Circular No. 967/01/ 2013 CX F. No. 208/36/2012-CX.

.6 Government of India Ministry of Finance Department of Revenue Central Board of Excise and Customs, New Delhi

Delhi, the Dated 1st January, 2013

To,

(i) (ii)

The Chief Commissioner of Central Excise (All), The Chief Commissioner of Central Excise & Customs (All),

(iii) The Chief Commissioner of Customs (All), (iv) Directors General (All)

Madam/ Sir,

Subject - Recovery of confirmed demand during pendency of stay application- regarding

I am directed to bring your attention to the following circulars issued from time to time on the above issue and to

state that it has been decided to rescind these circulars with immediate effect.

Sl No 1 2 3 4 5 6 7
2)

Date 18-11-88 2-3-90 21-12-90 12-11-92 3-8-94 2-6-98 25-2-2004

Circular no and File number of CX-6 80/88 and 208/31/88 7/90 and 208/107/89 23/90 and 209/107/89 16/92 and 208/59/92 47/47/94 and 208/33/94 396/29/98 and 201/04/98 788/21/2004 and 208/41/2003

Henceforth, recovery proceedings shall be initiated against a confirmed demand in terms of the following order

Sl No 1

Appellate Authority Situation NIL No appeal filed against a confirmatory order in original against which appeal lies with Commissioner (Appeals).

Directions regarding recovery. Recovery to be initiated after expiry of statutory period of 60 days for filing appeal.

Commissioner (Appeals)

Appeal filed without stay application against a confirmatory order in original.

Recovery to be initiated after such an appeal has been filed, without waiting for the statutory 60 days period to be exhausted.

Commissioner (Appeals)

Appeal filed with a stay Recovery to be initiated 30 days application against an order after the filing of appeal, if no stay is in original. granted or after the disposal of stay petition in accordance with the conditions of stay, if any specified, whichever is earlier.

NIL

No appeal filed against an Recovery to be initiated after expiry Order in Original issued by of statutory period of 90 days for the Commissioner. filing appeal from the date of communication of order.

CESTAT

Appeal filed without stay application against an Order in Original issued by the Commissioner.

Recovery to be initiated on filing of such an appeal, without waiting for the statutory 90 days period to be exhausted.

CESTAT

Appeal filed with a stay application against an Order in Original issued by the Commissioner.

Recovery to be initiated 30 days after the filing of appeal, if no stay is granted or after the disposal of stay petition in accordance with the conditions of stay, if any, whichever is earlier.

NIL

No appeal filed against an Order in Appeal issued by a Commissioner (Appeals) confirming the demand for the first time.

Recovery to be initiated after expiry of statutory period of 90 days for filing appeal from the date of communication of order.

CESTAT

Appeal filed without stay application against an Order in Appeal confirming the demand for the first time.

Recovery to be initiated on filing of such an appeal in the CESTAT, without waiting for the statutory 90 days period to be exhausted.

CESTAT

Appeal filed with a stay application against an Order in Appeal confirming the demand for the first time.

Recovery to be initiated 30 days after the filing of appeal, if no stay is granted or after the disposal of stay petition in accordance with the conditions of stay, if any, whichever is earlier.

10

CESTAT

All cases where Commissioner (Appeals) confirms demand in the Order in original.

Recovery to be initiated immediately on the issue of Order in Appeal.

11

High Court or Supreme Court

Tribunal or High Court confirms the demand.

Recovery to be initiated immediately on the issue of order by the Tribunal or the High Court, if no stay is in operation.

3) It may be noted that a confirmed demand remains an order in operation till it is stayed. Mere preferment of appeal itself does not operate as a stay. Honble Supreme Court in case of Collector of Customs, Bombay Vs Krishna Sales (P) Ltd [1994 (73) E.L.T 519 (S.C)] has observed that As is well known, mere filing of an Appeal does not operate as a stay or suspension of the Order appealed against. Accordingly, the above directions are hereby issued for initiating recovery of the confirmed demands.

4) Instructions in CBECs Excise Manual of Supplementary instructions on the above subject or any other circular, instruction or letter contrary to this circular stand amended accordingly.

Yours faithfully,

(V.P. Singh) OSD (CX-6)

Copyright Your Service Tax Helpline 2010

EMPTY COFFERS FORCE HARSH RECOVERY LAWS !!

Posted on January 9, 2013 by Team STO

The CBEC members should have been Historians rather than Economists! No one knows the art of twisting the case in their favour than the Ministry of Finance itself. A three decade old, Import duty case of meager 70 thousand rupees booked by the Mumbai Customs way back in 1983, which interestingly the department lost both in the Tribunal and thereafter in the Apex court, forms the basis of the recent illogical and hard-hitting Circular No. 967/01/2013CX dated 1-12013. The Hon Supreme Court while deciding the case in the assessees favour, reminded the department that mere filing of an Appeal does not operate as a Stay or suspension of the Order appealed against. After almost 30 years, the CBEC has picked up this line and come out with this insensitive, callous, harsh recovery guideline! Henceforth, this circular will form the governing principle for recovery proceedings to be initiated against a confirmed demand. The Circular gives absolute powers to the officers for recovery of government dues even though one may have appealed against the first or the second order. The situation varies from cases to case a, as the authority changes. The underling fact is that there is a huge short fall in the revenue targets and this years budget is an uphill task for the FM. The only remedy he sees is to go out and out for recovery of all pending dues! Accordingly where No appeal is filed against a confirmatory order in original (OIO) against which appeal lies with Commissioner (Appeals), recovery will be initiated after expiry of statutory period of 60 days for filing appeal. However in case of an appeal filed before Commissioner(Appeals) without stay application against a confirmatory order in original, the Recovery will be initiated after such an appeal has been filed, without waiting for the statutory 60 days period to be exhausted. Even if the Appeal is filed with a stay application against an order in original (OIO) the department will initiate recovery on completion of 30 days after the filing of appeal, if no stay is granted or after the disposal of stay petition in accordance with the conditions of stay, if any specified, whichever is earlier. In a situation where No appeal is filed against an Order in Original issued by the Commissioner, the Officers will go for recovery after expiry of statutory period of 90

days for filing appeal from the date of communication of order. In case the CESTAT Appeal is filed without stay application against an Order in Original issued by the Commissioner, the circular states that Recovery to be initiated on filing of such an appeal, without waiting for the statutory 90 days period to be exhausted. However in case of CESTAT Appeal filed with a stay application against an Order in Original issued by the Commissioner as per the new circular recovery is to be initiated, 30 days after the filing of appeal, if no stay is granted or after the disposal of stay petition in accordance with the conditions of stay, if any, whichever is earlier. However the harshest recovery proceedings are in case you tend to lose before the adjudicating officer as well as before the Commissioner(appeals). In All such cases where Commissioner (Appeals) confirms demand in the Order in original, the board circular directs the officers to initiate the recovery proceedings immediately on the issue of such Order in Appeal. It is pertinent to note that both being the departmental officers are likely to be biased and revenue minded. There are ample chances that they confirm the demand and one may not get justice at these levels. In all such cases, the department will initiate recovery proceedings on issue of the OIA (order in appeal). Out of the total litigations in the Central Excise and Service Tax, majority comprise of the cases which are pending before Assistant Commissioners, Deputy Commissioners or Additional Commissioners, who being revenue officers are bound to be Revenue biased and are likely to confirm the demands. Commissioner Appeals, though being an appellate authority, is none other than a revenue officer and belongs to the same clan. This leaves no scope for the assessee but to approach the Hon CESTAT, which is the only ray of hope. With the new hash recovery laws, the trade will be left with no choice but to knock the doors of the High Court. On one hand the Ministry lays stress on reducing the litigations and simplification of procedures, on the other, comes out with these insensitive guidelines. It only reflects one fact, empty coffers of the government revenue and pressure to cover the upcoming budget deficit!!

Stay Petitions: Recovery of outstanding tax demands

FULL TEXT OF IMPORTANT INSTRUCTIONS Recovery of outstanding tax demands [Instruction No. 1914 F. No. 404/72/93 ITCC dated 2-12-1993 from CBDT] The Board has felt the need for a comprehensive instruction on the subject of recovery of tax demand in order to streamline recovery procedures. This instruction is accordingly being issued in supersession of all earlier instructions on the subject and reiterates the existing Circulars on the subject.

The Board is of the view that, as a matter of principle, every demand should be recovered as soon as it becomes due. Demand may be kept in abeyance for valid reasons only in accordance with the guidelines given below : Responsibility: It shall be the responsibility of the Assessing Officer and the TRO to collect every demand that has been raised, except the following : (a) Demand which has not fallen due;(b) Demand which has been stayed by a Court or ITAT or Settlement Commission;(c) Demand for which a proper proposal for write-off has been submitted;(d) Demand stayed in accordance with paras B & C below. Where demand in respect of which a recovery certificate has been issued or a statement has been drawn, the primary responsibility for the collection of tax shall rest with the TRO. It would be the responsibility of the supervisory authorities to ensure that the Assessing Officers and the TROs take all such measures as are necessary to collect the demand. It must be understood that mere issue of a show cause notice with no follow-up is not to be regarded as adequate effort to recover taxes. Stay Petitions: Stay petitions filed with the Assessing Officers must be disposed of within two weeks of the filing of petition by the tax- payer. The assessee must be intimated of the decision without delay. Where stay petitions are made to the authorities higher than the Assessing Officer (DC/CIT/CC), it is the responsibility of the higher authorities to dispose of the petitions without any delay, and in any event within two weeks of the receipt of the petition. Such a decision should be communicated to the assessee and the Assessing Officer immediately. The decision in the matter of stay of demand should normally be taken by Assessing Officer/TRO and his immediate superior. A higher superior authority should interfere with the decision of the AO/TRO only in exceptional circumstances; e.g., where the assessment order appears to be unreasonably highpitched or where genuine hardship is likely to be caused to the assessee. The higher authorities should discourage the assessee from filing review petitions before them as a matter of routine or in a frivolous manner to gain time for withholding payment of taxes. Guidelines for staying demand: A demand will be stayed only if there are valid reasons for doing so. Mere filing an appeal against the assessment order will not be a sufficient reasonto stay the recovery of demand. A few illustrative situations where stay could be granted are: It is clarified that in these situations also, stay may be granted only in respect of the amount attributable to

such disputed points. Further where it is subsequently found that the assessee has not co-operated in the early disposal of appeal or where a subsequent pronouncement by a higher appellate authority or court alters the above situation, the stay order may be reviewed and modified. The above illustrations are, of course, not exhaustive. In granting stay, the Assessing Officer may impose such conditions as he may think fit. Thus he may a. require the assessee to offer suitable security to safeguard the interest of revenue;b. require the assessee to pay towards the disputed taxes a reasonable amount in lump sum or in instalments;c. require an undertaking from the assessee that he will co-operate in the early disposal of appeal failing which the stay order will be cancelled.d. reserve the right to review the order passed after expiry of a reasonable period, say up to 6 months, or if the assessee has not co-operated in the early disposal of appeal, or where a subsequent pronouncement by a higher appellate authority or court alters the above situations;e. reserve a right to adjust refunds arising, if any, against the demand. Payment by instalments may be liberally allowed so as to collect the entire demand within a reasonable period not exceeding 18 months. Since the phrase "stay of demand" does not occur in section 220(6) of the Income-tax Act, the Assessing Officer should always use in any order passed under section 220(6) [or under section 220(3) or section 220(7)], the expression that occurs in the section viz., that he agrees to treat the assessee as not being default in respect of the amount specified, subject to such conditions as he deems fit to impose. While considering an application under section 220(6), the Assessing Officer should consider all relevant factors having a bearing on the demand raised and communicate his decision in the form of a speaking order. Miscellaneous: Even where recovery of demand has been stayed, the Assessing Officer will continue to review the situation to ensure that the conditions imposed are fulfilled by the assessee failing which the stay order would need to be withdrawn. Where the assessee seeks stay of demand from the Tribunal, it should be strongly opposed. If the assessee presses his application, the CIT should direct the departmental representative to request that the appeal be posted within a month so that Tribunals order on the appeal can be known within two months. Appeal effects will have to be given within 2 weeks from the receipt of the appellate order. Similarly, rectification application should be decided within 2 weeks of the receipt t hereof. Instances where there is undue delay in giving effect to appellate orders, or in deciding rectification applications, should be dealt with very strictly by the CCITs/CITs. The Board desires that appropriate action is taken in the matter of recovery in accordance with the above procedure. The Assessing Officer or the TRO, as the case may be, and his immediate superior officer shall be held responsible for ensuring compliance with these instructions. This procedure would apply mutatis mutandis to demands created under other Direct Taxes enactments also. Part payment of outstanding demand Clarification regarding adjustment thereof [Instruction No. 1936 - F. No. 404/62/95-ITCC dated 21-3-1996 from CBDT] A question has been referred to the Board seeking clarification that : "If the tax paid by the assessee is not sufficient to cover the total demand then should it first be adjusted against the interest." The Board have been informed that the Assessing Officers are not following any uniform procedure in this regard. While one set of Assessing Officers are first adjusting the part payment received from the assessee against the tax due, the others are adjusting the part payments towards the outstanding interest due under section 220(2). The matter was referred to the Ministry of Law for their opinion and they have

also observed that both the views are possible. For the sake of uniformity the Board have decided that part payment received from assessee should first be adjusted towards the tax due and not the interest calculated under section 220(2) of the Income-tax Act. The aforesaid instruction may be brought to the notice all officers working under your charge. Clarification regarding charging of interest u/ss. 201(1A) and 220(2) of Income-tax Act [Instruction No. 1944 F. No. 275/14/97-IT(B) dated 27-8-1997 issued by CBDT] The Central Board of Direct Taxes have received several representations seeking clarification about the simultaneous charging of interest u/s. 201(1A) and u/s. 220(2) of the Income-tax Act, 1961. After due consideration, it is hereby clarified that for non-deduction of tax at source or failure to pay the tax after deducting the same, interest u/s. 201(1A) is chargeable. If the tax and/or interest is not paid within the stipulated time, then interest u/s. 220(2) also becomes chargeable.