reversed

earlier, the refund claim under sec. 11B is not required as the high

court held that this process involves only an account entry reversal and

factually there is no outflow of funds from the assessee by way of

payment of duty.

Further, it held that on a technical adjustment made, the question of

unjust enrichment as a concept does not arise.

CCE V.

Superintending

engineer TNEB

(2014) (Mad.)

relying on the

The high court followed the decision of the Apex court and held that

the concept of unjust enrichment is not applicable as far as the state

undertakings are concerned and to the state.

In other words, he cannot collect the duty from his purchaser at one

[18]

decision of apex

court in Mafatlal

Industries Ltd. V.

UOI (1997) (SC)

end and also collect the same duty from the State on the ground that it

has been collected from him contrary to law. The power of the Court is

not meant to be exercised for unjustly enriching a person. The doctrine

of unjust enrichment is, however, inapplicable to the State.

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 priceprevalent in the London Metal Exchange on a predetermined date based on the covenant inthe 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 unjustenrichment. Discuss whether the action of the department is correct in law?

Ans: The Department‟s action will be correct if M/s HIL does notproduce any evidence of bearing the burden of duty.

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 concessionalrate. Later Malhotra Ltd filed a refund claim under section 27 of the Customs Act,1962 by producinga certificate issued by a Chartered Accountant (CA) to establish that the amount of duty in relationto which such refund is claimed, has not been passed on by him to any other person. Therefund claim was rejected by the department as there was no other evidence (like balancesheet, ledged accounts, sales invoices prior to or after import etc.) other than the certificateissued by CA. Discuss with reference to decided case law, if any, whether the stand taken by the Departmentis correct in law.

Ans: 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. 2010 The certificate issued by the Chartered Accountant was merely a piece of evidence acknowledging certain facts.

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 accordancewith the Finance Act, 1994. They undertook certain construction work on behalf of a trust andpaid the service tax. However, later they filed refund claim for the service tax so paidcontending 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 filedby the assessee was beyond

Ans: No, the Department is not justified in rejecting the refund claim. The facts of the given case are similar to the case of CCE (A) v. KVR Construction

[19] © Tharun Raj

the limitation period as stated in section 11B of the Central Excise Act, 1944. Is the Department correct in rejecting the refund claim? Substantiate your answer with thehelp of a decided case law, if any.

4 Duty demand of₹ 10 lakh was made in terms of an order in original dated 25.02.2013 against XYZ Ltd. with interest as applicable on the ground of clandestine removal of the productsmanufactured by the assessee in the month of June, 2012. Penalty equal to duty demandedwas also imposed. On an appeal filed by XYZ Ltd., the Commissioner (Appeals) required it todeposit an amount of₹ 5 lakh as pre-deposit which was duly deposited on 03.06.2013. Thecase against XYZ Ltd. was finally decided and duty demand of₹ 3,20,000 was confirmed and penalty was set aside on 30.06.2013. XYZ Ltd. filed a refund claim on 15.09.2013. Refund was sanctioned on 10.12.2013. Calculate the amount of refund admissible.

Ans: Total Refund admissible = 1,82,101

5 M/s MM & Co., a machinery manufacturer, effected clearances from its factory with effect from1.4.2012 by payment of duty under protest and had also filed an appeal against the order forpayment of duty. On 15.5.2012, one of its customers M/s BB & Co. purchased the machinesfrom M/s MM & Co. On 23.5.2013, the appeal filed by M/s MM & Co. was decided in favour ofM/s MM & Co. Pursuant to the said order in the appeal filed by M/s MM & Co., its customerM/s BB & Co. filed a refund claim on 1.6.2013 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 section11B of the Central Excise Act, 1944 whether the action of the department is correct in law.

Ans: 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 15.05.2012, the same is barred by period of limitation. Thus, the Department‟s action is correct in law.

6 Deputy Commissioner of Central Excise passes an adjudication order classifying the goods manufactured by MTZ under heading 85.42 and charges duty @ 10% ad valorem. MTZ paysthe duty without challenging the adjudication order. After 4 months they realise that partialexemption under a notification was available to goods manufactured by them. They file a claimfor refund of duty paid in excess on the ground that benefit of exemption can be claimed atany time Are MTZ entitled to the refund of duty claimed in time? (Note : Presume that principle of unjust enrichment does not apply).

Ans: MTZcannot 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)

7 M/s. Export & Sons filed a claim for rebate of central excise duty between April and May, 2012. The Assistant Commissioner, vide order dated 23-06-2013 rejected the claim. On appeal, the Commissioner (Appeals) allowed the rebate claims vide order dated 30-09-2014.The rebate claims were sanctioned to M/s. Export & Sons within three months of

Ans: The rejection of interest by the Assistant Commissioner for delayed sanction of rebate claims is not

[20]

receipt oforder of the Commissioner (Appeals). However, on account of delay in payment of rebate, M/sExport & Sons filed a claim for interest under section 11BB of the Act on the contention thatinterest liability commences from the date of expiry of 3 months from the date of receipt ofapplication for refund. The Assistant Commissioner, relying upon the Explanation to section11BB 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 ofexpiry of 3 months from the date on which the order of refund is made and not from the date ofreceipt of application of refund. Examine, with the help of decided case, whether the rejection of interest for delayed sanctionof rebate claims is justified.

justified. The facts of the case are similar to the case of Ranbaxy Laboratories Ltd. v. UOI (2011) (SC)

[21] © Tharun Raj

APPEALS

What is the time limit for filing appeal?

Appeal to Time limit

Commissioner (Appeals)

Within 60 days (3 months in case of Service tax) after the receipt of adjudication order

CESTAT 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.

[22]

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 Time limit

Commissioner (Appeals) Within 3 months from the decision or order of adjudicating authority

CESTAT Within 3 months from the communication of order of commissioner

[23] © Tharun Raj

LAND MARK & RECENT CASE LAWS: Khanapur Taluka Co-op. 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 byit 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-in-original 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

[24]

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. Note: Gujrat HC has taken a contrary view from the above mentioned case.

Habib Agro Industries v. CCEx. (2013) (Kar.)

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.

Margara Industries Ltd. v. Commr. of C. Ex. & Cus. (Appeals) (2013) (All.)

Delay in filing appeal to CESTAT can be condoned if it is on account of the mistake of counsel

[25] © Tharun Raj

Rishiroop Polymers Pvt. Ltd. v. Designated Authority (2013) (Bom.)

Issue Involved: Can a writ petition2 be filed against an order passed by the CESTAT under section 9C of the Customs Tariff Act, 1975? Decision:

Writ petitions shouldnot 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 remedyby 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.

KSJ Metal Impex (P) Ltd (2013) (Mad.)

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

2A 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.

[26]

Raja Mechanical Co. (P) Ltd., (2012) (S.C.)

Issue Involved: Whether doctrine of merger3 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 dismissedon 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.

Thakker Shipping P. Ltd. (2012) (S.C.)

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 sub-section (4), if it is satisfied that there was sufficient cause for not presenting it within that period.

3DOCTRINE 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 thanone 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.

[27] © Tharun Raj

Section 129D(4): Where in pursuance of an order under sub-section (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. 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. 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 section129D(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

[28]

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 section129D(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.

Mihani Network V. CC&CCE (2012) (MP)

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 authority/Tribunal, the delay is condoned and if not found to be prevented by sufficient cause, the delay is not condoned.

CCE V. RDC concrete (India) P. Ltd. 2011 (SC)

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.

CCE V. Gujchem Distillers 2011 (Bom)

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.

Ccus. V. Trilux Electronics 2010 (Kar.)

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.

Nanumal Glass works V. CCE, Kanpur (2012) (Allahabad)

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.

C.C.E. & S.T. (LTU), Bangalore v. Dell Intl. Services India P. Ltd. 2014 (Kar.)

Can the Committee of Commissioners review its decision taken earlier under section 86(2A) of the Finance Act, 1994, at the instance of Chief Commissioner? The Karnataka High Court held that once the Committee of Commissioners, on a careful examination of the order of the Commissioner (Appeals), did not differ in their opinion against the said order of the Commissioner (Appeals) and decide to accept the said order, the matter ends there. The said decision is final and binding on the Chief Commissioner also. The Chief Commissioner is not vested with any power to call upon the Committee of Commissioners to review its order so that he could take decision to prefer an appeal. Such a procedure is not contemplated under law and is without jurisdiction.

Commissioner of Service Tax v. Ernst &

Point of dispute: The precise and significant issue which arose for consideration of the

[29] © Tharun Raj

Young Pvt. Ltd. 2014 (Del.)

High Court was whether chargeability or levy of service tax on a particular activity would be covered within the term „determination of any question having relation to rate of duty of excise (or service tax) or value of goods (or service) for the purpose of assessment‟ as contained in sections 35G and 35L of the Central Excise Act, 1944, so as to decide whether the order of Tribunal relating to such issue is appealable to High Court or Supreme Court. Observations of the Court: The High Court observed that determination of any question relating to rate of tax would necessarily directly and proximately involve the question, whether activity falls within the charging section and service tax is leviable on the said activity. The reason for the same is that in case service tax is not to be leviable under the charging section, rate of tax will be nil. Further, all assessments necessarily have to determine and decide the rate of tax after determining and deciding whether or not activity is chargeable to tax or tax can be levied. Assessment of the assessee would decide the rate of tax applicable once it is held that the activity is chargeable to service tax. The words „rate of tax‟ would include the question whether or not the activity is exigible to tax under a particular or specific provision. Decision: Thus, the High Court held that question of chargeability or levy of service tax on a particular activity would be covered within the term “determination of any question relating to rate of service tax or value of a service for the purpose of assessment”.

[30]

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.

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. 50,00,000.

5. 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:

[31] © Tharun Raj

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 days4: (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.

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

Ans: 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

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 thatthe machinery imported by „M‟ was classifiable under a different heading and chargeable tocustoms duty. Consequently, „M‟ had to furnish the bank guarantee for the duty payable underthat heading in order to release the machinery. Subsequently, the Assistant Commissioner of Customs ordered to encash the bank guaranteeexecuted by „M‟ to realise the customs duty. No sooner the aforesaid order-in-original wasissued to „M‟, the Customs Department invoked the bank guarantee by sending an intimation-cum-request to the Bank to pay to them the

Ans: it was not proper on the part of the Department to encash the bank guarantee before the expiry of the statutory periodprovided 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

4W.e.f 10.5.2013 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.

[32]

amount of bank guarantee. „M‟ contended that theorder of the Assistant Commissioner was an appelable order and since the statutory period offiling 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.

department is not teneable in law

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. An appeal was filed to the Commissioner of Central Excise (Appeals) which passed an order confirming the demand on RIL. RIL, being aggrieved by theorder 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.

Ans: Fee = ₹ 5,000 where the amount of service tax and interest demanded and 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.

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, 2013. The High Courtdismissed the appeal petition on the ground that the same had been filed beyond the periodprescribed for filing an appeal under section 35G i.e. 180 days. Examine whether the HighCourt was empowered to condone the delay in the said case.

Ans: High Court can condone delay in filing appeal after the expiry of 180 days if sufficient cause is shown

5 Bhavya Limited (BL) cleared the goods to Chandi Enterprises (CE) after making payment of excise duty @ 14% in the month of March although the rate of duty on the said goods hadbeen 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 adebit note. BL applied for the refund of excess excise duty paid of₹ 4,80,000 which wasrejected 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 orderaccepting 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) canfile an appeal to the CESTAT against such order.

Ans: Revenue cannot file an appeal to CESTAT against the order passed by the Commissioner of Central Excise (Appeals)

[33] © Tharun Raj

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.

[34]

LAND MARK & RECENT CASE LAWS: CCus.v. Ashok Kumar Jain (2013) (Del.)

Settlement Commission have jurisdiction over baggage cases also. Section 127B enumerates the kinds of cases which could not beentertained by the Settlement Commission. Had the intention of the Parliament been toexclude adjudication by Customs Authorities in respect of baggage claim from thepurview of the Commission‟s jurisdiction, such intention would have been more clearlymanifested as it had been mentioned in provisos to section 127B(1).

Saurashtra Cement Ltd. v. CCus. (2013) (Guj.)

Issue Involved: Can a writ petition be filed with High court or supreme court on the decision of settlement commission? 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 Commissionis final, finality clause would not exclude the jurisdiction of the High Court under Article226 of the Constitution (writ petition to a High Court) or that of the Supreme Court underArticles 32 or 136 of the Constitution (writ petition or special leave petition to SupremeCourt).

The Court would ordinarily interfere if the Settlement Commission has actedwithout jurisdiction vested in it or its decision is wholly arbitrary or perverse or mala fideor is against the principles of natural justice or when such decision is ultra vires the Actor the same is based on irrelevant considerations.

Ashwani Tobacco Co. Pvt. Ltd. v. UOI (2010) (Del.)

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.

Sanghvi Reconditioners Pvt. Ltd. V. UOI (2010) (SC)

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 additionalcustoms duty. The Court further opined that having opted to get their customs dutyliability 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.

[35] © Tharun Raj

RR Builders vs. CCE (2008) (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.

Mars Thereputics and Chem. Ltd. vs. CCESettlement Commission 2008 (HC)

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.

Re: Sadik Sadruddin Chunara (Sett.Comm) (2006)

The Person who is absconding and never appeared before the investigating agency cannot be prevented from making an application before Settlement Commission.

Commr of Customs v. Mahesh Raj (2006) (HC)

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.

UOI V. K. Amishkumar Trading P. Ltd. (2011) (HC)

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.

Icon Industries V. UOI (2011) (HC)

- 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.

J.R.B Engineering works V. Settlement commission (2012) (HC)

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.

Vadilal Gases Limited v Union of India 2014 (Guj.)

(i) Where a settlement application filed under section 32E(1) of the Central Excise Act, 1944 (herein after referred to as ‘Act’) is not accompanied with the additional amount of excise duty along with interest due, can Settlement Commission pass a final order under section 32F(1) rejecting the application and abating the proceedings before it ? (ii) In the above case, whether a second application filed under section 32E(1), after payment of additional excise duty along with interest, would be maintainable? Observations of the Court:

[36]

The High Court observed as under: (i) Clause (d) of the first proviso to sub-section (1) of section 32E of the Act clearly lays down that no application under section 32E(1) shall be made unless the applicant has paid the additional amount of excise duty accepted by him along with interest due under section 11AB. Therefore, if an application is made without complying with the first proviso, it would be defective and not maintainable. (ii) Settlement Commission in its discretion may allow time to the applicants to remove the defects or may direct that the applications be returned. Such discretionary power must be deemed to have been conferred on Settlement Commission. (iii) Under section 32F(1) only valid applications which do not suffer from any bar created by the first proviso to section 32E(1) can be considered and decided according to the procedure provided in the section. Therefore, the applications which are defective and non-maintainable in terms of the first proviso to section 32E(1) cannot be decided or rejected or declared to have abated under section 32F(1). (iv) Rejection of application cannot be taken as amounting to a final order, as that would render the mandatory bar created by clause (d) of proviso to section 32E(1) nugatory, redundant and otiose. Order rejecting the application for non-compliance with clause (d) of proviso to section 32E(1) would amount to administrative/technical order and it would not bar the second application filed by the petitioner. In other words, principle of res judicata would not apply as matter was not determined on merits. (v) Moreover, second application would not be barred under section 32-O as no direction had been issued under section 32L (the application was rejected as not entertainable). Decision: High Court held that since the earlier application was dismissed on technical defect for non-compliance of the provisions of clause (d) of the proviso to section 32E(1) of the Act and the same was not considered and decided on merits, the second application filed after depositing the additional excise duty and interest would be maintainable.

CASE STUDIES:

1 Briefly explain whether the following statements are correct with reference to the Central Excise Act, 1944. (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.

Ans: (i) Incorrect, the period can be further extended by 3 months (ii) Incorrect

[37] © Tharun Raj

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 petitionerhad 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 tosubstantiate 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.

Ans: The dismissal order is valid in law. The facts of the case are similar to the case of Mars Therapeutics & Chem. Ltd (2008)(HC)

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 Departmentfor the period prior to search. After that, it filed a settlement application in respect of theproceedings issued by the Commissioner. The Settlement Commission opined that the unitswere registered only after the search was conducted and prior to that there was no registrationand no returns as mandated by clause (a) of first proviso to section 32E(1) of the CentralExcise Act, 1944 were filed. Consequently, the Commission rejected the settlementapplication on the ground that the application did not conform to the parameters as stipulatedunder section 32E(1) of the Act. Explain, with the help of a decided case law, whether the rejection order passed by SettlementCommission is valid in law?

Ans: 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)

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 casewhether the stand taken by the Commissioner is correct.

Ans: 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

[38]

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

Ans: See below for the answer

Answer to Question No. 5:

(i) 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.

(ii) 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.

(iii) 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.

[39] © Tharun Raj

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.

[40]

LAND MARK & RECENT CASE LAWS: Oracle India P. Ltd. (2012) (AAR)

Advance ruling can be pronounced determining tax liability in relation to an activity which is „proposed to be undertaken‟, by the applicant. Thus, advance ruling is confined only to undertaking of a proposed activity. Conversely, when an existing „activity‟ is sought to be varied, added to or expanded, that would not entitle the existing entity to seek an advance ruling under the Customs Act, 1962.

UAE Exchange Centre Ltd v. UOI (2009) (Del. HC)

Ruling by Advance Rulings Authority binding on applicant, transaction onwhich ruling sought and the departmental officers concerned - Jurisdiction of Courts not excluded by implication or otherwise – Writ jurisdiction invocable against advance rulings - Article 226 of Constitution of India

Zuari Cement Ltd. (2009) (A.A.R.)

The advance ruling can be applied for only proposed activity. It cannot be applied for any ongoing activity. For example: Expansion of existing manufacturing activity

Tex (India) Pvt. Ltd. (2004) (AAR)

In this case, it was held that the application for rectification of mistake is not maintainable as the error was not apparent from the record.

Permalite Electricals (P) Ltd. (2004) (A.A.R)

It was held that, the question raised in application that has already been decided by the Appellate Tribunal and was not raised at the time of admission of application such plea cannot be entertained by the Authority.

CASE STUDIES: 1 Vaikunth, a non-resident intends to import certain goods, but

has entertained some doubts about their classification. Vaidehi, Vaikunth's friend, has obtained an „Advance Ruling' under Chapter VB of the Customs Act, 1962 from the Authority for Advance Rulings on an identical point. Vaikunth proposes to adopt the same ruling in his case. Vaikunth has sought your advice as his consultant Whether he could adopt the ruling given in the case of Vaidehi. Explain with reasons.

Ans: Advance Ruling will be binding only on the applicant who has sought it. Vaikunth should obtain ruling from AAR by making application along with a fee of ₹ 2,500

[41] © Tharun Raj

OFFENCES UNDER INDIRECT TAXES OFFENCES UNDER EXCISE [SEC. 9]:

The following are the offences which are criminal offences under the Act:

Evading payment of duty payable under the Act Removing excisable goods or concerning himself with such removal, in contravention of

provisions of the Act and Rules

Acquiring or in any way concerning himself with transporting, depositing, concealing, selling, purchasing or otherwise dealing with excisable goods where he knows or has reason to believe that the goods are liable for confiscation under the Act or Rules

Contravening any provision of CE Act or Rules in relation to CENVAT credit Failure to supply information or supplying false information Attempting to commit or abetting commission of an offence regarding evasion of duty or

transit of goods or restriction on storage of goods or non registration of an unit

OFFENCES UNDER CENTRAL EXCISE – COGNIZABLE AND NON COGNIZABLE:

Prior to the Finance Act, 2013, all offences under Central Excise law were non-cognizable and

bailable. In the case of Om Prakash v. UOI 2011, Supreme Court also affirmed that all the

offences under the Central Excise Act are non-cognizable and bailable. However, the Finance

Act, 2013 has amended sections 9A, 20 and 21 to overrule the aforesaid judgment to make

certain offences cognizable and non-bailable. Therefore, now some offences under central

excise are cognizable while others non-cognizable.

[42]

Note: The imprisonment should be minimum for six months unless there are special and adequate reasons for granting lesser punishment. Amended provisions w.r.to cognizable offences: (Section 19) Every person arrested under CE Act has to be forwarded, without delay

o To the nearest central excise officer (empowered to send persons so arrested to a magistrate) or

o To the officer in-charge of the nearest police station if there is no such central excise officer within a reasonable distance.

(Section 20) A person can be admitted to bail by an officer in charge of the police station only in respect of an offence which is non-cognizable.

(Section 21) In case there is sufficient evidence or reasonable ground of suspicion against the accused person, CEO in case of non cognizable offences, shall either admit him to bail to appear before the Magistrate having jurisdiction, or in default of bail, forward him in custody to such Magistrate. Otherwise, he shall release the accused person on his executing a bond, with or without sureties and may direct to appear before Jurisdictional Magistrate.

Punishment in case of cognizable offences

If the duty leviable on excisable goods exceeds ` 50 lakhs

Convicted for first time/ second and subsequent time

Imprisonment upto 7 years AND Fine (Without limit)

If the duty leviable on excisable goods is less than ` 50 lakhs

Convicted for first time

Imprisonment upto 3 years OR Fine

(without limit) OR Both

Convicted for second and subsequent time

Imprisonment upto 7 years AND Fine (without limit)

[43] © Tharun Raj

Guidelines for arrest and bail under the Central Excise Act, 1944 – Circular No. 974/08/2013

1) Power to arrest must be exercised with utmost care and caution:A person can

be arrested for both bailable and non-bailable offences. Since arrest takes away the liberty of an individual, the power must be exercised with utmost care and caution and only when the exigencies of the situation demand arrest

2) Power to arrest has to be exercised after careful consideration of facts and various factors: Decision to arrest needs to be taken on case-to-case basis considering various factors, such as, nature & gravity of offence, quantum of duty evaded or credit wrongfully availed, nature & quality of evidence, possibility of evidences being tampered with or witnesses being influenced, cooperation with the investigation, etc.

3) Person arrested must be produced before magistrate:A person can be arrested for non-bailable offence only when the offence committed by him is covered under clause (b) or clause (bbbb) of sub-section 9(1) and the duty involvement exceeds Rs. 50 lakh. Any person arrested for offences under these clauses should be informed of the grounds of arrest and produced before a magistrate without unnecessary delay and within 24 hours of arrest.

4) Arrest can be inititated only when there is mens rea:Chief Commissioners/ Commissioners of Central Excise are required to ensure that approval for arrest for non-bailable offence is granted only where the intent to evade duty is evident and element of mens rea/guilty mind is palpable.

5) The person arrested should either be released on bail or to be forwarded to magistrate: Any person arrested for non-cognizable and bailable offence shall have to be released on bail, if he offers bail, and in case of default of bail, he is to be forwarded to the custody of magistrate.

6)

[44]

In respect of the following non-bailable offences, decision to arrest may be taken by the Commissioner:

a. clandestine removal of manufactured goods; b. removal of goods without declaring the correct assessable value and receivinga

portion of sale price in cash which is in excess of invoice price and notaccounted for in the books of account;

c. taking CENVAT credit without receiving the goods specified in the invoice; d. taking CENVAT credit on fake invoices; e. issuing Cenvatable invoices without delivering the goods specified in the

saidinvoice. In all other cases of cognizable and non-bailable offences, not referred above, the decision to arrest shall be taken by the Commissioner only with the approval of the jurisdictional Chief Commissioner. Examples of such cases are:

a. removal of inputs as such, without reflecting such removal in records, on which CENVAT credit has been taken, without payment of amount equal to the credit availed on such inputs

b. irregular and wrongful availment of benefit of central excise duty exemption by reason of fraud, collusion, willful misstatement, suppression of facts, or contravention of the provisions of the Act or the rules with intent to evade payment of duty, etc.

[45] © Tharun Raj

[46]

CASE STUDY: 1 M/s Sharda Zarda Makers is engaged in manufacturing zarda with the

brand name „Aanand‟. It clandestinely cleared „Aanand‟ zarda and stored the same with Balram Trading Co. for further sales. Balram Trading Co. were allegedly the related concerns ofM/s Sharda Zarda Makers. The Commissioner of Central Excise has imposed a penalty under rule 25(1)(c) of the Central Excise Rules, 2002 on Balram Trading Co. on the ground that it has engaged in the storage of excisable goods without having applied for the required registration certificate. Examine with the help of a decided case law whether penalty under rule 25 of the Central Excise Rules, 2002 can be imposed on such firm? [RTP – May 2014]

Ans: Penalty under Rule 25 could not be imposed on Balaram Trading Co. The facts of the case is similar to the case of Balaji Trading Co. (2013) (HC)

OFFENCES WHICH ATTRACTS IMPRISONMENT – SEC. 89

Offences punishable under sec. 89

Category – A offence

(a) Willful evasion of payment of service tax

(b) Availment and utilization of credit of service tax/excise duty without actual receipt of taxable

service/excisable goods

(c) Maintenance of false books of accounts/ failure to supply an information /Supplying false

information

Category – B offence

Non payment of amount collected as service tax

for a period of more than 6 months from the

due date of payment

[47] © Tharun Raj

COGNIZANCE OF OFFENCES – SEC. 90

Offences punishable under sec. 89

Category – A Offence

First time

Amount involved in the offence ≤50

lakhs

Imprisonment upto 1 year

Amount involved in the offence >50

lakhs

Imprisonment for 6 months

– 3 years

Second & every subsequent offence

Term of imprisonment may extend to

3 years

Category – B Offence

First time

Amount involved in the offence ≤50

lakhs

Imprisonment upto 1 year

Amount involved in the offence >50

lakhs

Imprisonment for 6 months

– 7 years

Second & every subsequent offence

Amount involved in the offence ≤50 lakhs

Upto 3 years

Amount involved in the offence >50 lakhs

Upto 7 years

Offences

Cognizable offence

It is a criminal offence in which the police is empowered to register an FIR, investigate and

arrest an accused without a court issued warrant

These offences are usually serious in nature

Bailable Offence Non-bailable offence

Non-Cognizable offence

It is an offence in which police can neither register an FIR, investigate nor effect arrest without the express permission or directions

from the court

Not much serious as cognizable offence

Always bailableoffence

[48]

Offences which attracts imprisonment – Sec. 89 vis-à-vis Cognizance of offence –

Sec. 90

Sec. 90 provides that offence involving collection of any amount as service tax but failure to pay

the amount so collected to the credit of the central government beyond a period of six months

would be cognizable offence if the amount exceeds ₹ 50 lakhs. Therefore arrest can be made

for such an offence without a warrant

All other offences would be non-cognizable and bailable

Offences punishable under sec. 89

Category – A Offence

First time

Amount involved in the offence ≤50

lakhs

Imprisonment upto 1 year

Amount involved in the offence >50

lakhs

Imprisonment for 6 months –

3 years

Second & every subsequent offence

Term of imprisonment may extend to

3 years

Category – B Offence

First time

Amount involved in the offence ≤50

lakhs

Imprisonment upto 1 year

Second & every subsequent offence

Amount involved in the offence ≤50 lakhs

Upto 3 years

Cognizable offence

[49] © Tharun Raj

POWERS OF ARREST [SEC. 91]

(i) Who can arrest? - New section 91 provides that the Commissioner of Central

Excise by general or special order authorize any officer of Central Excise, not below

the rank of Superintendent of Central Excise to arrest a person.

(ii) Who can be arrested? - A person who has committed any of the offences

specified under section 89(1) and the amount involved in the offence exceeds `50

lakh.

(iii) When can arrest be ordered? - The Commissioner of Central Excise can order

arrest if he has reason to believe that a person has committed the offence

mentioned above.

(iv) Manner of arrest - All arrests have to be carried out in accordance with the

provisions of the Code of Criminal Procedure, 1973 relating to arrests.

(v) Procedure in case of cognizable offence – In case of cognizable offence, every

officer authorised to arrest a person has to inform the arrested person of the

grounds of arrest and produce him before a magistrate within 24 hours.

(vi) Procedure in case of non-cognizable and bailable offence – The Assistant

Commissioner /Deputy Commissioner is empowered to release an arrested person on

bail or otherwise. For this purpose, the Assistant Commissioner /Deputy

Commissioner will have same powers and be subject to the same provisions as an

officer in charge of a police station is under Code of Criminal Procedure, 1973.

Would service tax collected but not deposited prior to 10.05.2013 be taken into

consideration while calculating the amount of `50 lakh as contemplated by clause

(ii) of section 89(1) of the Finance Act, 1994?

Kandra Rameshbabu Naidu v. Superintendent (A.E.), S.T., Mumbai-II 2014 (34)

S.T.R. 16 (Bom.)

Facts of the case:

The assessee was arrested on 22.01.2014 on the ground that he had collected service

tax of ` 2.59 crores during the period between financial years 2010-11 and 2013-14, but

had deposited only ` 15 lakh with the Government.

The assessee did not dispute the liability to pay the service tax to the Government.

However, he contended that only the amount collected between 10.05.2013 and

21.07.2013 (six months prior to his arrest) should be considered while calculating the

amount of ` 50 lakh as contemplated by clause (ii) of section 89(1) of the Finance Act,

1994.

He submitted that since penal provisions could not be made effective retrospectively,

amended section 89(1) and newly introduced sections 90 and 91 of the Finance Act,

1994 (as introduced by the Finance Act, 2013) could not be made effective for a period

prior to 10.05.2013 [i.e. the date on which Finance Act, 2013 came into effect].

[50]

Assessee further submitted that since the amount collected between 10.05.2013 and

21.07.2013 was much less than ` 50 lakh, provisions of amended clause (ii) of section

89(1) were not applicable in his case.

Revenue contended that since failure to deposit service tax with Central Government

after collecting it from the customers was a continuing offence, entire amount of arrears

of service tax was required to be construed as liable to be deposited with the Central

Government when it became due and it being a continuing offence, the assessee was

liable to deposit the entire arrears which was more than ` 50 lakh.

Decision: The High Court held that since the said offence is a continuing offence, entire

amount of service tax outstanding [which is required to be deposited with the Central

Government] as on 10.05.2013, would be taken into consideration while calculating the amount

of ` 50 lakh as contemplated by section 89(1)(ii) of the Finance Act, 1994.

[51] © Tharun Raj

Offences under Customs Act, 1962

Cognizable and non-bailable offences

1. Evasion or attemped evasion of duty exceeding ` 50 lakhs

2. Prohibited goods notified under sec. 11

3. Import/export of any goods which have not been declared in accordance with the provisions of this Act and the market price

of which exceeds ` 1 crore

4. Fradulently availing of or attempt to avail of drawback or any exemption from

duty provided under this Act, if the amount of drawback or exemption from

duty exceeds ` 50 lakhs

Convicted for first time/ Second and subsequent time

Impriosnment for a term which may extend to 7

years AND with Fine

Non - Cognizable and bailable offences

Except the offences specified adjacent, all other offences are bailable offences

Convited for first time

Impriosnment for a term which may extend to 3

years

OR With Fine OR with Both

Convicted for second and subsequent time

Impriosnment for a term which may extend to 7

years AND with Fine

Imprisonment shall not

be for less than 1 year, in

the absence of special

and adequate reasons to

the contrary