Upload
gaurav-sethi
View
223
Download
0
Embed Size (px)
Citation preview
8/7/2019 8828Economic Offences Central Excise
http://slidepdf.com/reader/full/8828economic-offences-central-excise 1/34
Post Qualification Course inInternational Trade Laws &
WTO
Economic Offences : Central Excise Law
8/7/2019 8828Economic Offences Central Excise
http://slidepdf.com/reader/full/8828economic-offences-central-excise 2/34
8/7/2019 8828Economic Offences Central Excise
http://slidepdf.com/reader/full/8828economic-offences-central-excise 3/34
Direct & Indirect Taxes
� Tax Collection
� (2004 ± 05)� Union Excise Duty - Rs.1,04,1999
crore
� Customs Duty ± Rs. 54,250 crore
� Income Tax & Corporate Tax ± Rs.1,39,365
crore
8/7/2019 8828Economic Offences Central Excise
http://slidepdf.com/reader/full/8828economic-offences-central-excise 4/34
Offences ± Causes
± Central Excise Duty is an indirect tax
± Result - Entrusted to Subordinate Management
8/7/2019 8828Economic Offences Central Excise
http://slidepdf.com/reader/full/8828economic-offences-central-excise 5/34
Offences ± Causes II
� Indirect taxes are regressive
� Are they?
� CE Duty is a kind of ³expenditure tax´
8/7/2019 8828Economic Offences Central Excise
http://slidepdf.com/reader/full/8828economic-offences-central-excise 6/34
Offences ± Causes III
� High tax rates induce temptation to evade
� To sell cheap & break barriers
� (Anti dumping duty example)
� To enjoy unjust enrichment.
8/7/2019 8828Economic Offences Central Excise
http://slidepdf.com/reader/full/8828economic-offences-central-excise 7/34
Minimal Control Necessary� But economic progress calls for industrial
development
� Industrial development requires liberalised
environment
8/7/2019 8828Economic Offences Central Excise
http://slidepdf.com/reader/full/8828economic-offences-central-excise 8/34
Liberalization: CE Law &
Procedure
� 1968 ± Introduction of SRP
� 1986 ± Modvat ( 2000 ± cenvat)
� 1992 ± One time registration� 1994 ± Modvat on capital goods
±Invoice by Dealers
8/7/2019 8828Economic Offences Central Excise
http://slidepdf.com/reader/full/8828economic-offences-central-excise 9/34
Liberalization: CE Law &
Procedure
� 1996 : Mandatory penalty for evasion
� 1999 : Rationalisation of tax rates
� 2000 : Abolition of Statutory records
± Reliance on private records
8/7/2019 8828Economic Offences Central Excise
http://slidepdf.com/reader/full/8828economic-offences-central-excise 10/34
Liberalization: CE Law &
Procedure
� 2001: New Central Excise Rates
� 2004 : Integration of Cenvat credit
of CE duty & ST
8/7/2019 8828Economic Offences Central Excise
http://slidepdf.com/reader/full/8828economic-offences-central-excise 11/34
Liberalization : CE Law
Procedure
� 10 September 2004
� Cenvat Credit Rules 2004
± Compounding of offences.
± Duty liability from successor in business
± Maximum 3 adjournments
± Increase in fee for appeals
8/7/2019 8828Economic Offences Central Excise
http://slidepdf.com/reader/full/8828economic-offences-central-excise 12/34
Liberalization : CE Law &
Procedure
± Audit under section 14 A & 14AA
± Excise Audit ± 2000
8/7/2019 8828Economic Offences Central Excise
http://slidepdf.com/reader/full/8828economic-offences-central-excise 13/34
Excise Audit 2000
� Selective audit ± unit & frequency based on risk assessment
� Audit preceded by Desk Review� Specific audit duration:
� Duty > 5 crore - 7 days
� Duty 1 ± 5 crore ± 5 days
� Duty 0.5 ± 1 crore ± 4 days
� Duty 0.1 ± 0.5 crore ± 3 days
� Duty < 0.1 crore ± 2 days
8/7/2019 8828Economic Offences Central Excise
http://slidepdf.com/reader/full/8828economic-offences-central-excise 14/34
Why CAs Should Study
Economic Offences
± Certification role
± Tax Auditor role
± Advisory role
8/7/2019 8828Economic Offences Central Excise
http://slidepdf.com/reader/full/8828economic-offences-central-excise 15/34
Certification Role ± Examples
± Inventory» GSM case
» Excess stock - not clandestine removal
± Credit records
± Disclosures
± Suits involving audit certificates
± Call as witness
8/7/2019 8828Economic Offences Central Excise
http://slidepdf.com/reader/full/8828economic-offences-central-excise 16/34
Tax Auditor Role� Waste and scrap is practically treated as
final product for excise purpose
� There are about 85 entries of waste in
CETA
� Waste & scrap - importance
8/7/2019 8828Economic Offences Central Excise
http://slidepdf.com/reader/full/8828economic-offences-central-excise 17/34
Case Study on Waste & Scrap
� Activated clay is used for refining &
bleaching edible oil. The spent earth is
subsequently sold. It is specified in the
tariff. Offence case was made for failure to
pay daily.
� Discuss.
8/7/2019 8828Economic Offences Central Excise
http://slidepdf.com/reader/full/8828economic-offences-central-excise 18/34
Waste & Scrap� Mention in CETA
� Marketable commodity (spent nickel)
� There should be manufacture
� Ancillary process is not manufacture
(Cinder)
8/7/2019 8828Economic Offences Central Excise
http://slidepdf.com/reader/full/8828economic-offences-central-excise 19/34
Offences vs. Activism
� Thorough knowledge essential to guard
against overzealousness
8/7/2019 8828Economic Offences Central Excise
http://slidepdf.com/reader/full/8828economic-offences-central-excise 20/34
Offences vs. Technology� Computer assembly is not manufacture
� Triveni Engineering ± Marketability test ±
goods ³as such´
� No duty on immovable property
� No duty in case of dismantling
� Removal without dismantling attracts duty� Turnkey project not dutiable but
components, if marketable.
8/7/2019 8828Economic Offences Central Excise
http://slidepdf.com/reader/full/8828economic-offences-central-excise 21/34
Offences vs Technology� Computer assembly is manufacture
� Information supplied by e-mail
� Software is goods for ST & Octroi; but issoftware manufactured?
� Recording of cassette is manufacture
� Receiving cassette and recording music asper choice is service activity
� Packing of CD, pan masala etc.
8/7/2019 8828Economic Offences Central Excise
http://slidepdf.com/reader/full/8828economic-offences-central-excise 22/34
Important Concepts� Manufacturer
� Job Worker
� Hired Labourer
� Master-Servant relationship
� Owner of Raw material� Brand name owner
� Manufacturer should not be dummy
8/7/2019 8828Economic Offences Central Excise
http://slidepdf.com/reader/full/8828economic-offences-central-excise 23/34
Basic Procedures� Registration vs. exemption (> 40 / 100 lakh)
� Daily stock register (R 10) for goods
manufactured, cleared & in stock.� Form not prescribed
� Nil entry- when entry ± QC & packing
� Clearance under invoice duly authenticated� Triplicate / Additional copy ± proforma
invoice
8/7/2019 8828Economic Offences Central Excise
http://slidepdf.com/reader/full/8828economic-offences-central-excise 24/34
Basic procedure� Monthly return in ER 1
� Quarterly return by SSI in ER3
� Monthly return by EOU in ER2
� ER4 by assessee paying duty > 1 crore
8/7/2019 8828Economic Offences Central Excise
http://slidepdf.com/reader/full/8828economic-offences-central-excise 25/34
Basic procedure� W.e.f. 25.11.2004 information about
principal input in ER5 by 30th April
� First return by 31st December, 2004� Changes within 15 days in ER5
� Only for specific tariff heading and by
assessees paying duty > 1 crore� Monthly return of receipt and consumption
of principle input in ER6
8/7/2019 8828Economic Offences Central Excise
http://slidepdf.com/reader/full/8828economic-offences-central-excise 26/34
Basic procedure� Submission of list of records maintained for
purchase, receipt, sale or delivery of goods
including inputs and capital goods
� Changes in boundary, management etc. to
be intimated in EA 1.
8/7/2019 8828Economic Offences Central Excise
http://slidepdf.com/reader/full/8828economic-offences-central-excise 27/34
Cenvat Offences� If cenvat wrongly taken or availed, interest
is payable. (R 14) (S 11 A & B)
� Interest for wrong utilization - appears
valid
� Interest for wrong availment ± debatable
� Taking ± attempting to commit offence
� Utilising ± committing offence
8/7/2019 8828Economic Offences Central Excise
http://slidepdf.com/reader/full/8828economic-offences-central-excise 28/34
Cenvat Offences� Penalty for taking wrongly cenvat credit (R
15)
� Not ensuring inputs suffered duty
� Contravention to Cenvat Credit Rules
� Penalty ± confiscation on goods + monetary
penalty (limited to duty or Rs.10,000/-
whichever is high.
8/7/2019 8828Economic Offences Central Excise
http://slidepdf.com/reader/full/8828economic-offences-central-excise 29/34
Cenvat Offences� Penalty in case of fraud, etc. (S 11/ R 15)
� Mandatory penalty ± equal to duty
� 25% reduction in penalty for prompt
payment
� For service tax ± mandatory minimum
penalty = duty; maximum is twice duty.
8/7/2019 8828Economic Offences Central Excise
http://slidepdf.com/reader/full/8828economic-offences-central-excise 30/34
Offences ± SSI Units� Common office, common partners
� No financial flow back
� No common funding
� One unit belongs to FIL; another DIL; both under
SIL; no common funding or financial flow back
� One unit belongs to husband; another to wife; bothmanaged by husband under POA
� Other facts of case to be seen
8/7/2019 8828Economic Offences Central Excise
http://slidepdf.com/reader/full/8828economic-offences-central-excise 31/34
Payment under protest� Refund possible when payment under PLA
� Refund not possible when payment through
cenvat credit
� No provision for cash refund of cenvat
credit except for exports and other cases of
departmental lapses.
8/7/2019 8828Economic Offences Central Excise
http://slidepdf.com/reader/full/8828economic-offences-central-excise 32/34
SCN & Time Limit� SCN for normal cases - one year
� SCN for fraud ± five years
� Time limit valid even when there is interim stay
� SCN needed even if party admitted liability
� Mere letter is not SCN
� Mere endorsement is not SCN� No SCN - No Penalty
8/7/2019 8828Economic Offences Central Excise
http://slidepdf.com/reader/full/8828economic-offences-central-excise 33/34
Suppression, Misstatement or
Fraud� Conscious withholding not mere in action
� No suppression, if no disclosure
requirement
� When facts disclosed, fraud cannot be
alleged.
� No suppression, if department knows the
facts.
8/7/2019 8828Economic Offences Central Excise
http://slidepdf.com/reader/full/8828economic-offences-central-excise 34/34
Important Factors� Demand on fuel consumption basis is arbitrary.
� Demand without reckoning wastage is
unsustainable .� Raw material shortage is inadequate for
clandestine removal.
� False statement to bank etc. cannot prove
suppression of production.� Demand on private slips basis without
corroborative evidence not valid