Central Excise - Default or short-payment Board likely to amend Rule 8(3A)
RULE 8(3A) of the Central Excise Rules, 2002 reads as:
(3A) If the assessee defaults in payment of duty beyond thirty days from the due date, as prescribed in sub-rule (1), then notwithstanding anything contained in said sub-rule (1) and sub-rule (4) of rule 3 of CENVAT Credit Rules, 2004, the assessee shall, pay excise duty for each consignment at the time of removal, without utilizing the CENVAT credit till the date the assessee pays the outstanding amount including interest thereon; and in the event of any failure, it shall be deemed that such goods have been cleared without payment of duty and the consequences and penalties as provided in these rules shall follow.
This Rule has been the cause of mighty litigation in the recent past.
Trade has represented that the provisions of Rule 8(3A) needs to be reviewed as the rule does not make a distinction between cases of bona fide mistake which can lead to default in payment of duty and cases of willful default.
Board notes that the CESTAT in the following cases has allowed credit to be used even during the period of default.
1. Meenakshi Associates [para 15 and 16 in ,
2. Baba ViswakarmaEngg Co [para 11, 12 and 13 in and
3. Bactolac Formulations [para 5 of ]
For amending the Rule, CBEC has sought inputs from the field on the following issues:
1. Whether non-compliance of Rule 8(1) has become lesser by introduction of Rule 8(3A)?
2. Whether the rule is being enforced in all cases of default?
3. In view of the judicial pronouncements listed above, is the rule continuing to serve its purpose of timely and complete payment of duty?
4. Whether a rule of imposing automatic and mandatory penalty at the rate of 1% per month on the defaulted amount would better serve the purpose as it would reduce the grace period of 30 days given in the present rule, would do away with adjudication proceedings needed to impose penalty at present.
Let us hope the Board acts soon on this and puts an end to unwanted litigation.
Incidentally the Board letter does not bear a date and there is no time limit prescribed for the field to submit their reports.
Please also see
1. Monthly payment of Excise Duty - Boon or Bane? - Draconian Law! DDT 1542 - 03.02.2011
2. Is inadvertent short payment of duty more sinful than intentional evasion? DDT 2050 -21.02.2013
CBEC letter F. No.201/08/2013-CX-6 addressed to all Chief Commissioners, Dated: No date