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Withdrawal of Accredited Client Programme facility causing turmoil

JULY 27, 2015


By BK Prakash

CBEC introduced Risk Management System with Accredited Client Programme (ACP) as its major component through Circular No. 42/2005-Customs dated 24.11.2005. This scheme is aimed at facilitating Customs Clearance of goods and reducing dwell time. More than this, the objective of the department was to create an effective opportunity of voluntary compliance through trusted relationship with the department and the clients. The ACP is granted to select importers who have good internal controls, accounting systems which conform to the accounting standards. The ACP status is granted, subject to other conditions such as:

a) importers should have filed atleast 25 Bills of Entry in the previous year at any one of the Indian customs or more or must have paid central excise duty of INR One Crore in the previous financial year under PLA,

b) there should not be any duty demands pending on account of non-fulfillment of export obligations,

c) the quality of the submissions made by the applicant to Customs should be good as measured by the number of amendments made in the bills of entry submitted in relation to classification of goods, valuation and claim for exemption benefits. The number of such amendments should not have exceeded 20% of the bills of entry during the previous financial year;

d) no pending cases at Central Excise, Service Tax and Customs in the previous three years invoking penal provisions.

e) further the importers are not booked under case of the Allied Acts of Customs.

The ACP status is granted initially for one year and the renewals are based upon review of the compliance record of the Accredited Clients.

2 . Industry applauds the CBEC and Government on such initiative as the scheme immensely helped the industry to reduce the time considerably in regard to verification of the cargo which enabled the importers to service the customers more effectively. Needless to mention this scheme proved to be an incentive to the importers as they could reduce time to market / service the market need in a cost competitive manner.

3. Further CBEC also extended the ACP facility to export houses but widened the scope of the scheme with additional conditions through its Circular No. 29/2010-Customs dated 20/8/2010.The circular basically intends to deny the ACP status to the importers who have been booked under various cases under Central Excise, Customs, Service Tax and its allied Acts.

4. Further to the trade / industry representation, marginal relief was provided through Circular No. 18/2014-Cus, dated 22/12/2014 to ACP status holders to whom this facility had been withdrawn or not extended for reasons of having been served a show cause notice in terms of amended para 7(iii) of the said Circular dated 24/11/2005 with amended provisions and directed as under;

a. Restored after 3 months if the entity pays the duty demanded with interest and 25% penalty within 30 days of the Show Cause Notice or if the entity's application is allowed to be proceeded with by the Settlement Commission.

b. Restored after 6 months if the entity pays the duty demanded with interest.

In the said Circular it also included that the restoration of the ACP status in terms of (a) and (b) above would be subject to the condition that if another case of the type mentioned in paragraph 7(iii) of the said Circular dated 24.11.2005 is booked within the 3 months or 6 months period, as the case may be, against the said entity, the period of exclusion would be 1 year. If another (or more) case(s) is booked during the 1 year period, the exclusion period would be 3 years.

In this regard CBEC circular No.18/2014-Customs dated 22/12/2014 additionally clarified that the ACP status would not be denied if the cases under Customs / Central Excise or Service Tax is involving duty demand uptoRs.50 Lakhs and Rs.25 Lakhs respectively.

However industry was of the view that Circular No. 18/2014-Customs dated 22/12/2014was contravening the provisions as laid down under Section 35F of Central Excise Act, 1944 and 129E of Customs Act through Finance Act, 2014 regarding pre-deposit of certain percentage of duty demanded or penalty imposed that requires the Assessee / ACP clients to deposit 7.5% or 10% of the duty where duty and penalty are in dispute or penalty, where such penalty is in dispute, for the purposes of filing an appeal.

In order to hold the continuity of ACP status, the ACP clients are now required to pay the entire duty with interest and penalty of 25% within 30 days of Show Cause Notice or client's application is allowed to be proceeded with by the Settlement Commission due to the Circular No.18/2014-Customs dated 22/12/2014.

The conditions provided under CBEC circular No. 18/2014-Customs dated 22/12/2014 exceeds the limits provided under the amendment to Section 35F of Central Excise Act, 1944 and 129E of Customs Act by the Finance Act, 2014.

Effects of Circular No. 18/2014-Customs dated 22/12/2014.

i) Denial of ACP status for the inconsistent conditions laid down under Circular No. 18/2014-Customs dated 22/12/2014 against the provisions of Section 35F of Central Excise Act 1944 and 129E of Customs Act as amended by the Finance Act, 2014 as the circular compels the payment of entire demand with interest and penalty.

ii) No clarity is provided under circular as regards to the stay orders by the Tribunal / Courts on recovery of the demand and in spite of the stay order, the ACP status are not continued / extended.

iii) ACP status is withdrawn even for the Show Causes Notices that are issued on flimsy grounds or due to technical issues.

iv) ACP status is withdrawn even for revenue neutral cases.

v) ACP status is withdrawn in spite of duty having been paid under protest.

vi) Cases are referred under Call book by the department themselves due to pending clarification by the Board or pending appeals of the identical issues. These cases are pending for many years keeping the ACP clients / Assessees completely under dark.

vii) In case of erroneous refund by the sanctioning authority, the order should be challenged before the next appellate authority rather issuing another Show Cause Notice by the same sanctioning authority. These unlawful cases should not be considered for the purpose of denial of ACP status.

Due to the above reasons, in respect of many of the importers / ACP Clients / Assesses the ACP facility either have been withdrawn or suspended without giving any notice or opportunity of personal hearing.

Further as per Circular No. 18/2014-Customs, dated 22nd December, 2014 all the outstanding disputes of ACP clients that are pending adjudication / appeals should be disposed in an expeditious manner but the adjudicating/lower appellate authorities are not showing any interest in disposing the appeals as per the Board Circular dated 22/12/2014 and this is causing a lot of hardship to the industry due to the adverse actions initiated by the Customs Risk Management Services.

In light of the above, the CBEC should suitably amend the Circular No.18/2014-Customs dated 22/12/2014[paragraph 3, clauses (i) & (ii) refers] to the extent that in case of any duty demand confirmed by the Customs / Central Excise or Service Tax authorities and on such demands when appeals are preferred by the ACP clients / Assessees with the next Appellate Authorities along with payment of pre-deposit as prescribed under Section 35F of Central Excise Act, 1944 and Section 129E of Customs Act and Finance Act, 2014, the ACP status should not be withdrawn or suspended.

A small step in this direction, if taken by the CBEC, will go a long way in fulfilling the India that we always dream of.

Also See: Tax Administration Reform Commission

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