TMI BlogDEMAND NOTICE/SHOW CAUSE NOTICE, ADJUDICATION, INTEREST, PENALTY, CONFISCATION, DUTY PAYMENT UNDER PROTESTX X X X Extracts X X X X X X X X Extracts X X X X ..... l Excise law it is considered appropriate to penalize the defaulter, it is necessary to first issue a show cause notice. The show cause notice would detail the provisions of law allegedly violated and ask the noticee to show cause why action should not be initiated against him under the relevant provisions of the Act/Rules. Thus, a show cause notice gives the noticee the opportunity to present his case. Further, compliance with all the formalities pursuant to the issue of the notice alone would entitle the Department any dues. [Circular F.No. 67/17/88-CX.2 dated 18.8.1988]. 2. Issue of duty demand notice 2.1 Section 11A of the Central Excise Act, 1944 provides that if excise not been levied or paid or has been short levied or short paid or erroneously refunded, a notice has to be served within one year from the date on the person from whom the differential duty is demanded. Provided that where any duty of excise has not been levied or paid or short-levied or short-paid or erroneously refunded by reason of fraud, collusion or any wilful mis-statement or suppression of facts, or contravention of any of the provisions of this Act or of the rules made there-under with intent t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... otice issued, it is essential that the assessee is put to notice specifically regarding which of the various commissions or omissions stated in the Proviso to Section 11A has been committed. [1995(76) ELT 497 (SC) and Circular No.312/28/97-CX dated 22.04.1997]. For example, if the extended period is invoked on account of fraud, the notice should specifically allege fraud. 2.9 Invoking of the extended period under the proviso to Section 11A in the Show Cause Notice proposed to be issued should be resorted to only in the event of fraud, collusion, wilful mis-statement, suppression of fact or contravention of any of provisions of the Excise Act/Rules with intent to evade payment of duty and not as a matter of routine. [Circular No.5/92 dated13.10.19921 2.10 When a Show Cause Notice is issued, citing documents seized from the party, it should be ensured that only those documents/pages proposed to be relied on in framing/establishing charges should be referred to in the Notice. [Circular No.2/89 dated 09.01.1989] Once the Show Cause Notice is issued to the party, all the documents/records which have not been relied upon may be returned to the party under proper receipt. The party sh ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... evelopment Commissioner concerned determines that the Unit has failed to Export the fixed percentage of articles for the specified period, in such cases it can be held that the conditions of the notification have been violated and it will be open to the Department to issue a show Cause Notice to the Unit demanding the t the imported goods. [Circular No.21 /95-Cus dated 10.03.1995] 3.7 In respect of simplified export procedure for exempted units, where for home consumption and the clearances for export where proof of Export have not been furnished within 6 months, when taken together, is exceed the exemption limit, show cause Notice may be issued for safe guarding revenue.[ Circular No.212/46/96-CX dated 20.05.1996] 3.8 If during the scrutiny of the RT-12 return or the audit or inspection, rd that duty of excise leviable on any goods has escaped self-assessment and been not paid/short paid or has not been correctly or properly self-assessed i 'aid by the assessee on that basis, necessary action shall be taken by the proper Officer for preparation and issue of Demand-cum-Show Cause Notice in accordance with Section 11A of the Act, [ No.249/83/96-CX dated 11.10.1996] PART- ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... officer or Appellate Tribunal in connection with any proceedings. Cross examination of witnesses, whose statements are relied upon in the proceedings, shall be allowed if there is any request in this regard from the defendant [ (143) E.L.T. 21 (S.C.), 2002 (146) E.L.T. 248 (S.C.), 2000 (122) E.L.T. 641 (S.C.)]. The Allahabad High Court in [ (68) E.L.T. 548 (All)] has held that the right to cross-examination is not an absolute right and the question whether the petitioner was entitled to cross- examination is a question which may largely depend on the facts of the case. Hence, the adjudicating authority shall take a decision on requests for cross- examination is a question which may largely depend on the facts of the case. Hence, the adjudicating authority shall take a decision on requests for cross- examination considering the facts and circumstances of each case. In adjudication proceedings, reliance cannot be placed on Section 9C of the Central Excise Act, 1944, and powers under this Section is available only to a court of law in prosecution proceedings. However, mens rea is not a pre-requisite to impose penalty under Central Excise law. 2. Adjudication and determination of du ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of Central Excise Act! Rules with an intent to evade duty and/ or where extended period has been invoked in show cause notices (including classification and valuation of excisable goods and CENVAT credit cases) will be adjudicated as follows: Central Excise Officers Powers of Adjudication (Amount of Duty involved) Deputy/Assistant Commissioners Up to Rs.5 lakhs Joint Commissioners Above Rs.5 lakhs and up to Rs.20 lakhs Additional Commissioners Above Rs. 20 lakhs and up to Rs. 50 lakhs Commissioners Without limit B. Cases which do not fall under the Category (A) above including all cases relating to determination of classification and valuation of excisable goods and CENVAT credit will be adjudicated as follows: Central Excise Officers Powers of Adjudication (Amount of duty involved) Deputy/Assistant Commissioners Up to Rs.5 lakhs Joint Commissioners Above Rs.5 lakhs and up to Rs.20 lakhs Additional Commissioners Above Rs.20 lakhs and up to Rs.50 lakhs Commissioners Without limit C. Cases related to issues me ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... se Act, 1944 read with rule 3 also invests certain officers with powers of Commissioners or other officers through out the territory of India, for the purpose of investigation and adjudication. 4. Time limit for issue of adjudication orders: The demand on account of short levy, non-levy or erroneous refund, by reason of fraud collusion, willful mis-statement or suppression of facts shall be adjudicated within a period of one year from the date of issue of show cause notice, where it is possible (Clause (a) of Sub-section 2A of Section 11A of Central Excise Act, 1944). In any other case, as far as possible, the case shall be adjudication within a period of six months (Clause (b) of Sub-section 2A of section 11A ibid). All cases where personal hearings have been concluded, it is necessary to communicate the decision immediately or wi6thin a reasonable time of 5 days. If the above limit cannot be adhered to under any circumstances, the order should be issued within 15 days or at the most one month from the date of personal hearing (Board's Circular No.732/48/2003-CX dated 5.8.2003). 4.1 The adjudication order must be a speaking order giving clear adjudicating authority and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the provisions of Section 11 BB. 1.2 As per Section 11 AA inserted with effect from 26.5.1995 by the Finance Act, 1995, interest is chargeable on delayed payment of duty after three months from the date of determination of duty liability by the Central Excise officer under sub-section (2) of Section 11 A. 1.3 Section 11 AB was inserted by the Finance Act, 1996 with effect from 28.9.1996 as per which interest will be charged from the first date of the month following the month in those cases where the duty was not paid on account of fraud suppression etc. [Section 11 AB(1) 1.3.1 As a result of the insertion of Section 11 AB by the Finance Act, 1996 for the period from 28.9.1996 to 11.5.2001 {substitution of Section 11 AB(1) and 11 AB(2) vide Finance Bill 2001 } interest is chargeable as follows: (a) In the normal case, interest will be charged for the period of delay after three months from the date of such determination of the duty liability till the date of payment of duty. (b) In cases where the duty is not paid on account of fraud, suppression etc., the interest will be charged from the first date of the month following the month in which the duty was not paid. 1.3. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... aracter of Duty but has character only of security deposits. Such Deposit not governed by provisions of Section 11 BB - Interest on delayed Refunds. 1.11 Interest chargeable under the Sections is simple interest and the fixed by the Government from time to time between the lower limit 10% and upper limit of 36% per annum. 1.12 Under Section 11BB interest is payable by the Department in delayed refund cases. Interest is payable for the period of delay after 3 months from the date of receipt of application of refund. 1.13 Interest payable by the Department as delayed refunds as per Section 11BB will be not below 5% and not exceeding 30% per annum, fixed by the government from time to time. 2. Penalties and Confiscation 2.1 Penalty is imposable under Section 11 AC of Central Excise Act, rule 25, rule 26 and rule 27 of Central Excise Rules, 2002 and rule 15 of CENVAT Credit rules, 2004. Confiscation is provided under rule 25 and rule 27 of Central Excise Rules and rule 15 of CENVAT Credit Rules, 2004. Though, there is no pro in the Central Excise Act, 1944 for confiscation, Section 12 of Central Excise Act, 1944 read with Notification No.68/63 dated 4.5.1963 as provides for ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... which may extend to five thousand rupees and wit confiscation of the goods in respect of which the offence committed. This is attracted when no other specific penalty provided for. (v) Rule 15 of CENVAT Credit Rules, 2004 provides for penalty on an person takes CENVAT credit in respect of inputs or capital good wrongly or without taking reasonable steps to ensure the appropriate duty on the said inputs or capital goods has been pal as indicated in the document accompanying the inputs or capital goods specified in Rule 9 of CENVAT Credit Rules, 2004 or contravenes any of the provisions of these rules in respect of an inputs or capital goods in respect of which any contravention hi been committed or ten thousand rupees, whichever is greater. In a case, where the CENVAT credit has been taken or utilized wrongly on account of fraud, willful mis-statement, collusion or suppression of facts, contravention of any of the provisions of the Act or the rules made there-under with intention to evade payment of duty, then, the manufacturer shall also b liable to pay penalty in terms of the provisions of Section 11AC of the Act. 2.2 If penalty is imposed under Section 11AC, penalty under r ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... des that the limitation of one year period prescribed for making application for refund of duty from the relevant date shall not apply where any duty has been paid under protest. 3.2 Earlier, Rule 233 B of the Central Excise Rules, 1944 was in existence h prescribed the procedure to be followed in cases where duty is paid under protest. No corresponding provision exists in the present rules. The procedure to be followed has been incorporated only in the Supplementary instructions issued CBEC under the provision of Rule 31 of Central Excise Rules, 2002, which is as below: (i) The assessee shall inform the Superintendent or Inspector of Central Excise in writing giving reasons for paying duty under protest and a dated acknowledgement will be given to him. (ii) He will mark invoices or monthly/ quarterly return indicating the goods on which duty is paid 'under protest'. If it is a lump-sum duty payment in respect of past demand, he may record the fact of duty payment under protest in the Personal Ledger Account [debits] CENVAT Account [debits] and the Daily Stock Account. (iii) If a case is appealed against by the assessee or where the appeal period for further appeal is avail ..... X X X X Extracts X X X X X X X X Extracts X X X X
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