Central Excise Law - Retrospective Bungling - Reprehensible - but assessee will invariably get punished for all mistakes of babus
IT is only our Government, which has the luxury of committing mistakes in haste and correcting them at leisure retrospectively. With effect from 01.06.2006, "Parts, components and assemblies of automobiles" were included under the Third Schedule to the Central Excise Act, so as to attract the "deemed manufacturing" principle and they were simultaneously notified under Section 4A also, to attract MRP based levy of excise duty. Subsequently, the Government wanted to bring some more commodities also under the Third Schedule and also notify them under Section 4A.
The entry "Parts, components and assemblies of vehicles (including chassis fitted with engines) falling under Chapter 87 excluding vehicles falling under headings 8712, 8713, 8715 and 8716" was substituted for the earlier entry of "Parts, components and assemblies of automobiles" under Section 4A with effect from 27.02.2010.
Again with effect from 29.04.2010, the following item was also notified under Section 4A.
"Parts, components and assemblies of goods falling under tariff item 8426 41 00, headings 8427, 8429 and sub-heading 8430 10"
Notifying these items under Section 4A is a bureaucratic exercise of amending the existing notification .
The intention was to simultaneously place these items under Third Schedule to the Central Excise Act also, so as to subject them to the "deemed manufacturing" concept. But, somehow this was not done. The result - these items would attract MRP based levy, when "manufactured". Activities like packing, repacking, labelling, etc. would not be construed as "manufacture" for these goods. In 2011 Budget, this anomaly was sought to be rectified by retrospectively amending Third Schedule to the Central Excise Act and placing these items under the said schedule, from 27.02.2010 and 29.04.2010, respectively. But, the legislative wisdom erred and instead of placing these items under the Third Schedule to the Central Excise Act, they placed them under the non existing Third Schedule to the Central Excise Tariff Act, in Finance Act, 2011.
This mistake was rectified in Budget 2012 and these items were correctly placed under the third schedule to the Central Excise Act, with retrospective effect from 27.02.2010 and 29.04.2010 respectively.
All is well.
When "Parts, components and assemblies of automobiles" were under the third schedule and MRP levy, a doubt arose as to whether parts of items like hydraulic excavators, etc, would also be covered by these amendments. This was clarified in the negative vide CBEC'sInstructions in F.No. Dt. 16.12.2008. Further, the intention to subject these items under deemed manufacture only from 2010 is also evident from the CBEC's instructions F.No. Dt. 12.09.2011.
Despite the above, the Mumbai bench of the Hon'ble Tribunal, in the case of CCE VS JCB Limited - had held that parts of "Loader, backhoe loader, etc" would be covered from 2006 itself as parts of automobiles. Of course, the Tribunal has held that the extended period of limitation cannot be invoked in this case.
Now to the crux of the story.
TIOL is in possession of an Order passed by a Commissioner of Central Excise, confirming the demands on a major manufacturer / importer of parts of dumpers, excavators, bulldozers, etc. by treating them as parts of automobiles and confirming the demand even prior to 2010. But that is not the surprise. The Commissioner has confirmed the demand by invoking the extended period of demand, imposed equal amount of penalty and also imposed personal penalties on the executives of the company.
This is the environment in which one has to do business in India. Government can get away with whatever mistakes they do and they can rectify them retrospectively. But the poor citizens should predict everything, ignore any Circulars of the highest policy making body and still pay the tax.
DDT had extensively covered this 'retrospective' drama.
Please see:
1. On the Third Schedule: - 25.01.2008
2. Third Schedule requires rescheduling - DDT 1360 - 17.05.2010
3. Retrospective Bungling by CBEC - Even Parliament Not Spared - DDT 1599 - 02.05.2011
4. Retrospective Bungling - Discussions on Non Existing Statute - Height of Ignorance at highest Seat - DDT 1705 - 03.10.2011
In fact, based on DDT reports, a Netizen had shot off letters to the President, Prime Minister, Sonia Gandhi, Rahul Gandhi etc,.on this bungling.