DEMAND NOTICE/SHOW CAUSE NOTICE
1.1 In accordance with the principles of natural justice the central excise law provides that before any action is taken against an assessee he must be given reasonable opportunity of presenting his case. One such situation would be that relating to the demand of duty not paid, short paid or erroneously refunded.
1.2 As see, a show cause notice is invariable to be issued if the department contemplates any action prejudicial to the assessee. Thus, if on account of an infraction of the provisions of the central excise law it is considered appropriate to penalise the defaulter, it is necessary to first issue a show cause notice. The show cause notice would detail the provisions of law allegedly violated and ask the noticee to show cause why action should not be initiated against him. Thus, a show cause notice gives the noticee the opportunity to present his case.
2. Issue of duty demand notice
2. 1 Section 11A of the Central Excise Act, 1944 provides that if excise duty has not been levied or short levied or not paid or short paid, a notice has to be issued demanding the differential duty. This notice will be issued by Commissioner of Central Excise if the amount demanded does not exceeding one crore rupees. Where amount exceeds one crore rupees, prior approval of the Chief Commissioner of Central Excise is required.
2.2 The Board has also empowered the Officers of Director General of Central Excise Intelligence to issue Show-cause notices in accordance with the powers of Central Excise Officers conferred on them under rule 3 and the instruction above.
2.3 In order to provide mechanism for early dispute resolution, it has also been provided in the Act that an assessee may request for waiver of notice, if he deposits the amount of differential duty on his own along with interest in respect of only such cases where such non-levy or short levy or non-payment or short payment is by reason other than suppression of facts, fraud, collusion etc.
2.4 By opting for waiver of issue of notice, the assessee may avoid long drawn process of adjudication and appellate process including interest on the differential duty demanded. It is therefore, advisable that in cases where the assessee is convinced that the Department is correct in demanding duty, he may opt for this facility.
1.1 Central Excise law is a self-contained provision. Besides containing the provisions for levy of duty, the law also provides for the adjudication of matters relating to the legal provisions. The adjudication is done by the departmental officers, and in this capacity they act as quasi-judicial officers.
2. Adjudication and determination of duty
2.1 Adjudication of confiscation and penalty has to be done by Officers specified in section 33 of the Central Excise Act, 1944. Central Excise Officers have the power to determine duty short paid or not paid erroneously refunded under section 11A of the said Act. For this purposes, the Board has decided the powers of adjudication and determination of duty shall be exercised, based on monetary limit (duty involved in a case): -
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:
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: -
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:
4.3 A letter of protest or a representation for paying duty under protest shall not constitute a claim of refund.