CHAPTER 13
DEMAND NOTICE/SHOW CAUSE NOTICE, ADJUDICATION, INTEREST, PENALTY,
CONFISCATION, SEIZURE, DUTY PAYMENT UNDER PROTEST
PART III
INTEREST, PENALTY, CONFISCATION, DUTY PAYMENT UNDER PROTEST1. Introduction
1.1 Interest of duty not paid on time is provided for in the Central Excisestatute. It is expected that the interest provision would normally not have to beinvoked as the assessee would make the duty payment on time.
1.2 Penalty and confiscation of offending goods i.e. which have violated theprovision of the Central Excise law are an outcome of the adjudicationproceedings. These are deterrents aimed at cautioning the dishonest taxpayer.
2. Interest on duty
2.1 Under the provisions of Section 11AA, interest is charged on the delayedpayment of duty. Thus, it is in the interest of an assessee to discharge the dutyliability the earliest and not to prolong the dispute only for the sake of delayingpayments. The interest will be charged under said Section 11AA, as follows:
(a) In the normal case interest will be charged for the period of delayafter 3 months of the determination of the duty liability till the date ofpayment of duty.
(b) In the case the duty is not paid on account of fraud, suppression etc.the interest will be charged from the first date of the month followingthe month in which the duty was not paid.
2.2 There may not be need for any explicit mention of the interest liability inthe show-cause notice since the legal provisions are explicit. However, the samemay be done as a matter of abundant precaution. Likewise, the adjudicatingofficer may incorporate the fact about the interest liability in the order confirmingthe demand.
3. Penalty and Confiscation
3.1 Penalty is imposed under any of the following provisions of the CentralExcise Act, 1944 or the rules made thereunder: -
(i) Section 11AC prescribes a mandatory penalty equal to the dutynot levied or paid or short paid or erroneously refunded by reasonof fraud, suppression etc. However, in the vent the duty andinterest thereon is paid within 30 days of the communication of theorder, the penalty shall be 25% of the duty subject to it being paidwithin the said period of 3o days.
(ii) Rule 25 of the said Rules provides for penalty on any producer,manufacturer, registered person of a warehouse or a registereddealer not exceeding the duty on the excisable goods in respectof which any of the specified contravention have beencommitted, or rupees ten thousand, whichever is greater. Thepenalty is subject to the provisions of Section 11 AC of the CentralExcise Act, 1944. The offending goods are also liable toconfiscation. The specified contravention are:
(a) Removal of any excisable goods in contravention of any ofthe provisions of the said rules or the notifications issuedunder the said rules; or
(b) Non-accountal of any excisable goods produced ormanufactured or stored; or
(c) Manufacture, production or storage of any excisablegoods without having applied for the registrationcertificate required under Section 6 of the Central ExciseAct; or
(d) Contravention of any of the provisions of the said rules orthe notifications issued under the said rules with intent toevade payment of duty.
(iii) Under rule 26 of the said Rules It is provided that any person whoacquires possession of, or is in any way concerned in transporting,removing, depositing, keeping, concealing, selling or purchasing, orin any other manner deals with, any excisable goods which heknows or has reason to believe are liable to confiscation under theAct or the said Rules, shall be liable to a penalty not exceeding theduty on such goods or rupees ten thousand, whichever is greater.
(iv) Rule 27 of the said Rules provides for imposition of a general penaltypenalty which may extend to five thousand rupees and withconfiscation of the goods in respect of which the offence iscommitted. This is attracted when no other specific penalty isprovided for.
3.2 If penalty is imposed under Section 11AC, penalty under rule 25 will not beimposed. This, however, does not preclude the Department from confiscating thegoods, imposing any fine in lieu of confiscation and prosecuting a person.
3.3 Rule 26 of the said Rules also provides that before any order of penalty orconfiscation is passed the adjudicating authority shall follow the principles ofnatural justice. In other words a notice explaining the reasons why penalty shouldnot be imposed or goods confiscated has to be given to the person. Thereafter,reasonable opportunity shall be given to such person to explain or defend hiscase. The adjudicating Officer shall pass a reasoned order, incorporating thedefence arguments given by such person or his authorised representative.
3.4 As per Rule 28 of the said Rules, when any goods are confiscated underthese rules, such thing shall thereupon vest in the Central Government.Accordingly, the Central Excise Officer adjudging confiscation shall take andhold possession of the things confiscated, and every Officer of Police, on therequisition of such Central Excise Officer, shall assist him in taking and holdingsuch possession.
3.5 Rule 30 provides that if the owner of the goods, the confiscation of whichhas been adjudged, exercises his option to pay fine in lieu of confiscation, hemay be required to pay such storage charges as may be determined by theadjudicating officer.
3.6 Provisions for disposal of goods confiscated are contained in rule 29 of thesaid Rules. Goods of which confiscation has been adjudged and in respect ofwhich the option of paying a fine in lieu of confiscation has not been exercised,shall be sold, destroyed or otherwise disposed of in such manner as theCommissioner may direct.
4. Duty under protest
4.1 As per Section 11B of the Central Excise Act, 1944 the time limitation ofapplication for refund of duty fixed at one year from the relevant date shall notapply when the duty has been paid under protest.
4.2 Any assessee who desires to pay duty under protest, may do so byfollowing the procedure mentioned below:
a. The assessee shall inform the Superintendent or Inspector ofCentral Excise in writing giving reasons for paying duty underprotest and a dated acknowledgement will be given to him.
b. He will mark invoices or monthly/quarterly return indicating thegoods on which duty is paid ‘under protest’. If it is a lump-sum dutypayment in respect of past demand, he may record the fact ofduty payment under protest in the Personal Ledger Account[against debits] CENVAT Account [against debits] and the DailyStock Account.
c. If a case is appealed against by the assessee or where the appealperiod for further appeal is available, he may continue to pay dutyunder protest. However, if decision is not in his favour and heexhausts the appellate remedy or does not appeal withinstipulated period, the assessee shall not have ay right to pay dutyunder protest.
4.3 A letter of protest or a representation for paying duty under protest shallnot constitute a claim of refund.
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