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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