Thursday, August 05, 2010

New Central Excise Rules - New Problems?

by


 

K. VIJAY KUAMR

MA,BL,MBA,B.Ed.

Superintendent of Central Excise, Hyderabad


 

The new rules are here – at least some of them. We are yet to have rules for CENVAT, EXPORT, APPEALS etc,. The rules which served us quite well for over half a century are being discarded for a set of new rules. I only hope that the new rules do not bring in new litigation. While I hesitate to rush in pointing out the flaw in the law, I can not resist the urge to bring the following to the notice of the respectable authorities with a hope that changes, if deemed, necessary, would be made well within time.


 

As per Rule 4

Every person who produces or manufactures any excisable goods, or who stores such goods in a warehouse, shall pay the duty leviable on such goods in the manner provided in rule 8 or under any other law.


 

What is this any other law? May be it is contemplated to make some other laws for determining manner of payment of duty.


 

Provisional assessments:- Under Rule 7(3), the AC or DC shall pass final assessment order – what happens after finalisation of assessments? Demands and refunds? The earlier rule 9B(5) stipulates that after finalisation of assessments, there has to be an adjustment and consequential demand or refund. The proviso to rule 9B(5) added in 1999, clarified that refund shall be made only in accordance with the procedure under Section 11B(2). This was necessitated because tribunal held that the principle of unjust enrichment and even section 11B did not apply to refunds consequent to finalisation of provisional assessments. Based on the observations of the hon'ble supreme Court in the famous Mafatlal case, 1997 (89) E.L.T. 247 (S.C.) "Any recoveries or refunds consequent upon the adjustment under sub-rule (5) of Rule 9B will not be governed by Section 11A or Section 11B, as the case may be. However, if the final orders passed under sub-rule (5) are appealed against - or questioned in a writ petition or suit, as the case may be, assuming that such a writ or suit is entertained and is allowed/decreed - then any refund claim arising as a consequence of the decision in such appeal or such other proceedings, as the case may be, would be governed by Section 11B. It is also made clear that if an independent refund claim is filed after the final decision under Rule 9B(5) re-agitating the issues already decided under Rule 9B - assuming that such a refund claim lies - and is allowed, it would obviously be governed by Section 11B. It follows logically that position would be the same in the converse situation" , Tribunal had held that section 11B and consequently concept of unjust enrichment is not applicable to refunds arising out of finalisation of provisional assessments. The Board in Circular No. 518/14/2000-CX, dated 3-3-2000 [From F. No. 387/231/99-JC] had clarified that rule 9B was amended to make the position more clear and even for the previous period, an appeal has been filed in the Supreme Court. In spite of the amendment, Tribunal in several decisions -


 

(STAR PAPER MILLS LIMITED v COMMISSIONER OF C. EX., MEERUT- 2000 (122) E.L.T. 114 (Tribunal),

Commissioner v. Steel & Metal Tubes India Ltd. — 2000 (126) E.L.T. 1201 (Tribunal)

Sanat Products Ltd. v. Commissioner — Tribunal's Final Order No. 648/2000-A, dated 10-8-2000


 

held that unjust enrichment concept is not applicable to refunds after finalisation of provisional assessments. There were similar decisions on the Customs side also.

Now when the present rule does not state anything about refund at all, what could be the position? May be because the rule is totally silent, there would be no question of interpretation and now provisions of section 11B would apply.


 


 

As per rule 8, Duty for the 2nd fortnight of March is to be paid by 31st March. How is it possible?. If there is a clearance at 11.30 p.m. on 31st March, is the assessee required to pay duty before 12 midnight? The present rule has a provision for payment of a pro rata amount for the 2nd fortnight of March. The absence of this provision in the rule is likely to cause undue litigation.


 

Rrule 8(4) reads,

"(4) If the assessee defaults,- (i) 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

(ii) in payment of instalment by the due date in a financial year, whether in succession or otherwise,

then, the assessee shall forefeit 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.

What is the difference between clause (i) and (ii) ? Don't they appear contradictory? This is perhaps a mistake caused by the computer. Clause (ii) should have been, "
in payment of instalment by the due date (for the third time
) in a financial year, whether in succession or otherwise".
This is the position in the present rule. May be if the government wanted, they could have reduced the frequency from third time to second time, but without those words, the rule has no meaning.


 

The later part of this rule reads, .....
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.

What is the account current? The old PLA? It is not mentioned anywhere. Suddenly out of the blue, rule 8 mentions about debiting in the account current without any previous rule mentioning about what the account current really is. Perhaps a definition of what exactly the account current is, has to be given . Procedure for payment of duty is also not specified.


 

Rule 9: Registration.- (1) Every person, who produces, manufactures, carries on trade, holds private store-room or warehouse or otherwise uses excisable goods, shall get registered and shall not engage in the production, manufacture, trade, storing in private store room or warehouse or use excisable goods without having applied for such registration to the jurisdictional Superintendent of Central Excise in proper form.

Does "proper form" refer to Superintendent or application?


 

(8) In case a registered person intend to manufacture a new product, he shall get the product endorsed on his registration certificate.

This should have been intends


 

Rule 10. DSA :
(1) Every assessee shall maintain proper records, on a daily basis, in a legible manner indicating the particulars regarding description of the goods produced or manufactured, opening balance, quantity produced or manufactured, inventory of goods, quantity removed, assessable value, the amount of duty payable and particulars regarding amount of duty actually paid


on a daily basis! What does this mean?

(2) The first page and the last page of each such account book shall be duly authenticated by the producer or the manufacturer or his authorised agent.


 

First and last page to be authenticated. What if the account is not in a book? There is no rule that it should be in a book! And what about computerised records?

Rule 11: Goods to be removed on invoice.-

(1) No excisable goods shall be removed from a factory or a warehouse except under an invoice signed by the owner of the factory or his authorized agent and in the case of cigarettes, each such invoice shall also be countersigned by the Inspector of Central Excise or the Superintendent of Central Excise before the cigarettes are removed from the factory.

(2) The invoice shall be serially numbered and shall contain the description, quantity and

value of goods and the duty payable thereon.

(3) The invoice shall be prepared in triplicate in the following manner, namely:- (i) the original copy being marked as ORIGINAL FOR BUYER;

(ii) the duplicate copy being marked as DUPLICATE FOR TRANSPORTER;

(iii) the triplicate copy being marked as TRIPLICATE FOR ASSESSEE.

(4) Only a copy of invoice book shall be in use at a time, unless otherwise allowed by the

Assistant Commissioner of Central Excise, or the Deputy Commissioner of Central Excise, as the case may be, in the special facts and circumstances of each case.

(5) The owner or working partner or Managing Director or Company Secretary shall

authenticate each foil of the invoice book, before being brought into use.

(6) Before making use of the invoice book, the serial numbers of the same shall be intimated to the Superintendent of Central Excise having jurisdiction.


 

  1. What is invoice? This has not been defined.
  2. The invoice shall be serially numbered. How is it possible to serially number one invoice? And when would the serial number start, at what number and where does it end? For example can an assessee have a serial number starting at 345 from the 15th of April?
  3. Invoice book? There is no requirement of maintaining an invoice book; it can be in loose sheets also, which is the case with many units. Suddenly there is a requirement of having only one copy of the invoice book. What if there is no book at all?
  4. Before making use of the book serial number of the SAME to be intimated? What if there is no book?


 

This is under the assumption that there is an invoice book! And what about Computer generated invoices?


 

Though the duplicate is for the transporter, there is no obligation to carry the invoice along with the goods and less so to show it to overzealous Excise officers on road checks. Have road checks come to an end?


 

Rule 12: Monthly return. In how many copies? Why not an electronic return?


 

Rule16: Credit of duty on goods returned to the factory.- (1) Where any goods on which duty has been paid at the time of removal thereof are subsequently returned to the factory for being re-made, refined, re-conditioned or for any other reason, the assessee shall state the particulars of such return in his records and shall be entitled to have CENVAT credit of the duty paid as if such goods are received as inputs under the CENVAT Rules.

(2) The assessee shall be liable to pay the duty on goods returned under sub-rule (1) when

removed subsequently at the rate applicable on the date of removal and on the value determined under section 4 of the Act.

Comparable with the former rules 51A and173H; returned to the factory for repair... or for any other reason? If the goods are returned for any reason, the rule applies; then why mention re-made, refined and re- conditioned ? If the goods are returned for any other reason,the assessee is entitled to CENVAT credit. If a duty paid air conditioner is brought to a factory for any other reason -
for air conditioning the MD's room, as per this rule, the assessee can take credit.

The old restriction on retention of duty paid goods in the factory is now gone. And is there any time limit for bringing in duty paid goods? Can an assessee bring back goods cleared 20 years ago and take credit now?

Rule 17. Removal of goods by a unit in the Free Trade Zone or by a Hundred per cent. Export-Oriented undertaking for Domestic Tariff Area.-

What is DTA? Not defined!


 

Rule 22 . Access to a registered premises.- An officer empowered by the Commissioner in this behalf shall have access to any premises registered under these rules for the purpose of carrying out any scrutiny, verification and checks as may be necessary to safeguard the interest of revenue.

Is the access or scrutiny that may be necessary to safeguard revenue – who decides? Is the assessee entitled to ask the officer why he needs access and what he intends to scrutinise to safeguard revenue?


 

Rule 23 . Power to stop and search .- Any Central Excise Officer, not below the rank of an Inspector of Central Excise, may search any conveyance carrying excisable goods in respect of which he has reason to believe that the goods are being carried with the intention of evading duty.

Though the heading says, "Power to stop and search", the rule only empowers to search and not to stop. May be an inspector can search a conveyance with a flat tyre, but has no power to stop a conveyance! Strange but true!!!

– only to search not to stop?

Carried with intention to evade – It is actually already evaded.


 

Rule 31: Power to issue supplementary instructions – I can not find anything wrong with this rule, but I have a suggestion regarding this rule. I suggest that this power should be vested only with the Board, as different kinds of instructions and interpretations given by Commissioners have caused havoc in the field. And judicial decision is that Trade Notices of one commissionerate are binding on another commissionerate. As the apex Court remarked, consistency is more important than winning a few cases, we should ensure a uniform law and procedure throughout the country. The practice of issuing trade notices by Commissioners should be stopped immediately as they only lead to confusion and involve unfortunate waste of mountains of stationery. Board can issue instructions and they should be available on our web site immediately for any body to download. Commissioners in cases of emergency may be allowed to issue instructions, but they should be immediately checked by Board and accepted for nation wide instruction if necessary with changes.


 

I am not being fussy or over cautious or standing on too many technicalities. It is these small technicalities that make life miserable for both the field officers and assessees. Recently the CEGAT ruled that since the Central Excise Law does not define " deemed exports", the definition in the Exim Policy has to be adopted! This is the kind of stuff that litigation is made of.


 


 

EXCISE LAW TIMES – 01.05. 2001 – A 223

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