Budget 2007 – Central Excise – Proposed changed in Central Excise Act, 1944

The following changes have been prescribed in the Finance Act, 1944 shall come into effect from the date of enactment of Finance Bill, unless otherwise provided:

1. In view of the specific legislation covering Special Economic Zones, sub-section (1) of Section 3 of the Central Excise Act, 1944 is being amended to omit the provisions relating to 'free trade zone' and substitute the meaning of 'special economic zone' so  as  to  harmonize  the  said  provisions  with  the  Special Economic Zone Act, 2005.

2. Section 11B of the Central Excise Act, 1944 provides that an application for refund of duty should be made before the expiry of one year from the relevant date.   This section is being amended by inserting a new sub-clause (ec) in clause (B) of Explanation to provide that the relevant date for the purpose of refund of duty in  consequence of judgement, decree, order or  direction  of  appellate authority, Appellate Tribunal or any court, shall be the date of such judgement, decree, order or direction.

3.Section 23A I of the Central Excise Act, 1944 act defines an "applicant" who is entitled to seek Advance Ruling.   Under section 32AI (ii), applicant includes a joint venture in India. This section is being amended by inserting an Explanation in clause I so as to clarify that 'joint venture in India' means a venture in which at least one of the participants, partners or equity holders shall be a non-resident having substantial interest in the joint venture and exercising joint control over it.

4. Section 31 of the Central Excise Act, 1944 is being amended so as to provide that an applicant can file an application before the Settlement Commission only in respect of cases pending before the adjudicating authority.   It further provides that in respect of cases referred back by the Appellate Tribunal, Court or any other authority to the adjudicating authority for fresh adjudication, the applicant shall not be entitled to file an application;

5. Section 32A of the Central Excise Act, 1944 is being amended so as to empower the Chairman, Settlement Commission to constitute a Bench consisting of three Members and the senior among the Members shall act as the presiding officer of the Bench, if the Vice-Chairman is not one of the Members;

6. Section 32E of the Central Excise Act, 1944 is being amended so as provide that the applicant shall be eligible to file an application in respect of the case in which he admits short levy on account of misclassification, under valuation, inapplicability of exemption notification or CENVAT credit but not in respect of the goods for which he had not filed a return.   It further provides that while filing any application, he shall deposit the additional amount of excise duty accepted by him along with stipulated interest due thereon.   It also proposes to enhance the minimum settlement amount from Rs.2 lakh to Rs.3 lakh.   It also provides that in respect of an application filed before 1st June, 2007, but pending issuance of an order by the Commission, the applicant shall pay the accepted duty by 30th June, 2007, failing which the application shall be rejected;

7. Section 32F of the Central Excise Act, 1944 is being amended so as specify time limit at every stage for the disposal of the application filed before the Settlement Commission.  It, inter alia, provides that in respect of an application filed on or before 31st May, 2007, the order shall be passed by 29th February, 2008, and in respect of application made on or after 1st June, 2006, the order should be passed within 9 months of the application.   It also provides that amount of settlement ordered by the Commission shall in no case be less than duty liability admitted by the applicant.   It further provides that the settlement amount shall be paid within 30 days of the receipt of the order and no extension for payment of this amount shall be granted by the Commission;

8. Section 32H of the Central Excise Act, 1944 is being amended with a view to debar the Settlement Commission from re-opening the completed proceedings in respect of applications received on or after 1.6.2007;

9. Section 32 I of the Central Excise Act, 1944 is being amended so as to make consequential changes in view of the amendments made in section 32F;

10. Section 32K of the Central Excise Act, 1944 is being amended so as to debar the Settlement  Commission from granting immunity from prosecution for any offence under Indian Penal Code or any Central Act for the time being in force other than Central Excise Act.   It also provides that the Settlement Commission shall not have the power to grant immunity from payment of interest as provided under this Act.   It further provides that the applications pending before the Settlement Commission on 31st May, 2007 shall be decided in accordance with the existing provisions;

11. Section 32M and Section 32N of the Central Excise Act, 1944 are being amended so as to make consequential changes in view of the amendments made in section 32F;

12. Section 32 O of the Central Excise Act, 1944 is being amended so as to provide that an applicant can apply for settlement only once during his lifetime so that the scheme of settlement is not treated as a permanent amnesty scheme by the tax  evaders.    It  also  provides  that  in  respect  of  cases  involving  identical recurring issue, the applicant can file application for settlement provided that his earlier application is pending before the Settlement Commission;

13. Section 32PA of the Central Excise Act, 1944 is being omitted as it has outlived its utility;

14. Section 35E of the Central Excise Act, 1944 is being amended so as to provide that the Committee of Chief Commissioners or the Commissioners shall review the orders of the Commissioner or adjudicating authorities below the rank of Commissioner within a period of three months as against the present period of one year from the date of communication of the decision or order of the Adjudicating Authority. It is also proposed to reduce the time available for authorized  officer  to  file  appeal  before  the  Appellate  Tribunal  or  the Commissioner (Appeals), as the case may be, from three months at present to one month.

15. Section 35F of the Central Excise Act, 1944, inter alia, provides that where in any appeal, the decision or order appealed against relates to any duty demanded, the person appealing against such decision or order shall deposit first the duty demanded.  This section is being amended so as to insert an Explanation therein with a view to widen the scope of expression 'duty demanded'.   The proposed amendment provides for inclusion of amount determined under section 11D; amount of erroneous CENVAT credit taken; amount payable under rule 57CC of Central Excise Rules, 1944; amount payable under rule 6 of Cenvat Credit Rules, 2001 or Cenvat Credit Rules, 2002 or Cenvat Credit Rules, 2004; interest payable under the provisions of this Act or the rules made thereunder; within the ambit of expression 'duty demanded' in addition to the duty specified under section 3 of the said Act for the purpose of predeposit, pending appeal, under section 35F of the Act.

16. Section 37 (4) of the Central Excise Act, 1944 provides that if any manufacturer, producer or licensee of a warehouse contravenes any of the provisions stipulated therein, then such person, inter alia, will be liable to a penalty not exceeding duty leviable on such goods or ten thousand rupees, whichever is higher.   This section is being amended so as to reduce the penalty from Rs.10000 to Rs.2000 for possessing, transporting, removing, depositing, keeping, concealing, selling or purchasing any excisable goods which are liable to confiscation.   Similarly, section 37 (5) is also being amended to reduce the penalty from Rs.10000 to Rs.2000.