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Inflicting penalty without any authority

MAY 28, 2015

By G Jayaprakash, Advocate

THE question as to whether Rule 27 of Central Excise Rules, 2002 is applicable for delayed filing of monthly/ quarterly/ yearly returns prescribed as per Rule 12& 17(3) of Central Excise Rules, 2002 was not a subject hotly debated till power of adjudication of Central Excise Officers was amended to pave way for Superintendent of Central Excise to adjudicate cases with monetary limit up to Rs.1 lakh with certain restrictions.

Armed with the power of adjudication, the Superintendents started issuing show Cause Notices for delayed filing of returns proposing penal action under Rule 27 of Central Excise Rules. It is interesting to note that a notice was slapped on a small scale assessee who opted to surrender the Registration and stopped production. On the very same issue, this paper writer published a paper in a law journal doubting the imposition of penalty for delayed filing of Return by a Central Excise assessee for want of authorisation by law and also on the ground that Rule 27 of Central Excise Rules, 2002 does not encompass within its ambit non-filing of returns prescribed as per law. The officers mistakenly got influenced by Rule 7C of Service Tax Rules, 1994 and camouflaged Rule 27 for imposing penalty for delayed filing of returns by a Central Excise assessee.

Notification 8/2015 Central Excise (NT) dated 01.03.2015 have brought in amendments for Rule 12 & 17(3) as reproduced below -

In the said rules, in rule 12, after sub-rule (5), the following sub-rule shall be inserted, namely:-

"(6) Where any return or Annual Financial Information Statement or Annual Installed Capacity Statement referred to in this rule is submitted by the assessee after due date as specified for every return or statements, the assessee shall pay to the credit of the Central Government, an amount calculated at the rate of one hundred rupees per day subject to a maximum of twenty thousand rupees for the period of delay in submission of each such return or statement.".

In the said rules, in rule 17, after sub-rule (5), the following sub-rule shall be inserted, namely:-

"(6) Where the return is submitted under sub-rule (3) by the assessee after the due date as mentioned in that sub-rule, the assessee shall pay to the credit of the Central Government, an amount calculated at the rate of one hundred rupees per day subject to a maximum of twenty thousand rupees for the period of delay in submission of each return.".

Now sanction of law is accorded for imposing penalty for late filing of returns by a Central Excise assessee. What will be the fate of old notices proposing penal actions for delayed filing of return by a Central Excise assessee?

Recently the writer of this piece had an occasion to appear before a Joint Commissioner for personal hearing, wherein one of the proposals in the notice was imposition of penalty under Rule 27 of Central Excise Rules, 2002 for delayed filing of Return. The reply was annexed with the paper published. It was politely explained that there is a lack of legal sanctity for imposing penalty for late filing of returns by a Central Excise assessee and the proposal was due to wrong understanding of Rule 27, which can be invoked only in relation to violation of any provisions of law in relation to excisable goods. It was also pointed out that if a penalty needs to be imposed for delayed filing of returns by a Central Excise assessee, specific sanction of law is necessary.

However the draftsman of the order was not impressed and the proposal to impose penalty was implemented and now it is before the Commissioner (Appeals).

As mentioned, now the law is enacted. No doubt it is prospective only. What about the amount collected as penalty for late filing of returns by Central Excise assessee for the earlier period? Since the same is collected without an authority of law and not being duty paid, it appears, Section 11B is not applicable for refund and only the Limitation Act may be applicable.

Board may like to issue a clarification and also an instruction on the subject matter before the "concerned" authorities run amok!

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 RECENT DISCUSSION(S) POST YOUR COMMENTS
   
 
Sub: Act or omission must an offence

Rule 27 is nodoubt a residuary penal provision. But, any act or omission which the officer thinks is an offence cannot be brought under that rule for imposing penalty. The act or omission must be an offence under one provision or the other under the Act or under the rules, for which no separate penalty has been prescribed. It is too much to expect the present breed of adjudicators to apply their minds in this manner.

Posted by Gururaj B N
 
Sub: Delayed filing of excise returns and imposition of penalty

I do not subscribe to the opinion expressed by the author as it lacks consistency. The Rule 27 of CER2002 which reads, “A breach of these rules shall, where no other penalty is provided herein or in the Act, be punishable with a penalty which may extend to five thousand rupees and with confiscation of the goods in respect of which the offence is committed”, means it covers all instances wherein breaches / violations are noticed and separate penalty not prescribed. The department is regularly imposing penalty invoking provisions of Rule 27 from the beginning, whenever violations of Rules and Act are noticed, including the delay in filing return, and in all such cases where there is no specific penal measure stipulated. In this regard department has issued instruction in F.No.267/117/2010-CX8 dated 14-01-2011, which is a clear indication that it is not a recent happening. I have seen orders as early as 2005 which have invoked this provision to cover the instances quoted by the author. The Rule 12 prescribes that “every assessee shall submit … a monthly return in the form specified by notification … of production and removal of goods and other relevant particulars, within ten days after the close of the month to which the return relates….etc, ” has to be strictly adhered to as the term ‘shall’ indicates. Not conforming to the above provisions (omission to act) is an offence and there is no need to further emphasis to term it as an offence. It is a fact that delay in filing returns is frequent and rampant when compared to earlier years, and therefore the law has been amended by issue of notification no 8/2015 Central Excise (NT) dated 01.03.2015 with a purpose to cover such instances specifically. This new measure inserted in respective rules is to specifically cover such instances and to make penalty in such instances imperative, without allowing the executive to use his discretion or liberty by resorting to Rule 27. The law has been provided with specific stings so that there is no scope for the executive either to ignore or take arbitrary decisions in such instances. This should not be read to interpret that there was no provision to impose penalty in the instances of stated breaches, prior to 01.03.2015.

Regarding the applicability of the amended law, for notices issued for such violations prior to 01.03.2015 and covering period only upto 01.03.2015, the Rule 27 could alone be invoked. But if the notice is issued after 01.03.2015, which includes continued breaches after 01.03.2015, the amended existing law could be invoked.
M G kodandaram
Supdt NACEN
Bengaluru


Posted by madihally kodandaram
 

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