TMI BlogMaster Circular on Recovery and Write-Off of Arrears of RevenueX X X X Extracts X X X X X X X X Extracts X X X X ..... rs of Indirect taxes and Customs. 2. THE CONCEPT OF ARREAR: (i) Arrears are the overdue payment of the amount of tax, interest, fine or penalty that is confirmed against a person who is liable to pay the same to the exchequer. It arises as a result of Order-in-Original, Order of Appellate forum, like the Commissioner Appeals / ADC/JC Appeals or the CESTAT and the Courts of law. (ii) The amount in the case under investigation, unconfirmed demands (i.e. Show Cause Notice, including those in Call Book), the Order-in-Original that has been set aside or remanded for de-novo adjudication by Appellate authority do not fall under the category of arrears . 3. THE STATUTORY PROVISIONS FOR RECOVERY: Recovery of Arrears is the positive act of getting the money that is legally overdue from a person/entity. The act of recovery of arrears has to be persuasive and legal. The taxing statutes incorporate the legal provisions for such recovery. Various statutory provisions for recovery of arrears are indicated as below:- (a) Customs Act, 1962: Section 28 BA , Section 142 read with Section 142 A (b) Customs (Attachment of Property of Defaulters for recovery of Gover ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s arising out of common adjudication orders, it is directed that copy of SCN and Adjudication Order should be endorsed to the concerned Jurisdictional Pr. Commissioners/Commissioners for recovery of arrears. Such arrears should be reported by the said Jurisdictional Pr. Commissioners / Commissioners and action of recovery of arrear should be taken by him. 5.1 CASES UNDER LITIGATION/APPEAL- Though, arrears pending before the appellate fora may not be recoverable immediately yet the status of these cases need to be clarified and monitored regularly. For this category the following guidelines should be followed for effective monitoring: (a) Cases of arrears pending before SC / HC/ CESTAT- (i) The Jurisdictional Commissioners /Commissioners will identify all cases of appeal where the department has a strong case or a reasonable chance of success and the amount involved in the arrears is more than ₹ 1 Crore. (ii) The particulars of all such cases will be kept with the Review Cell/Legal Cell and the TRC of the Commissionerate for regular monitoring. (iii) Miscellaneous Application for early hearing, out-of-turn hearing, early decision, stay vacation, bunchi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s charge is subject to the provisions of Section 529 A of the Companies Act, 1956 (Section 326 of Companies Act, 2013), the Recovery of Debts due to Banks and the Financial Institutions Act, 1993 (RDB Act), the Securitisation and Reconstruction of Financial Assets and the Enforcement of Security Interest Act, 2002 (SARFAESI Act) and the Insolvency and Bankruptcy Code, 2016. In cases pending with BIFR /OUDRT/Units taken over by Banks, the department should file affidavits for first charge under Section 11 E of the Central Excise Act/Section 142 A of the Customs Act /Section 88 of the Finance Act, 1994 and Section 82 of the CGST Act, 2017. Besides taking aforesaid action, the cases pending in such authorities should be monitored and approached constantly for their early disposal. (a) Cases with Board for Industrial and Financial Reconstruction (BIFR) /National Company Law Tribunal (NCLT)- BIFR was set up in January 1987 under The Sick Industrial Companies (Special Provisions) Act, 1985 (SICA) to determine the sickness of industrial companies and to assist in reviving those that may be viable and shutting down others. It was dissolved on 30.11.2016 and its proceedings we ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Resolution Professionals (IRPs) in prescribed format accompanied with all requisite documents. The IRP forms the Committee of creditors and calls its meeting to decide whether the business of corporate defaulter can be revived. Since taxes have been declared as Operation debts under IBC, the jurisdictional Central Tax or Customs officer should attend the meeting of committee of creditors although they do not possess the voting rights. By attending the meetings called by Interim Resolution Professionals/Resolution Professionals, jurisdictional officer may raise their points regarding protection of Government revenue. (ii) When the insolvency professional acts as the liquidator, he collects the claims of the creditors within a period of 30 days from the date of commencement of the liquidation proceedings and creates a liquidation estate comprising of all the assets of the corporate debtor and holds these assets in a fiduciary capacity for the benefit of all the creditors. The jurisdictional Central Tax/ Customs officers shall have to submit a claim to the liquidator, within the time period (30 days) along with all such supporting documents required to prove the claim as may ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the creditors and contributories, prosecution of directors of the company in the event of misfeasance and eventual dissolution of the company. (iii) A company is ordered to be compulsorily wound up by the High Court in response to a petition filed by one or more creditors seeking such relief when the company is unable to pay off its debts to its creditors. In the same order the Official Liquidator is appointed with a direction to take charge of the assets and affairs of the company. (iv) During such processes, a claim can be filed by the defaulter as per proforma annexed herewith as annexure B. The claimant (department) is required to submit all documents necessary to prove the claim. The said proforma is an Affidavit sworn by the claimant and is to be filed through the departmental counsel. (v) The Official Liquidator invites claims from the creditors of the company through an advertisement in leading dailies giving at least 14 days time (normally 30 days) for the claimants to file their claims before him. Further, as part of e-governance initiative the advertisement is also displayed .in the court s website covering the entire period of 30 days. The claimant is required ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... manner provided in aforesaid clauses - (d) Send a certificate specifying the amount the collector of District for recovery of the amount where the defaulter owns an roperty or records or business and the said Collector shall proceed to recover the id arrear as land revenue. (e) Detention/attachment and sale of property of defaulter by the department as per provisions of Section 142 1(c)(ii) of Customs Act, 1962 . (f) Recovery by way of attachment and sale of goods/ material etc. from the successor of the defaulter (i.e. transferee, purchaser etc.) in business or trade in whole or part thereof. (g) Invoking the Garnishee Provisions i.e. recovery from any other person from whom money is due to such defaulter or may become due to such defaulter or who holds or may subsequently hold money for on account of defaulter. II. Apart from aforesaid legal provisions there may be occasions where there is a possibility to recover the arrears, few such aspects are illustrated below- (a) On the Customs side, a lot of facilities, including facility of duty-free imports of goods, are permitted on submission/furnishing of bank guarantee. The authorities may review such cases and t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... local market and other departments where there is possibility of registration of defaulter viz. electricity, SGST, pollution control department, stamp authorities etc. (d) On the basis of PAN Number, the Income Tax Department s data base should be accessed to ascertain the Aadhaar No., Mobile No., phone no., e-mail address, location address, any house property, life/ medical/ general insurance, Bank details, movable immovable property etc. of the defaulters. (e) DGFT website can provide the registered residential, business address/details of the defaulters on the basis of IEC and further access to MCA Company data to verify Directors details [DIN] and other companies where the person is a director, its address etc. (f) Details of shares in capital market held by defaulters should be found out through the two depositaries viz. National Securities Depository Limited (NSDL) and Central Depository Services (India) Limited (CSDL) by searching with PAN of the defaulters. (g) Department should access the digital format of land/assets details maintained/held by District Authorities so that recovery proceedings can be initiated early. (h) CBIC modules (viz. GST backend (Sa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ers is located for the following action. (a) Any moveable or immovable property belonging to or under the control of the defaulter will be detained under Section 142(1)(c) read with Customs (Attachment of Property of Defaulters for Recovery of Government Dues) Rules, 1995. (b) For recovery of the dues under these provisions, simultaneous action through district authorities and through Jurisdictional Pr. Commissioners /Commissioners should be taken. Accordingly, the Circular No. 54/95-Cus. Dt. 30.05.95 stands superseded. (c) If any dues are not paid within 30 days of the detention as above, the said property would be sold in the prescribed manner. (d) For recovery through attachment and sale, the procedure prescribed vide following Circulars may be followed: (i) Circular No. 56/96-Cus., Dated 14/11/96 F. No. 450/72/96-Cus-VI Sub: Recovery of arrears of Revenue under amended Section 142(1) of the Customs Act 1962 read with Customs (Attachment of Property of Defaulters for Recovery of Government of Dues) Rules, 1995. (ii) Circular No. 365/81/97-CX Dated 15/12/1997 F. No. 296/1/95-Cx.9 Sub: Sale of movable/immovable properties by Central Excise Officers for recovery ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... stituted shall examine the proposals and on the basis of the recommendation/decision of the Committee, the competent authority shall write-off arrears in deserving cases in accordance with the powers delegated for the purpose. (d) The Committee of Jurisdictional Pr. Commissioners/Commissioners so constituted shall also examine the proposals/cases to write-off the arrears where only penalty is levied on the defaulters (viz. penalty imposed in cases of non-filing of returns, penalty on crew in smuggling cases/penalty on transporters etc.). On the basis of recommendations of the Committee the Competent Authority shall write-off arrears in deserving cases. (e) As regards write-off of interest amount, it is clorified that once duty/tax involved is written off, the interest due thereon would autOiatically get written-off. (f) It is also directed that the act of writing off of arrear does not absolve the defaulter from the liability to pay for any new facts coming to notice in future. Therefore, consequent action if any, should be ensured by the jurisdictional Pr. Commissioners / Commissioners and the Pr. Chief /Chief Commissioner as the case may be. 10. The following instruct ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 202/2017-CX-9 dated Sep 2017 Sub: Writing off of arrears of Central Excise, Service Tax and Customs duty- Constitution of Committees to advise the authority for writing off of arrears read with corrigendum w.r.t 20/10/2017. ANNEXURE-B FORM FOR FILING CLAIM WITH OL/DRT Affidavit of proof of arrear (may be filed in the form of application as the case may be) (PETITION No of .. (20 ) I, of (full name, address and occupation of deponent to be given) do solemnly affirm and state as follows: 1. The Company/firm (full name, address etc. of the company/firm/entity to be given) was, at the date of the order of winding-up the same* viz., the day of . 20 and still is, justly and truly indebted to the Department of indirect Taxes Customs as arrears mentioned as follows are pending for recovery by the office of Jurisdictional Pr. Commissioners/Commissioners of .. (full address) Arrears of- Duty/Penalty/Fine/other dues arising out of 010 /0IA /FO . (complete details) Duty of (Rs) Fine (Rs) Penalty (Rs) Other Dues ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and sell the goods as per provisions of Section 142(i) C(ii) of Customs Act, 1962. (f) to attach/and sell the goods in the possession/custody of the transferee/successor in business under Section 11 of Central Excise Act, 1944 / Sec. 142 of Customs Act, 1962, Section 87 of Finance Act, 1994. (g) invoking the garnishee provisions (h) attachment of Bank account appropriation of Bank Guarantee/enforcement of bail - bond etc (i) to ascertain the location of any moveable/ immoveable assets belonging to the defaulter through sources mentioned at para 6 (iv) (a) to (j) of the circular and result thereof. (j) others, if any 8 Amount to be written off: Total Amount due Rs. Duty Rs. ..... X X X X Extracts X X X X X X X X Extracts X X X X
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