Summary of recent Circular by CBEC to reduce Litigation

CBEC Circular No. 1063/2/2018-CX dt 16th Feb 2018 is running into 29 pages covering as many as 63 orders. Most of the issues related to clandestine removal, Cenvat credit, Usage of goods under advance authorization, Refunds, Limitation of time, Valuation etc.

CBEC Circular No. 1063/2/2018-CX dt 16th Feb 2018, informing the field staff to expeditiously decide on files in courts. It is an appreciable exercise undertaken by the Government to reduce litigations on question of law, on facts or on monetary limits from their end.

This circular assumes more significance, when the trade is very close to the year end 2017-18. It has a direct impact on Financial statement and on the internal control over financial reporting in respect of provisions and contingent liabilities.

The circular is running into 29 pages covering as many as 63 orders. Most of the issues related to clandestine removal, Cenvat credit, Usage of goods under advance authorization, Refunds, Limitation of time, Valuation etc.

I have made an attempt to extract the nature of disputes listed in the circular. In the event of a reader finds he or she has a dispute covered by the list either to follow up with the department or to make provisions in the financials, request them to read the facts of the relevant case and nature of dispute before proceeding.

The disputes are listed below:

  • Mandatory penalty equivalent to the amount of duty – Rules 96ZO,96 ZP, and 96ZQ – not sustainable -Question of Law
  • Procedural irregularity in availing CENVAT credit – Rule 7, 15(3) of Cenvat credit Rules,2004-credit eligible.
  • Credit availed as per original purchase invoice which was much higher than the corresponding stock transfer invoice actually received. Held to be valid as no claim of refund has been filed- Cenvat credit Rules,2004 and section 4 of Central Excise Act,1944
  • Refund claim was made under Rule 19 instead of Rule 18. Refiled the claim but time barred- Held department to reconsider the claim on merits
  • Duty paid and cenvat credit availed against imports covered by advance authorization though the scheme does not permit – Ref FTP and CE(NT) notification 44/2001 dt 26th June 2001
  • The refund application filed under section 11B, CEA 1944 was rejected as time barred. While the appeal lies before revisional authorities, it was filed in the wrong forum, Commissioner Appeals. Still to be considered. Ref Rule12(1)(a) of CER,1944
  • Manufacturer has availed abatement of duty without depositing first due to strike. Held the option is valid- Question of Law
  • Service tax paid on reinsurance for providing output insurance service – Eligible for cenvat credit
  • Unjust enrichment does not apply to state controlled, funded, monitored organization to another department an organ of the state.
  • The central excise notification was not amended by oversight giving effect to the explanation of SSI notification no 8/2003 dt 1.3.2003- Held clearances to Nepal is Exports
  • Pre-deposit of 15% as duty or penalty accepted as against 25% ordered by CESTAT referring the pronouncements of same judgment in other cases.
  • Assesses request for cross examination in the case of clandestine removals is to be considered
  • Penalty is not sustained as the claim was in the nature of money laundering, not covered by central excise rules 26 and 27, CER 2002
  • Service tax credit can be availed to the extent of tax paid instead of waiting for the full tax paid (Rule 2A of Service tax (Determination of Value) Rules 2006
  • The demand for duty was struck down on limitation grounds, as the clearance under dispute is just 3 % to the total clearances
  • Sales tax amount retained under the tax concession scheme is not forming part of Assessable value
  • AIR draw back and brand rate drawback can be claimed prior to 22-11-2014
  • Cenvat credit can be availed based on the DRI certificate.
  • When there is an element of doubt and no willful mis-statement or suppression of facts no penalty applicable.
  • Set aside the penalty for not maintaining separate records for dutiable and exempted goods where common input is used (Rule 6 of CCR,2004)
  • Items purchased under intermediate transferable advance authorization sold in the open market. Export obligation not fulfilled. Relaxation was allowed as the item was covered under notified goods in customs notification.
  • Notice was issued on the same ground of earlier notice. Can not be said as suppression of facts.
  • Interest is payable on refund as it was held the demand of duty was on the wrong ground
  • Statement of transporter or driver not an evidence to deny cenvat credit on the fact of non-receipt of material.
  • Credit availed on photocopy of Bill of entry – a verifiable document
  • Credit was denied on certain input services with out showing cause to the assesse- Department Appeal dismissed
  • Cenvat credit is allowed on remission of duty prior to 7th Sep 2007
  • High court held Cestat decision of deposit of just 20% of duty can not be interfered
  • Cenvat credit was denied on input and capital goods of a power plant which was leased. Credit is allowable as it was not a sale.
  • CVD paid on the no knowledge of the forged bill of entry, eligible for credit
  • Pending clarification, no interest is payable, when the credit was reversed on receipt of clarification.

We all strongly believe, such reviews, would be very useful under GST while it is in the evolution stage.

Categories: Excise Duty


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