Indirect Tax Update / Jan.

04, 2013

Circular No. 967/01/2013-CX dated January 1, 2013 (“the Circular”)
The Central Board of Excise & Customs (“the CBEC”) rescinded all previous circulars issued in regard to recovery of confirmed demand during pendency of stay application and has laid down fresh parameters for recovery. This circular has un-settled position being followed so far by trade and revenue in terms law laid down by large number of judicial pronouncements on this issue.

IMPACT BY THIS CIRCULAR TIOL-DDT 2017 (TaxIndiaOnline) 04.01.2013 Friday IT is always the small businessmen who have to bear the might of the Government, more so in the Indirect Taxes Department of the Central Government. Even the recent New Year Bomb from the Board on Recovery of confirmed demands stands testimony to this theory. Let us take a live classic example. Two Companies A and B manufacture the same product P. As per the Board clarification and Supreme Court judgement, the Product P attracts a nil rate of duty. But recently, a Commissioner felt that he was not bound by the stupid clarifications of the Board and the wrong orders of the Supreme Court. So, he revived an issue that was settled by the Apex Court and the Apex Board long ago. Show Cause Notices came to be issued to both the assessees A and B. Demand from A was Rs.20 Crores and demand from B was Rs. 4 Lakhs. A was to answer the Show Cause Notice to the Commissioner and B was asked to answer to Deputy Commissioner. Both gave identical replies (they had the same lawyer). And both the adjudicating Authorities confirmed the demands with equal amounts of penalty and consequent interest. What happened to them after that was not identical. „A' went in appeal to the CESTAT and got an absolute stay and waiver of pre-deposit, because Tribunal could easily understand that the case was covered in favour of the assessee by the Board Circular and Supreme Court judgement, which the Commissioner had the audacity to brush aside. ‘B' appealed to the Commissioner (Appeals) who did not find any prima facie case and ordered pre-deposit of the entire duty and penalty. The assessee told him that in an identical case in respect of a giant assessee, the Tribunal had granted absolute stay, but he was not impressed. He wrote that stay orders have no precedential value. Because the

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Indirect Tax Update / Jan. 04, 2013

assessee could not comply with the atrocious order of the learned Commissioner (Appeals) to deposit Rs. 8 lakhs, his appeal was dismissed. Immediately the Central Excise officers swarmed all over him demanding that he pay up the Rs. 8 Lakhs or face attachment. He told them that his neighbour manufacturing the same product and who had a turnover of 100 Crores is not asked to pay up. They politely told him that the neighbour has a stay from the Tribunal - you also go and get a stay. The poor assessee who is not able to pay his workers is forced to pay a lawyer to appeal to the Tribunal. (He started the business after being assured that there is no Central Excise Duty on his product). After he filed his appeal in the Tribunal, he found that the Tribunal is not functioning regularly as they don't have enough Members. In the meantime, the Central Excise Officers harassed him so much that he paid up Rs. 2 Lakhs. Finally, the Tribunal remanded the case to the Commissioner (Appeals) with a direction to hear the appeal without pre-deposit. Rs. 2 lakhs were already extracted from him! He is back with the Commissioner (Appeals), but now he finds that the Commissioner has been transferred and there is nobody posted in his place. Meanwhile, the Central Excise Officers are after him to collect the remaining Rs. 6 Lakhs. Unable to bear the tension, he has closed down his factory - but that is only the beginning of new troubles for him. Even now, the Central Excise officers don't leave him alone - they threaten to attach his bank accounts and personal property. Finally, in helpless exasperation, he told me, "I feel sorry for these officers - they will see the worst hell for harassing me like this!"

This is the plight of the small assessee and this is prior to 1.1.2013. After 1.1.2013, things are different. Immediately after you lose the first stage of appeal, you are required to pay up all those atrocious unrealistic demand! Thanks to Board Circular 967/01/2013-CX dated 01.01.2013.

Please CBEC Circular on Pg 3 below !

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Indirect Tax Update / Jan. 04, 2013

Circular No. 967/01/ 2013 – CX F. No. 208/36/2012-CX.6 Government of India Ministry of Finance Department of Revenue Central Board of Excise and Customs, New Delhi New Delhi, the Dated 1 January, 2013 To, (i) The Chief Commissioner of Central Excise (All), (ii) The Chief Commissioner of Central Excise & Customs (All), (iii) The Chief Commissioner of Customs (All), (iv) Directors General (All)
st

Madam/ Sir, Subject - Recovery of confirmed demand during pendency of stay application- regarding I am directed to bring your attention to the following circulars issued from time to time on the above issue and to state that it has been decided to rescind these circulars with immediate effect. Sl No 1 2 3 4 5 6 7 2) Date 18-11-88 2-3-90 21-12-90 12-11-92 3-8-94 2-6-98 25-2-2004 Circular no and File number of CX-6 80/88 and 208/31/88 7/90 and 208/107/89 23/90 and 209/107/89 16/92 and 208/59/92 47/47/94 and 208/33/94 396/29/98 and 201/04/98 788/21/2004 and 208/41/2003

Henceforth, recovery proceedings shall be initiated against a confirmed demand in terms of the following order – Sl No 1 Appellate Authority NIL Situation No appeal filed against a confirmatory order in original against which appeal lies with Commissioner (Appeals). Appeal filed without stay application against a confirmatory order in original. Appeal filed with a stay application against an order in original. Directions regarding recovery. Recovery to be initiated after expiry of statutory period of 60 days for filing appeal.

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Commissioner (Appeals)

Recovery to be initiated after such an appeal has been filed, without waiting for the statutory 60 days period to be exhausted. Recovery to be initiated 30 days after the filing of appeal, if no stay is granted or after the disposal of stay petition in accordance with the conditions of stay, if any specified, whichever is earlier.

3

Commissioner (Appeals)

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Indirect Tax Update / Jan. 04, 2013

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NIL

No appeal filed against an Order in Original issued by the Commissioner. Appeal filed without stay application against an Order in Original issued by the Commissioner. Appeal filed with a stay application against an Order in Original issued by the Commissioner.

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CESTAT

Recovery to be initiated after expiry of statutory period of 90 days for filing appeal from the date of communication of order. Recovery to be initiated on filing of such an appeal, without waiting for the statutory 90 days period to be exhausted. Recovery to be initiated 30 days after the filing of appeal, if no stay is granted or after the disposal of stay petition in accordance with the conditions of stay, if any, whichever is earlier. Recovery to be initiated after expiry of statutory period of 90 days for filing appeal from the date of communication of order.

6

CESTAT

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NIL

No appeal filed against an Order in Appeal issued by a Commissioner (Appeals) confirming the demand for the first time. Appeal filed without stay application against an Order in Appeal confirming the demand for the first time. Appeal filed with a stay application against an Order in Appeal confirming the demand for the first time.

8

CESTAT

Recovery to be initiated on filing of such an appeal in the CESTAT, without waiting for the statutory 90 days period to be exhausted.

9

CESTAT

Recovery to be initiated 30 days after the filing of appeal, if no stay is granted or after the disposal of stay petition in accordance with the conditions of stay, if any, whichever is earlier. Recovery to be initiated immediately on the issue of Order in Appeal.

10

CESTAT

All cases where Commissioner (Appeals) confirms demand in the Order in original. Tribunal or High Court confirms the demand.

11

High Court or Supreme Court

Recovery to be initiated immediately on the issue of order by the Tribunal or the High Court, if no stay is in operation.

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Indirect Tax Update / Jan. 04, 2013

3) It may be noted that a confirmed demand remains an order in operation till it is stayed. Mere preferment of appeal itself does not operate as a stay. Hon’ble Supreme Court in case of Collector of Customs, Bombay Vs Krishna Sales (P) Ltd [1994 (73) E.L.T 519 (S.C)] has observed that “As is well known, mere filing of an Appeal does not operate as a stay or suspension of the Order appealed against”. Accordingly, the above directions are hereby issued for initiating recovery of the confirmed demands. 4) Instructions in CBEC’s Excise Manual of Supplementary instructions on the above subject or any other circular, instruction or letter contrary to this circular stand amended accordingly. Yours faithfully,

(V.P. Singh) OSD (CX-6)

(Source : http://www.cbec.gov.in/excise/cx-circulars/cx-circ13/967-2013cx.htm)

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