Monday, August 02, 2010

Default of fortnightly payment

Is a SCN necessary for barring the facility


 

by


 

VIJAY. K. KUMAR

MA, B.Ed,BL,MBA

Superintendent of Central Excise, Hyderabad


 


An assess, who fails to pay the fortnightly duty, as per Rule 8(4) of the Central Excise Rules 2001, forfeits
the right to pay the duty in installments. Let us see what the rule says


 

8 (4)    If the assessee defaults,-


 

  1. in payment of any one instalment and the same is discharged beyond a period of thirty days from the date on which the instalment was due in a financial year, or


     

    1. in payment of instalment by the due date for the third time in a financial year, whether in succession or otherwise,


     

then, the assessee shall forfeit the facility to pay the dues in instalments under this rule for a period of two months, starting from the date of communication of the order passed by the Assistant Commissioner of Central Excise or the Deputy Commissioner of Central Excise, as the case may be, in this regard or till such date on which all dues are paid, whichever is later, and during this period the assessee shall be required to pay excise duty for each consignment by debit to the account current and in the event of any failure, it shall be deemed that such goods have been cleared without payment of duty and the consequences and penalties as provided in these rules shall follow.


 

So the rule stipulates an order passed by the AC or DC. Now the question that arises is whether this order is required to be a speaking order passed after following the principles of natural justice. If so look at the likely procedure.

An assessee has failed to pay the duty by the required dates on three occasions and the last occasion is say in December 2001. This has to be noticed by the Range superintendent. Now perhaps range superintendents have to be asked to maintain a register to monitor the prompt payment of duty by the assessees. Assuming it is noticed and is brought to the notice of the Assistant Commissioner and the AC issues a notice sometime in March 2002 (I am very realistic!) requiring the assessee to show cause why he should not be denied the facility and why he should not pay duty consignment wise for a period of two months from the date of passing the order or till the dues are paid, whichever is later. In most cases, the order is going to be the later event. The assessee has time until April 2002 to reply. He can ask for a couple of extensions and then submit the reply, may be in July 2002. Then he is to be called for a personal hearing, which is fixed in August 2002. Here also the assessee can ask for a few extensions on serious grounds such as:-


 

  1. Consultant is away
  2. Factory is undergoing renovation
  3. Records are sent to Internal auditors
  4. Concerned officers are on leave
  5. The concerned officer left the company and nobody has any idea where he has left the records.
  6. In spite of best efforts could not attend! Could you please give us one more chance?


 

The assistant Commissioner was pleased to grant extension each time though each such communication said emphatically that no further adjournment would be granted and the next time if the assessee fails to turn up the case would be decided ex- parte. By this time, it would be March 2003! And the assessee at last decides to attend the Personal hearing fixed on 15th March 2003!. When our assessee reaches the office, he is informed that the AC is called by the Commissioner for an urgent meeting. There after the hearing is postponed six times as:-

    the AC had to go out on some other urgent work/ is called out for a meeting/ has gone on training/ Member or Chief Commissioner is visiting his office/ the AC is transferred.


 

Finally assuming that a date suitable to the assessee and the AC has been fixed and the personal hearing is over – by September 2003. The AC orders payment of duty consignment wise for two months after nearly two years!


 

Is it worth all this trouble? And is it necessary to go through all this? Is a Show Cause Notice, Hearing and Speaking Order mandatory? What is the point in giving a notice? The fact is that the assessee defaulted thrice and what could be his defence? When there was not even a remote chance of any defence, where is the need to issue a Show Cause Notice? Further the rule does not specify that a notice has to be issued. Then can the AC pass the order without a notice and hearing?


 

In a recent case " Krishna Engineering works Ltd v UOI – 2001(134) ELT 14(P&H)", the Honourable high Court of Punjab and Haryana considering this very issue observed, " The defence which the affected person may put forward in reply to the show cause notice cannot be visualised, but the possibility of giving a plausible explanation cannot, altogether, be ruled out. In a given case, the noticee may show that no default has been committed in making the payment of duty within the stipulated period. In another case, it may prove that the notice has not been issued by the competent authority. In yet another case, it may convince the authority concerned that the amount standing in its credit could be used for payment of duty. The defense offered by the notice may not be accepted by the concerned authority, but there does not appear to be any reason or justification to exclude the applicability of the rules of natural justice by assuming that the notice will have no defence explanation to offer."

And the order passed by the Deputy Commissioner, without notice and hearing, forfeiting the facility of fortnightly payment was quashed as violating the principles of natural justice. Interestingly the assessee explained that he could not pay the duty due to the financial difficulties created by the Defence Department to whom they had supplied the goods!

EXCISE LAW TIMES – 01.02. 2002 – A 202

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