Rapid Revision on

Common Topics
For CA Final
(Nov 2014 Exams)

By
THARUN RAJB.Com, ACMA

SHOW CAUSE NOTICE (SCN)

Central Excise Act,
1944
Section 11A

Customs Act,
1962
Section 28

Finance Act,
1994
73

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

What is the time limit for serving show cause notice?

Situation
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

Time limit
Within 1 year from Relevant
date*
(18 months in case of service
tax)
Within 5 years from Relevant
date*

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.
* 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.

[2]

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

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

Either - a) On his own ascertainment or

b) As ascertained by the Assessing
officer

If Duty/Tax along with interest is

fully discharged

If assessing officer is of the opinion that

Duty/Tax along with interest is not fully
discharged

On receipt of such information,

the excise officer shall not serve
any SCN

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

*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
Normal cases (i.e. other than fraud, collusion etc.,)
In case of fraud, collusion, wilful mis-statement,
suppression of facts, contravention of any provision with
an intention to evade payment of duty

Time limit
Within 6 months from the date of issue of
SCN
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
[3]
Tharun Raj

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

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

Infinity Infotech
Parks Ltd. v. UOI
(2013) (Cal.)
Kemtech
International Pvt.
Ltd. v. CCus. (2013)
(S.C.)
Raghunath
International Ltd. v.

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.
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,
companys 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.
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
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.
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.
Issue Involved:
Whether DGCEI and ADGCEI are authorized to issue show cause
[4]

Union of India,
(2012) (All.)

Nanumal Glass
Works v. CCEx.
Kanpur, (2012) (All.)
Hans steel rolling
mill V. CCE 2011
(SC)
CCE V. Accrapac P.
Ltd. 2010 (Guj.)
Jay Kumar Lohani V.
CCE (2012) (MP)
Darshan Boardlam
Ltd. V. UOI (2013)
(Guj)

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.
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.
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
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.
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.
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.

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Tharun Raj

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?

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:
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.
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.

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
[6]

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

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

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.

[7]
Tharun Raj

INTEREST AND PENALTY

Central Excise Act, 1944

Customs Act, 1962

Section 11AA

Section 28AB

When interest shall be

payable?
What is the Rate of
interest?

What is the period for

which interest
payable?

When duty becomes

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

Finance Act,
1994
Section 75

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

[8]

Penalty under Excise, Customs and Service tax

General Penalty

On account of fraud,
collusion etc.,

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

Excise - Sec. 11AC

Customs - Sec. 112 and 114

Customs - Sec. 114A

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

Service tax - Sec. 78 of FA, 1994

PENALTIES UNDER EXCISE (RULE 25):

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

Penalty
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.
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
Value of the goods or 5,000, whichever is higher
any prohibition is in force under this
Act/any other law for the time being in
force
In the case of dutiable goods other
Duty sought to be evaded on such goods or
thanprohibited goods
5,000
whichever is the higher
Difference between actual value and declared
If Actual value is higher than the value
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Tharun Raj

declared in bill of entry

If the actual value is higher than the
value in declaration given in case of
baggage
In case the goods are prohibited and value
is mis-declared
In case the goods are dutiable and value
is mis-declared

value or 5,000 whichever is higher.

a) Value of Goods or
b) Difference between actual value and declared
value or
c) 5,000, whichever is higher
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
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
In the case of dutiable goods other
thanprohibited goods
In case of any other goods

Maximum Penalty
3 times the Value of the goods declared by
exporter or value as determined under this Act,
whichever is higher.
Duty sought to be evaded on such goods or
5,000whichever is the higher
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
Section 11AC
When penalty
shall be levied?
What is the
amount of
penalty?

Customs Act, 1962

Section 114A

Finance Act, 1994

78

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.
In case of Excise/Service Tax:
PENALTY, WHERE DETAILS OF THE TRANSACTIONS ARE
AVAILABLE IN THE SPECIFIED RECORDS
If Excise duty/Service Tax accepted 1% p.m from the month following
by assessee, in full or in part, is
the month in which such duty was
paid along with interest before
payable
issue of SCN
(or) 25% of such Excise
duty/Service tax,
Whichever is LOWER
If Excise duty/Service tax is paid
25% of such Excise Duty/Service
within 30 days from the date of
tax
communication of order
[Note: In case of Service tax
[The period of 30 days will be
[10]

penalty is also required to be paid

within 30 days]
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]

extended to 90 days, if the value

of taxable service is 60 lakhs]
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 25% of the Duty
paid in full or in part along with interest
within 30 days of receipt of notice
If customs duty along with penalty is
25% of the duty or Interest
paid within 30 days from the date of
communication of order of the proper
officer
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.
[11]
Tharun Raj

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

CCEx. v. Castrol India

Ltd. (2012) (Bom.)

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.
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.
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,
Customs Act, 1962
Finance Act,
1944
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
[12]

 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

[13]
Tharun Raj

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:

[14]

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 Within 1 year from Relevant date
personal use or import by government or
by any educational, research or
charitable institution, hospital
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).
Recovery proceedings shall be initiated
Where commissioner (Appeals) confirms
the demand in the order in original
IMMEDIATELY in the following cases
Where Tribunal or High court confirms
the demand, with no stay in operation
Where no appeal is filed with commissioner
Recovery to be initiated after the expiry of
(Appeals)/CESTAT
statutory period of filing appeal i.e. 60 days/90
days
Where an appeal is filed with Commissioner
Recovery to be initiated after filing of such
(Appeals)/ CESTAT, without a stay
appeal, without waiting for the statutory period
application
of filing an appeal to be exhausted.
Where an appeal is filed with a stay
Recovery to be initiated 30 days after filing of
application with commissioner (Appeals)/
appeal, if no stay is granted, otherwise as per
CESTAT
the conditions of the stay order

1Many

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

[15]
Tharun Raj

LAND MARK & RECENT CASES:

CCE (A) v. KVR
Construction
(2012)
(Kar.)
&
Swastik
Sanitarywares Ltd.
v.
UOI (2013) (Guj.).

CCE v. Flock India

Ltd. (2000)
(S.C)

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.
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?
[16]

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)
CCE V. Techno
rubber Industries
P. Ltd. 2011 (Kar.)
CCE V. Gem
properties P. Ltd.
2010 (Kar.)
Aman Medical
products V. CCus,
Delhi 2010 (Del.)
Narayan Nambiar
Meloths V. CCus
2010 (Ker.)
ICMC Corporation
Ltd. V. CESTAT
(2014) (Mad.)

CCE V.
Superintending
engineer TNEB
(2014) (Mad.)
relying on the

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]
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.
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]
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.
Refund is available on the basis of attested copy of GAR-7 challan also
[No need to file original GAR-7 challan]
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.
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
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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 Departments action
will be correct if M/s HIL
does notproduce any
evidence of bearing the
burden of duty.

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 Departments
plea is justified in law.
The facts of the given
case are similar to the
case of CCus., Chennai
v. BPL Ltd. 2010

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

[18]

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

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.
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.
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.
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).
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:
Total Refund admissible
= 1,82,101

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
Departments action is
correct in law.
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)

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

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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.

[20]

justified. The facts of

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

APPEALS

What is the time limit for filing appeal?

Appeal to
Commissioner
(Appeals)
CESTAT

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

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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
Commissioner (Appeals)
CESTAT

Time limit
Within 3 months from the decision or order of
adjudicating authority
Within 3 months from the communication of order of
commissioner

[22]

LAND MARK & RECENT CASE LAWS:

Khanapur Taluka Coop. 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-inoriginal 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
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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.)

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

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

[24]

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?

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

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.

A 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 courts 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.
2

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Tharun Raj

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.)

3DOCTRINE

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

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.
[26]

Section 129D(4): Where in pursuance of an order under subsection (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
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Mihani Network V.
CC&CCE (2012) (MP)

CCE V. RDC concrete

(India) P. Ltd. 2011
(SC)
CCE V. Gujchem
Distillers 2011 (Bom)
Ccus. V. Trilux
Electronics 2010
(Kar.)
Nanumal Glass works
V. CCE, Kanpur
(2012) (Allahabad)
C.C.E. & S.T. (LTU),
Bangalore v. Dell
Intl. Services India P.
Ltd. 2014
(Kar.)

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.
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.
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.
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.
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.
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.
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
Point of dispute:
Service Tax v. Ernst & The precise and significant issue which arose for consideration of the
[28]

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.

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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:

[30]

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

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:
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
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.

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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 Departments 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

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.

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

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 RILs 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)

[32]

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.
[33]
Tharun Raj

LAND MARK & RECENT CASE LAWS:

CCus.v. Ashok Kumar
Jain (2013) (Del.)

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

Ashwani Tobacco Co.

Pvt. Ltd. v. UOI (2010)
(Del.)

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

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 Commissions
jurisdiction, such intention would have been more
clearlymanifested as it had been mentioned in provisos to section
127B(1).
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.
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.
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.
[34]

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

Re: Sadik Sadruddin

Chunara (Sett.Comm)
(2006)
Commr of Customs v.
Mahesh Raj (2006)
(HC)
UOI V. K. Amishkumar
Trading P. Ltd. (2011)
(HC)

Icon Industries V. UOI

(2011) (HC)

J.R.B Engineering
works V. Settlement
commission (2012)
(HC)
Vadilal Gases Limited v
Union of India 2014
(Guj.)

Observations of the Court:

[35]
Tharun Raj

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.
[36]

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

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

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)

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

[37]
Tharun Raj

Discuss the correctness of the following

Ans:
(i) Mr. As case is pending in appeal before commissioner See below for the
(Appeals). Since the appeal is pending, Mr. A wants to file an answer
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

Answer to Question No. 5:

(i)

(ii)

(iii)

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.
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.
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.

[38]

ADVANCE RULING
Central Excise Act, 1944
Section 23A

Customs Act, 1962

Section 28E

Finance Act, 1994

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.
[39]
Tharun Raj

LAND MARK & RECENT CASE LAWS:

Oracle India P. Ltd.
(2012) (AAR)

UAE Exchange
Centre Ltd v. UOI
(2009) (Del. HC)
Zuari Cement Ltd.
(2009) (A.A.R.)
Tex (India) Pvt.
Ltd. (2004) (AAR)
Permalite
Electricals (P) Ltd.
(2004) (A.A.R)

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.
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
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
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.
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.

[40]

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

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.

[41]
Tharun Raj

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

Convicted for second

and subsequent time

Imprisonment upto 3
years OR Fine
(without limit) OR
Both

Imprisonment upto 7
years AND Fine
(without limit)

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.

[42]

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 nonbailable 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)

[43]
Tharun Raj

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.

[44]

[45]
Tharun Raj

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

Category B offence

(a) Willful evasion of payment of

service tax

Non payment of amount

collected as service tax
for a period of more
than 6 months from the
due date of payment

(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

[46]

Offences punishable under sec. 89

Category A Offence

Category B Offence

Second & every

subsequent offence

First time

Amount
involved in the
offence 50
lakhs

Amount
involved in the
offence >50
lakhs

Imprisonment
upto 1 year

Imprisonment
for 6 months
3 years

Term of
imprisonment
may extend to
3 years

Second & every

subsequent offence

First time

Amount
involved in the
offence 50
lakhs

Amount
involved in the
offence >50
lakhs

Amount
involved in
the offence
50 lakhs

Amount
involved in
the offence
>50 lakhs

Imprisonment
upto 1 year

Imprisonment
for 6 months
7 years

Upto 3
years

Upto 7
years

COGNIZANCE OF OFFENCES SEC. 90

Offences

Cognizable offence

Non-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

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

These offences are usually

serious in nature

Not much serious as cognizable

offence

Bailable Offence

Non-bailable offence

Always bailable
offence

[47]
Tharun Raj

Offences which attracts imprisonment Sec. 89 vis--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

Amount
involved in the
offence >50
lakhs

Imprisonment
upto 1 year

Imprisonment
for 6 months
3 years

Category B Offence

Second & every

subsequent offence

Term of
imprisonment
may extend to
3 years

First time

Second & every

subsequent offence

Amount
involved in the
offence 50
lakhs

Amount
involved in
the offence
50 lakhs

Imprisonment
upto 1 year

Upto 3
years

Cognizable offence

[48]

POWERS OF ARREST [SEC. 91]

(i)

(ii)

(iii)

(iv)
(v)

(vi)

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.
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.
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.
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.
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.
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].

[49]
Tharun Raj

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.

[50]

Offences under Customs Act, 1962

Non - Cognizable and bailable offences

Cognizable and non-bailable offences

Except the offences specified adjacent, all

other offences are 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

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

Convicted for first time/

Second and subsequent time

Imprisonment shall not

be for less than 1 year, in
the absence of special
and adequate reasons to
the contrary

Impriosnment for a term

which may extend to 7
years AND with Fine

[51]
Tharun Raj