Chapter - 13

PART III

INTEREST, PENALTY, CONFISCATION, DUTY PAYMENT UNDER PROTEST
1. Introduction

1.1 Interest of duty not paid on time is provided for in the Central Excise statute. It is expected that the interest provision would normally not have to be invoked as the assessee would make the duty payment on time.

1.2 Penalty and confiscation of offending goods i.e. which have violated the provision of the Central Excise law are an outcome of the adjudication proceedings. These are deterrents aimed at cautioning the dishonest taxpayer.

2. Interest on duty

2.1 Under the provisions of Section 11AA, interest is charged on the delayed payment of duty. Thus, it is in the interest of an assessee to discharge the duty liability the earliest and not to prolong the dispute only for the sake of delaying payments. The interest will be charged under said Section 11AA, as follows:

(a) In the normal case interest will be charged for the period of delay after 3 months of the determination of the duty liability till the date of payment of duty.

(b) In the case the duty is not paid on account of fraud, suppression etc. the interest will be charged from the first date of the month following the month in which the duty was not paid.

2.2 There may not be need for any explicit mention of the interest liability in the show-cause notice since the legal provisions are explicit. However, the same may be done as a matter of abundant precaution. Likewise, the adjudicating officer may incorporate the fact about the interest liability in the order confirming the demand.

3. Penalty and Confiscation

3.1 Penalty is imposed under any of the following provisions of the Central Excise Act, 1944 or the rules made thereunder: -

(i) Section 11AC prescribes a mandatory penalty equal to the duty not levied or paid or short paid or erroneously refunded by reason of fraud, suppression etc. However, in the vent the duty and interest thereon is paid within 30 days of the communication of the order, the penalty shall be 25% of the duty subject to it being paid within the said period of 3o days.

(ii) Rule 25 of the said Rules provides for penalty on any producer, manufacturer, registered person of a warehouse or a registered dealer not exceeding the duty on the excisable goods in respect of which any of the specified contravention have been committed, or rupees ten thousand, whichever is greater. The penalty is subject to the provisions of Section 11 AC of the Central Excise Act, 1944. The offending goods are also liable to confiscation. The specified contravention are:

(a) Removal of any excisable goods in contravention of any of the provisions of the said rules or the notifications issued under the said rules; or

(b) Non-accountal of any excisable goods produced or manufactured or stored; or

(c) Manufacture, production or storage of any excisable goods without having applied for the registration certificate required under Section 6 of the Central Excise Act; or

(d) Contravention of any of the provisions of the said rules or the notifications issued under the said rules with intent to evade payment of duty.

(iii) Under rule 26 of the said Rules It is provided that any person who acquires possession of, or is in any way concerned in transporting, removing, depositing, keeping, concealing, selling or purchasing, or in any other manner deals with, any excisable goods which he knows or has reason to believe are liable to confiscation under the Act or the said Rules, shall be liable to a penalty not exceeding the duty on such goods or rupees ten thousand, whichever is greater.

(iv) Rule 27 of the said Rules provides for imposition of a general penalty penalty which may extend to five thousand rupees and with confiscation of the goods in respect of which the offence is committed. This is attracted when no other specific penalty is provided for.

3.2 If penalty is imposed under Section 11AC, penalty under rule 25 will not be imposed. This, however, does not preclude the Department from confiscating the goods, imposing any fine in lieu of confiscation and prosecuting a person.

3.3 Rule 26 of the said Rules also provides that before any order of penalty or confiscation is passed the adjudicating authority shall follow the principles of natural justice. In other words a notice explaining the reasons why penalty should not be imposed or goods confiscated has to be given to the person. Thereafter, reasonable opportunity shall be given to such person to explain or defend his case. The adjudicating Officer shall pass a reasoned order, incorporating the defence arguments given by such person or his authorised representative.

3.4 As per Rule 28 of the said Rules, when any goods are confiscated under these rules, such thing shall thereupon vest in the Central Government. Accordingly, the Central Excise Officer adjudging confiscation shall take and hold possession of the things confiscated, and every Officer of Police, on the requisition of such Central Excise Officer, shall assist him in taking and holding such possession.

3.5 Rule 30 provides that if the owner of the goods, the confiscation of which has been adjudged, exercises his option to pay fine in lieu of confiscation, he may be required to pay such storage charges as may be determined by the adjudicating officer.

3.6 Provisions for disposal of goods confiscated are contained in rule 29 of the said Rules. Goods of which confiscation has been adjudged and in respect of which the option of paying a fine in lieu of confiscation has not been exercised, shall be sold, destroyed or otherwise disposed of in such manner as the Commissioner may direct.

4. Duty under protest

4.1 As per Section 11B of the Central Excise Act, 1944 the time limitation of application for refund of duty fixed at one year from the relevant date shall not apply when the duty has been paid under protest.

4.2 Any assessee who desires to pay duty under protest, may do so by following the procedure mentioned below:

a. The assessee shall inform the Superintendent or Inspector of Central Excise in writing giving reasons for paying duty under protest and a dated acknowledgement will be given to him.

b. He will mark invoices or monthly/quarterly return indicating the goods on which duty is paid ‘under protest’. If it is a lump-sum duty payment in respect of past demand, he may record the fact of duty payment under protest in the Personal Ledger Account [against debits] CENVAT Account [against debits] and the Daily Stock Account.

c. If a case is appealed against by the assessee or where the appeal period for further appeal is available, he may continue to pay duty under protest. However, if decision is not in his favour and he exhausts the appellate remedy or does not appeal within stipulated period, the assessee shall not have ay right to pay duty under protest.

4.3 A letter of protest or a representation for paying duty under protest shall not constitute a claim of refund.

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