indirect tax adjudication

1. Indirect taxation = common areas
Common topics
In
Central excise ,customs & service tax
T.VENKATARAMANAN.FCS.FCMA(COST).
1

2. INTRODUCTION.
 UNDER INDIRECT TAXES WE HAVE 3 MAJOR
TAXES.
 They are 1)central excise 2)customs &
 3)service tax , being under the same ministry of
finance, final departmental appellate authority – the
tribunal ,all have the natural basic thinking &
approach .
 Many provisions of CE are applicable to service tax &
many to customs & vice versa.
 Such areas are commonly dealt with in these slides.
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3. Welcome and Introduction
 Welcome the staff members to the session.
 We will take up assessment , adjudication,
penalties etc
 Including appeals
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4. Assessment & audit
 Defn. of assessees : Rule 2 ( c ) of CE Rules
define assessee as a person who is liable for
payment of duty assessed,producer,
manufacturer,or ware house keeper of excisable
goods or his authorized agent
 Assessment means determining the tax liability.
4

5. Fill in the blanks:
1)Assessment under central excise is basically ___________ based ____
2)In the case of ________ the superintendent/inspector of CE shall assess
the duty payable before _____ __ goods.
3)Monthly returns are to be in _____ ____ & ____ forms along with _____.
4) The scrutiny has to done in 2 stages ,They are a) ______ & b)_________
5) In case of customs _______ & ________ is an assessment order.
Ans: 1)invoice based ; self assessment 2)cigarettes; removal , of
3)ER1/ER II/ERIII/; SELF ASSESSMENT MEMORANDOM
4)Scrutiny of return; scrutiny of assessment
5)Bill of entry; shipping bill
5

6. True or false
1)Assessment order is there in customs but not in excise & service tax
2)If valuation shown by assessee is not accepted by dept. order with reasons
Have to be issued with in 45 days.
3)Scrutiny of return & assessment should be completed with in 3 m0nths from
the date of receipt of return.
4)After initial scrutiny 5% of the returns will be selected for scrutiny of
assessment .
5)Extension beyond 1 year , for further period can be granted by commissioner.
6) DEPARTMENT CAN ORDER PROVISIONAL ASSESSMENT
Ans: 1)T 2)F -14 DAYS 3) T 4)T 5)F –CHIEF COMM.
6) F – CAN NOT
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7. Topic :PROVISIONAL
ASSESSMENT
 Explain WHEN IT CAN be TAKEN UP?
 Explain when provisional & how , (conditioned to
be fulfilled) provisional duty can be paid.
 Finalisation of provisional assessment.
7

8. Topic :remission of duty
 Define remission of duty(sec -25)
 Explain WHEN IT CAN be granted .(Rule 21)
 Explain the provisions.
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9. Exemptions
recoveries,demands & refunds
CE CUSTOMS SERVICETAX
SECTIONS 5 SECTIONS 25 SEC 73,83,
TO TO SEC 28 93.
15 SEC,114,138,
36,37, ETC 142 & 152
9 Common provisions

10. POWER TO GRANT EXEMPTIONS
 U/S 5A of the CE act 25 of the customs act
 Falls under 2 categories 1)general exemption
2)special exemptions
 General exemptions are to notified, are not available
for FTZ/SEZ Etc ,
 Spl exemptions are under spl. Circumstances.
 No customs duty will be collected if the duty payable =
or < Rs 100.
 Also not applicable to smuggled goods
10

11. True or false
1) Turpentine oil manufactured w/o the use of power is subject to excise duty
2) Issuance of show cause notice with in the specified time limit is mandatory.
3) Erroneous refund includes erroneous rebate
4) In case fraud , collusion etc the extended period of limitation is 5 years.
5) Intent to evade duty is inbuilt in all cases of fraud to contravention.
Ans 1)false , with power is taxable 2) true 3) true
4) True 5)true
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12. Write short notes on
1)certification action or certificate proceedings
 An officer of CE prepares a statement of dues of
an assessee and signs the same & sends it to the
collector .He proceeds to recover the amount as
arrears of land revenue . This is called
certification action.
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13. What are the requirement of show
cause notice?.
 1)with in the specified /extended time limit
 Must be specific & not vogue
 State the nature of contravention
 State the charges ,allegations & contraventions
 Penalty to be mentioned.
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14. Case vs penalty
case penalty
1)Tax & penalty accepted before 1% pasubject to a maximum of 25%
SCN 0f duty/tax (from month following the
month in case of CE&period of
default in case of Service tax)
2)In case of payment with in 30 25% of duty
days of notice(in case service tax Some changes to service
penalty also to be paid) tax(p/18.19)
3)In any other case 50% of duty/tax
Penalty @ 50% in case transactions
Are recorded in books
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15. True or false
1)Application should be submitted after removal of goods for Remission of duty
2) Remission of duty is permitted even If goods are not entered in stock register.
3)Remission Has to be given even if intimation not given with in 24 hours.
4)Remission has to be granted if molasses was damaged due to rain water.
.
5)Remission need not be granted if goods are destroyed by fire. .
6)Remission has to be given despite insurance claim..
7)The doctrine of unjust enrichment means no one to be allowed to enjoy at
the cost of other.
Ans: 1)F-BEFORE 2)F - 3) T 4)T 5)F – 6)T
7)T
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16. Time limit for refund ETC
Refunds ,Interest & other
Provisions.
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17. Write short notes on (1)relevant date for export
(2) relevant date for computation of 1 year
3)rate of interest under service tax
4) fund
STATE TRUE OR FALSE
1)APPLICATION FOR REFUND MUST BE MADE BEFORE THE EXPIRY OF ONE YEAR
FROM THE RELEVENT DATE.
2)The appellate tribunal shall hear & decide every appeal with ina period of 3 years from
the date on which appeal was filed.
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18. Original jurisdiction in excise
customs &service tax
Adjudication in
indirect taxes
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19. Vocabulary
 Adjudicate means to hear or try & decide
judicially.
 Adjudication means giving a decision.
 Adjudication can be departmental or judicial
 Adjudicating authority – any authority competent
to pass any order or decision under the act
19

20. True or false
 1)The central excise officer is adjudicating
authority for service tax purposes .
 2)Any order or decision under the act by
authority other than commissioner (appeals)is
an adjudication order.
 3)statutory powers can be cut down by issuing a
circular.
20 Ans : 1)T 2)T 3)F

21. State the adjudication powers of
custom
p/223
21

22. Provisions of customs applicable to
CE ETC
p/226
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23. Protection of acts done in good faith
Sec. 40 of CE & SEC.155 of customs offer full protection
Sec 155 of customs act protects even from criminal prosecution even
if the person being chased & fired upon dies.
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24. Powers of inspection & visits
As per rule 22(1) all officers of the rank of inspector & above are authorized
to inspect
Should be in their uniform or carry their identity card.
Should make entry in the visit book.
However for visits to SSI UNITS written permission of AC/DC WILL
BE REQUIRED
Stop & inspect conveyance , X ray bodies etc (p/227)
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25. Power to summon & arrest
Section 108 of customs & section 14 (1) empower officers under the
act to summon & enquire.
Enquiry under these provisions amount to “judicial proceedings”with in
the meaning of sec 193 & 228 of IPC
OBTAIN VOLUNTARY STATEMENTS IN WRITING & SIGNED BY
THE MAKER.” “no right of silence”
Customs & CE officials have power to arrest which can not be excised by
service tax. These are governed by sec 50 & 57 of Cr PC.
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26. Procedure after arrest
The arrested person should be sent to empowered central excise officer
Who will send the arrested person to magistrate . In the absence of such
empowered officer ,the arrested person should be sent to the officer in
charge of the nearest police station who will produce him before the
magistrate with in 24 hrs.
In case of insufficiency of strong evidence , the arrested person can be released
on bond by excise officer himself..
Bail means security for prisoner’s appearance , on giving which the prisoner
is released pending trial..
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27. Offences –cognizable Etc
Offence is not defined in excise Law.however sec 3(8) of the general clauses
Act defines an offence ,as any act or omission made punishable by any
law for the time being in force..
Cognizance of a case : offences under CE & customs are non cognizable
Sce 9(A)of CE Act& 104 (4) of customs Act.
What is cognizance ?sec 2(c ) of CrPC defines cognizable offence as an
Offence for which a police officer may arrest w/o warrant.As per sec 155 of
CrPC a police officer cannot investigate a non-cognizable case w/o the
order of the magistrate.
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28. Search & seizure
Search & seizure are coercive powers designed to enforce cooperation
from persons unwilling to be subjected to these operations.
Sec18 of CE Act & sec 82 ( 2 ) of finance act of 1994 provide that all searches
& seizures must be as per Sec 165 of CrPC which states that the following points
to be kept in mind: (1) reason to believe some thing is hidden (2) to avoid delay
(3)Reasons to be recorded.(4) officer should search himself (5) authority to
subordinates should be in writing (6)copy of records made to be sent to
magistrate.& owner or occupier of the place free of cost
Section 105 of CE Act empowers excise officers to search.which in common
parlance is known as raid.(p/229)
For vexatious searches the officers sec 22 0f CE Act provides for fine of
28 the officer concerned.customs act provides for 6 months imprisonment.

29. Ingredients in case of seizure
u/s 123 of customs act
There are 4 ingredients
They are 1)should be under the provisions of custom act
2)Must be from the person proceeded against
3)In respect of goods for which sec 123 applies
4)Reasonable belief goods seized are smuggled.
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30. Return of searched & seized
documents & goods
As per rule 24(a ) of CE rules records seized by dept. during investigatioin
but not replied upon SCN should be returned with in 30 days.of issue of SCN
Or from the date of expiry of the period for issue of SCN.
In the case of goods
As per sec110 of customs act goods can be released provisionally to the
Owner on execution of bond with security
Under CE Act vehicles can be released by AC/DC while goods can be
released by as per powers to adjudicating officer.Bond in B-4 to be excuted
& bond value to be decided by adjudicating authority.
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31. Granting “bail”
Further offences are classified as bailable & non bailable.
A bail is only a security for the prisoner’s appearance.
If offence is bailable grant of bail is automatic
If nonbailable it is for the court to decide to issue bail or not.
Granting bail in this case is “discretionary” & not mandatory .
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32. True or false
1)If no SCN is issued with in 6 months the goods shall be returned to the
Person from whom they were seized. true
2)The owner of goods gets a civil right & goods must be returned only
when application is made. False ( to be returned even without appln.)
3) Under sec124, even if SCN is not issued with in 6months ,
adjudication for confiscation & penalty can continue true
4)Both goods released under bond & those cleared unconditionally ,
can be confiscated .
False (only those released under bond can be confiscated)
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33. Penalties & confiscation
Civil & criminal liabilities : penalty for violation of provisions involving
a penalty of money & confiscation of goods is a civil penalty & adjudged in
deptl. adjudication
Criminal liability :criminal punishment is of imprisonment & fine which can
awarded only in a criminal court after prosecution.
Both departmental penalties & criminal prosecution for same offence is possible
& permissible.
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34. Mens rea- the guilty mind/ criminal
intention
There is complete absence of mens rea in penalty provisions,Mens rea
is not an essential in gradient for imposing penalty unless the specifically
provides so.
Sec 11AC requires Mens rea,& penalty equal to duty is mandatory
under this section & there is no discretion to reduce duty under this section
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35. Principles of penalty
 No penalty if assessee is ignorant about legal
provision.
 Lenient view in case of technical lapses
 Personal liability only for penalty & not for duty
liability
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36. Confiscation & redemption
p/234
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37. More information
 Confiscation of goods u/r25
 Confiscation of conveyance 115(1)
 Confiscation of goods used for concealing
 Contravening goods if mixed with other goods “whole” goods
can be confiscated
 If contravening goods are sold ,then sale proceeds can be
confiscated.
 Confiscated goods can be sold.
 The person from whom goods have been confiscated can get
them back on payment of a fine called “redemption fine”.
 Redemption fine shall not exceed market price- duty
payable(p/235)
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38. what special adequate reasons,who can
be punished etc (p/236-7)
Offences punishable u/CE
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39. Offences by officers of customs
1)Entering into agreements to do or abstain from doing , permits any act or thing
Whereby any fraudulent export is effected or by which customs duty is evaded
Or prohibited goods are allowed to enter into india or to go out of india,
He shall be punishable with imprisonment upto 6 months or fine upto Rs 1000/=
or both.
Officers are also punishable for disclosure of secret information
For their wrong acts
But they can be prosecuted only with the previous permission of Govt..
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40. Compounding of offences
u/s 9(a)2 of CEA & 137(3) of customs act compounding of offences is
permitted (p/239)
Chief commissioner is the compounding authority &
commissioner is the reporting authority
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41. Burden of proof
Burden of proof of offence is on the department beyond reasonable doubt
Absence of culpable state of mind /guilty mind beyond reasonable doubt
is on the accused .
Burden of proof regarding Non-existence of mens rea is on the accused.
Also burden of proof that the sensitive goods like Gold,Silver ,watches etc
Are not smuggled is on the accused.
On the contrary ,prosecution has to prove that they are of 1) foreign origin,
2)Imported from abroad, etc.
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42. Four ingredients in the case of
seizure.
1)Seizure shall be under the provisions of customs act
2)Must be from a person proceeded against
3)Must be in respect of goods for which sec123 of customs act applies
4)Reasonable belief that goods seized are smuggled.
What is sec 123 ?
Sec 123 deals with sensitive goods like gold ,silver etc.
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43. Relevancy of documents
1)In case of documents signed before CEO/CO; will be allowed as evidence,
To avoid delay ,or incase of dead persons
2)Court can admit statements in the interest of justice.
3)Statements made before police officer cannot be admitted
4) Statements must be voluntary & true.
5)Documents seized from a person is presumed to be true.If he claims that
it is not true, burden of proof lies with him..In case of documents obtained
from abroad ,prosecution has to prove the contents , signature etc
Insufficiently stamped and computer print outs are accepted as evidence,
6) Testing of samples see page 242
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44. Chart showing appellate & revisionary remedies
details CCE/CC CESTAT HIGH SUPREM
APPEAL COURT COURT
S
WHO ASSESS A/DEPT A/DEPT A/DEPT
CAN FILE EE/DEPT
TIME 60 DAYS 3 MONTH 180 days As per Cr
LIMIT /3MONS from of receipt pc
UNDER commn./d of
SERVICE ecision/or CESTAT
TAX der. order.
condonati Upto 30 Sufficient Sufficient Do
on days cause cause
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45. Time limit for disposal of appeal is 6 months for cc ,3 years or 180 days as the
case may be in the case of CESTAT.,as per CCP in the case of high court &
supreme court
Adjournment of hearing upto 3 months in the case of cc & CESTAT
As per code of civil procedure in the case high court & supreme court
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