Indirect taxation

Common topicsIn Central excise ,customs & service taxT.VENKATARAMANAN.FCS.FCMA(COST).

Indirect taxation = common areas

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07/16/96

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INTRODUCTION.

UNDER INDIRECT TAXES WE HAVE 3 MAJOR TAXES.They are 1)central excise 2)customs &3)service tax , being under the same ministry of finance, final departmental appellate authority the tribunal ,all have the natural basic thinking & approach .Many provisions of CE are applicable to service tax & many to customs & vice versa.Such areas are commonly dealt with in these slides.

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Welcome and Introduction

Welcome the staff members to the session.We will take up assessment , adjudication, penalties etc Including appeals

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Assessment & audit

Defn. of assessees : Rule 2 ( c ) of CE Rules define assessee as a person who is liable for payment of duty assessed,producer, manufacturer,or ware house keeper of excisable goods or his authorized agentAssessment means determining the tax liability.

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Fill in the blanks:

1)Assessment under central excise is basically ___________ based ____2)In the case of ________ the superintendent/inspector of CE shall assess the duty payable before _____ __ goods.3)Monthly returns are to be in _____ ____ & ____ forms along with _____.4) The scrutiny has to done in 2 stages ,They are a) ______ & b)_________5) In case of customs _______ & ________ is an assessment order.

Ans: 1)invoice based ; self assessment2)cigarettes; removal , of 3)ER1/ER II/ERIII/; SELF ASSESSMENT MEMORANDOM4)Scrutiny of return; scrutiny of assessment5)Bill of entry; shipping bill

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True or false

1)Assessment order is there in customs but not in excise & service tax2)If valuation shown by assessee is not accepted by dept. order with reasons Have to be issued with in 45 days.3)Scrutiny of return & assessment should be completed with in 3 m0nths from the date of receipt of return.4)After initial scrutiny 5% of the returns will be selected for scrutiny of assessment .5)Extension beyond 1 year , for further period can be granted by commissioner.6) DEPARTMENT CAN ORDER PROVISIONAL ASSESSMENT

Ans: 1)T 2)F -14 DAYS3) T4)T5)F CHIEF COMM. 6) F CAN NOT

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Topic :PROVISIONAL ASSESSMENT

Explain WHEN IT CAN be TAKEN UP?Explain when provisional & how , (conditioned to be fulfilled) provisional duty can be paid.Finalisation of provisional assessment.

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Topic :remission of duty

Define remission of duty(sec -25)Explain WHEN IT CAN be granted .(Rule 21)Explain the provisions.

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Common provisions

Exemptions recoveries,demands & refunds

CE

CUSTOMS

SERVICETAX

SECTIONS 5

SECTIONS 25

SEC 73,83,

TO

TO SEC 28

93.

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SEC,114,138,

36,37, ETC

142 & 152

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POWER TO GRANT EXEMPTIONS

U/S 5A of the CE act 25 of the customs act Falls under 2 categories 1)general exemption 2)special exemptions General exemptions are to notified, are not available for FTZ/SEZ Etc , Spl exemptions are under spl. Circumstances.No customs duty will be collected if the duty payable = or < Rs 100.Also not applicable to smuggled goods

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True or false

Turpentine oil manufactured w/o the use of power is subject to excise dutyIssuance of show cause notice with in the specified time limit is mandatory.Erroneous refund includes erroneous rebate In case fraud , collusion etc the extended period of limitation is 5 years.Intent to evade duty is inbuilt in all cases of fraud to contravention.

Ans 1)false , with power is taxable2) true 3) true4) True 5)true

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Write short notes on 1)certification action or certificate proceedings

An officer of CE prepares a statement of dues of an assessee and signs the same & sends it to the collector .He proceeds to recover the amount as arrears of land revenue . This is called certification action.

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What are the requirement of show cause notice?.

1)with in the specified /extended time limitMust be specific & not vogueState the nature of contraventionState the charges ,allegations & contraventions Penalty to be mentioned.

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Case vs penalty

case

penalty

1)Tax & penalty accepted before SCN

1%pasubjectto a maximum of 25% 0f duty/tax (from month following the month in case ofCE&periodof default in case of Service tax)

2)In case of payment with in 30 days of notice(in case service tax penalty also to be paid)

25% of dutySome changes to service tax(p/18.19)

3)In any other case

50% of duty/taxPenalty @ 50% in case transactionsAre recorded in books

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True or false

1)Application should be submitted after removal of goods for Remission of duty2) Remission of duty is permitted even If goods are not entered in stock register.3)Remission Has to be given even if intimation not given with in 24 hours.4)Remission has to be granted if molasses was damaged due to rain water. .5)Remission need not be granted if goods are destroyed by fire. .6)Remission has to be given despite insurance claim..7)The doctrine of unjust enrichment means no one to be allowed to enjoy at the cost of other.

Ans: 1)F-BEFORE 2)F -3) T4)T5)F 6)T7)T

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Time limit for refund ETC

Refunds ,Interest & other Provisions.

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Write short notes on (1)relevant date for export(2) relevant date for computation of 1 year3)rate of interest under service tax4) fund

1)APPLICATION FOR REFUND MUST BE MADE BEFORE THE EXPIRY OF ONE YEAR FROM THE RELEVENT DATE.2)The appellate tribunal shall hear & decide every appeal with ina period of 3 years from the date on which appeal was filed.

STATE TRUE OR FALSE

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Original jurisdiction in excise customs &service tax

Adjudication in indirect taxes

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Vocabulary

Adjudicate means to hear or try & decide judicially.Adjudication means giving a decision.Adjudication can be departmental or judicial Adjudicating authority any authority competent to pass any order or decision under the act

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True or false

1)The central excise officer is adjudicating authority for service tax purposes .2)Any order or decision under the act by authority other than commissioner (appeals)is an adjudication order.3)statutory powers can be cut down by issuing a circular.

Ans : 1)T2)T3)F

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State the adjudication powers of custom

p/223

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Provisions of customs applicable to CE ETC

p/226

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Protection of acts done in good faith

Sec. 40 of CE & SEC.155 of customs offer full protection

Sec 155 of customs act protects even from criminal prosecution even if the person being chased & fired upon dies.

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Powers of inspection & visits

As per rule 22(1) all officers of the rank of inspector & above are authorized to inspectShould be in their uniform or carry their identity card.Should make entry in the visit book.However for visits to SSI UNITS written permission of AC/DC WILL BE REQUIREDStop & inspect conveyance , X ray bodies etc (p/227)

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Power to summon & arrest

Section 108 of customs & section 14 (1) empower officers under the act to summon & enquire.Enquiry under these provisions amount to judicial proceedingswith in the meaning of sec 193 & 228 of IPC OBTAIN VOLUNTARY STATEMENTS IN WRITING & SIGNED BY THE MAKER. no right of silence

Customs & CE officials have power to arrest which can not be excised by service tax. These are governed by sec 50 & 57 of Cr PC.

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Procedure after arrest

The arrested person should be sent to empowered central excise officer Who will send the arrested person to magistrate . In the absence of such empowered officer ,the arrested person should be sent to the officer in charge of the nearest police station who will produce him before the magistrate with in 24 hrs.In case of insufficiency of strong evidence , the arrested person can be released on bond by excise officer himself..

Bail means security for prisoners appearance , on giving which the prisoner is released pending trial..

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Offences cognizable Etc

Offence is not defined in excise Law.however sec 3(8) of the general clauses Act defines an offence ,as any act or omission made punishable by any law for the time being in force..

Cognizance of a case : offences under CE & customs are non cognizable Sce 9(A)of CE Act& 104 (4) of customs Act.

What is cognizance ?sec 2(c ) of CrPC defines cognizable offence as an Offence for which a police officer may arrest w/o warrant.As per sec 155 of CrPC a police officer cannot investigate a non-cognizable case w/o the order of the magistrate.

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Search & seizure

Search & seizure are coercive powers designed to enforce cooperation from persons unwilling to be subjected to these operations.

Sec18 of CE Act & sec 82 ( 2 ) of finance act of 1994 provide that all searches & seizures must be as per Sec 165 of CrPC which states that the following points to be kept in mind: (1) reason to believe some thing is hidden (2) to avoid delay(3)Reasons to be recorded.(4) officer should search himself (5) authority to subordinates should be in writing (6)copy of records made to be sent to magistrate.& owner or occupier of the place free of costSection 105 of CE Act empowers excise officers to search.which in common parlance is known as raid.(p/229)

For vexatious searches the officers sec 22 0f CE Act provides for fine of the officer concerned.customs act provides for 6 months imprisonment.

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Ingredients in case of seizure u/s 123 of customs act

There are 4 ingredientsThey are 1)should be under the provisions of custom act2)Must be from the person proceeded against3)In respect of goods for which sec 123 applies4)Reasonable belief goods seized are smuggled.

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Return of searched & seized documents & goods

As per rule 24(a ) of CE rules records seized by dept. during investigatioin but not replied upon SCN should be returned with in 30 days.of issue of SCN Or from the date of expiry of the period for issue of SCN.

In the case of goods

As per sec110 of customs act goods can be released provisionally to the Owner on execution of bond with security

Under CE Act vehicles can be released by AC/DC while goods can be released by as per powers to adjudicating officer.Bond in B-4 to be excuted & bond value to be decided by adjudicating authority.

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Granting bail

Further offences are classified as bailable & non bailable.A bail is only a security for the prisoners appearance.If offence is bailable grant of bail is automatic If nonbailable it is for the court to decide to issue bail or not.Granting bail in this case is discretionary & not mandatory .

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True or false

1)If no SCN is issued with in 6 months the goods shall be returned to the Person from whom they were seized.

true

2)The owner of goods gets a civil right & goods must be returned only when application is made.

False ( to be returned even without appln.)

3) Under sec124, even if SCN is not issued with in 6months , adjudication for confiscation & penalty can continue

true

4)Both goods released under bond & those cleared unconditionally , can be confiscated .

False (only those released under bond can be confiscated)

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Penalties & confiscation

Civil & criminal liabilities : penalty for violation of provisions involving a penalty of money & confiscation of goods is a civil penalty & adjudged in deptl. adjudication

Criminal liability :criminal punishment is of imprisonment & fine which can awarded only in a criminal court after prosecution.

Both departmental penalties & criminal prosecution for same offence is possible & permissible.

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Mens rea- the guilty mind/ criminal intention

There is complete absence of mens rea in penalty provisions,Mens reais not an essential in gradient for imposing penalty unless the specifically provides so.

Sec 11AC requires Mens rea,& penalty equal to duty is mandatory under this section & there is no discretion to reduce duty under this section

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Principles of penalty

No penalty if assessee is ignorant about legal provision.Lenient view in case of technical lapsesPersonal liability only for penalty & not for duty liability

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Confiscation & redemption

p/234

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More information

Confiscation of goods u/r25Confiscation of conveyance 115(1)Confiscation of goods used for concealingContravening goods if mixed with other goods whole goods can be confiscated If contravening goods are sold ,then sale proceeds can be confiscated.Confiscated goods can be sold.The person from whom goods have been confiscated can get them back on payment of a fine called redemption fine.Redemption fine shall not exceed market price- duty payable(p/235)

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what special adequate reasons,who can be punished etc (p/236-7)

Offences punishable u/CE

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Offences by officers of customs

1)Entering into agreements to do or abstain from doing , permits any act or thing Whereby any fraudulent export is effected or by which customs duty is evaded Or prohibited goods are allowed to enter into india or to go out of india,He shall be punishable with imprisonment upto 6 months or fine upto Rs 1000/= or both.Officers are also punishable for disclosure of secret informationFor their wrong actsBut they can be prosecuted only with the previous permission of Govt..

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Compounding of offences

u/s 9(a)2 of CEA & 137(3) of customs act compounding of offences is permitted (p/239)

Chief commissioner is the compounding authority & commissioner is the reporting authority

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Burden of proof

Burden of proof of offence is on the department beyond reasonable doubt

Absence of culpable state of mind /guilty mind beyond reasonable doubt is on the accused .

Burden of proof regarding Non-existence of mens rea is on the accused.

Also burden of proof that the sensitive goods like Gold,Silver ,watches etc Are not smuggled is on the accused.On the contrary ,prosecution has to prove that they are of 1) foreign origin,2)Imported from abroad, etc.

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Four ingredients in the case of seizure.

1)Seizure shall be under the provisions of customs act2)Must be from a person proceeded against3)Must be in respect of goods for which sec123 of customs act applies4)Reasonable belief that goods seized are smuggled.

What is sec 123 ?

Sec 123 deals with sensitive goods like gold ,silver etc.

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Relevancy of documents

1)In case of documents signed before CEO/CO; will be allowed as evidence,To avoid delay ,or incase of dead persons

2)Court can admit statements in the interest of justice.

3)Statements made before police officer cannot be admitted

4) Statements must be voluntary & true.

5)Documents seized from a person is presumed to be true.If he claims that it is not true, burden of proof lies with him..In case of documents obtained from abroad ,prosecution has to prove the contents , signature etc

Insufficiently stamped and computer print outs are accepted as evidence,

6) Testing of samples see page 242

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Chart showing appellate & revisionary remedies

details

CCE/CC APPEALS

CESTAT

HIGH COURT

SUPREMCOURT

WHO CAN FILE

ASSESSEE/DEPT

A/DEPT

A/DEPT

A/DEPT

TIME LIMIT

60 DAYS /3MONS UNDER SERVICE TAX

3 MONTH fromcommn./decision/order.

180 days of receipt of CESTAT order.

As per Cr pc

condonation

Upto30 days

Sufficient cause

Sufficient cause

Do

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Time limit for disposal of appeal is 6 months for cc ,3 years or 180 days as the case may be in the case of CESTAT.,as per CCP in the case of high court & supreme court

Adjournment of hearing upto 3 months in the case of cc & CESTATAs per code of civil procedure in the case high court & supreme court

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