35310finalsupp8

INDIRECT TAX LAWS
© The Institute of Chartered Accountants of India

124
INDIRECT TAX LAWS
AMENDMENTS AT A GLANCE
Finance (No.2) Act, 2014 & Budget Notifications
S.No. Particulars Section/Rule/
Notification
Effective
Date
A. Central Excise
I. Central Excise Act, 1944
1. Submission of Information Return to prescribed
authority by assessee or specified authorities
New section
15A
06.08.2014
2. Penalty for failure to furnish information return New section
15B
06.08.2014
3. Discretionary powers of CESTAT to refuse
admission of appeals enhanced from
` 50,000 to ` 2,00,000
Section 35B 06.08.2014
4. Board empowered to condone delay upto 30 days
for review by the Committee of Chief
Commissioners/Commissioner
Section 35E 06.08.2014
5. Fixed pre-deposit of 7.5%/10% of duty or penalty
mandatory for filing appeal before Commissioner
(Appeals) and CESTAT
Section 35F 06.08.2014
6. Interest on delayed refund of amount deposited
under section 35F (pre-deposit)
Section 35FF 06.08.2014
7. Determination of taxability or excisability of goods
is determination of a question having a relation to
rate of duty
Section 35L 06.08.2014
8. Non-fling of appeal against a particular order on
account of monetary limits to be considered by
Commissioner (Appeals) also
Section 35R 06.08.2014
9. Two additional designations introduced in
departmental administration structure
Section 2(b)] 06.08.2014
10. Customs and Central Excise Settlement
Commission rechristened as Customs, Central
Excise and Service Tax Settlement Commission
Sections 31(g)
and 32(1)
06.08.2014
11. Cases involving non-filing of returns eligible for
settlement
Section 32E 06.08.2014

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12. Concealment under section 32O is the
concealment made from Central Excise Officer
Section
32O(1)(i)
06.08.2014
II. Central Excise Valuation (Determination of
Price of Excisable Goods) Rules, 2000
13. Transaction value to be the assessable value when
excisable goods are sold at a price below
manufacturing cost and profit without any
additional consideration
Rule 6 11.07.2014
III. CENVAT Credit Rules, 2004
14. Place of removal defined in the rules Rule 2(qa) 11.07.2014
15. Credit on inputs and input services to be availed
within 6 months of the date of invoice
Sub-rule (1)
and (7) of rule
4
01.09.2014
16. Payment of value of input service to service
provider no more a pre-requisite for availing credit
in case of service tax paid under full reverse
charge
Rule 4(7) 11.07.2014
17. Condition of reversal of credit on failing to pay
value of input service and service tax within 3
months of the date of invoice not to apply in case
of full reverse charge
Rule 4(7) 11.07.2014
18. Credit reversed on account of non-receipt of export
proceeds within the specified or extended period
can be re-availed if export proceeds are received
within one year from the specified or extended
period
Rule 6(8) 11.07.2014
19. Inter-unit transfer of CENVAT credit in LTUs
disallowed
Rule 12A(4) 11.07.2014
20. Manner of distribution of common input service
credit under rule 7(d) of the CENVAT Credit Rules,
2004 clarified
IV. Central Excise Rules, 2002
21. E-payment of excise duty mandatory for all
assessees irrespective of the duty paid during
previous year
New rule
8(1B)
01.10.2014
22. Default in payment of duty to attract a penalty of
1% per month or part thereof on the unpaid duty
Rule 8(3A) 11.07.2014

126
V. Others
23. Benefit of advance ruling extended to resident
private limited companies
Section
23A(c)(iii)
11.07.2014
B. Service Tax
I. Chapter V of Finance Act, 1994
24. Service tax to be levied on sale of space or time for
advertisements in all media except print media
Section
66D(g)
01.10.2014
25. Radio taxis/radio cabs liable to service tax Section
66D(o)
01.10.2014
26. Rate of exchange under section 67A to be
determined as per GAAP
Section 67A 01.10.2014
27. Retrospective exemption for services provided by
ESIC
New section
100
06.08.2014
28. Time limit for completion of adjudication prescribed
under section 73
Section 73 06.08.2014
29. No waiver of penalty for suppressing value of
taxable services where true and complete details of
transactions are available in the specified records
Section 80 06.08.2014
30. Provisions introduced for recovery of service tax
dues of a predecessor from the assets of a
successor purchased from the predecessor
Section 87(c) 06.08.2014
31. (i) Search and seizure to be conducted by any
authorized Central Excise Officer
(ii) Additional Commissioner and a notified
Central Excise Officer also empowered to
authorize any Central Excise Officer to search
and seize
Section 82(1) 06.08.2014
32. Provisions of section 5A(2A), 15A and 15B of
Central Excise Act, 1944 to apply in case of service
tax matters as well
Section 83 06.08.2014
33. Committee of Chief Commissioners or
Commissioners to be constituted by order and not
by notification
Section
86(1A)(i)
06.08.2014
34. Scope of rule making power of the Government
widened
Section 94 06.08.2014
35. Central Government to issue order for removing
difficulties, if any, in implementation of the
amendments made vide Finance (No.) Act, 2014
Section 95 06.08.2014

127
II. Place of Provision Rules, 2012
36. Intermediary of goods brought at par with
intermediary of services
Rule 2(f) 01.10.2014
37. Provision for prescribing conditions for
determination of place of provision of repair service
carried out on temporarily imported goods under
rule 4(a) omitted
Rule 4(a) 01.10.2014
38. Hiring of vessels (except yachts) and aircraft
excluded from rule 9(d)
Rule 9(d) 01.10.2014
III. Point of Taxation Rules, 2011
39. Rule 7 to override the provisions of rules 3, 4 and 8
only
Rule 7 01.10.2014
40. Point of taxation under reverse charge to be the
payment date or the first day occurring immediately
after three months from the date of invoice,
whichever is earlier
Rule 7 01.10.2014
IV. Service Tax (Determination of Value) Rules,
2006
41. Category ‘B’ and ‘C’ of works contracts merged into
one single category with service portion as 70%
Rule 2A(ii) 01.10.2014
V. Service Tax Rules, 1994
42. Service tax to be payable by the recipient of
service in case of services provided by recovery
agents to banks, financial institutions and NBFC
Rule
2(1)(d)(i)(AA)
11.07.2014
43. Service tax to be payable by the recipient of
service in case of service provided by a director to
a body corporate
Rule
2(1)(d)(i)(EE)
11.07.2014
44. E-payment of service tax mandatory for all
assessees irrespective of the tax paid during
previous year
Rule 6(2) 01.10.2014
VI. Others
45. Services provided by common bio-medical waste
treatment facility operators to clinical
establishments exempted
46. Transport of organic manure by vessel, rail or road
(by GTA) exempted
47. IRDA approved life micro-insurance schemes with
sum assured not exceeding ` 50,000 exempted

128
48. Loading, unloading, packing, storage or
warehousing, transport by vessel, rail or road
(GTA), of cotton - ginned or baled - exempted
Mega
Exemption
Notification
No. 25/2012
ST dated
20.06.2012
All
amendments
effective from
11.07.2014
49. Services received by RBI from outside India in
relation to management of foreign exchange
reserves exempted
50. Services provided by Indian tour operators to
foreign tourists in relation to a tour wholly
conducted outside India exempted
51. Limited exemptions in respect of services provided
to Government or local authority or governmental
authority
52. Concept of auxiliary education services done away
with and exemption restricted to only few specific
services
53. Exemption available to accommodation services
provided by hotels etc. at declared tariff of less
than ` 1,000 per day re-worded
54. Renting of immovable property service received by
educational institutions taxable
55. Transport of passengers in air-conditioned contract
carriages taxable
56. Clinical research on human participants chargeable
to service tax
57. SEZ Notification amended for simplifying
procedural compliance
Notification
No. 12/2013
ST dated
01.07.2013
11.07.2014
58. Only service providers need to satisfy the condition
of non- availment of credit for availing abatement in
case of GTA service
Abatement
Notification
No. 26/2012
ST dated
20.06.2012
11.07.2014
59. Credit allowed on input service received by a
person providing services of renting of motorcab
from a sub-contractor engaged in the similar line of
business
01.10.2014
60. 60% abatement prescribed for transport of
passengers by a contract carriage (other than
motorcab) and a radio taxi
11.07.2014

129
61. Abatement in respect of transport of goods in a
vessel increased from 50% to 60%
01.10.2014
62. Credit allowed on input service received by a tour
operator from a sub-contractor
01.10.2014
63. Services tax to be paid under reverse charge in
case of service provided by recovery agents to
banks and directors to body corporate
Reverse
charge
Notification
No. 30/12 ST
dated
20.06.2012
11.07.2014
64. Entire service tax to be paid by the service receiver
in case of service provided by recovery agents to
banks and directors to body corporate
11.07.2014
65. Service receiver and provider to pay equal service
tax on non-abated value in case of renting of motor
vehicle
01.10.2014
66. Slab rate of interest introduced for delayed
payment of service tax
Section 75 01.10.2014
Section
96A(b)(iii)
11.07.2014
C. Customs
I. Customs Act, 1962
68. Mineral oils extracted in the CSI/EEZI prior to
07.02.2002 exempted from customs duties
Section 25 06.08.2014
69. Relevant date for determination of rate of duty and
tariff valuation for imports through a vehicle to be
the date of arrival of vehicle where bill of entry is
filed prior to the arrival of the vehicle
Section 15(1) 06.08.2014
70. Two additional designations introduced in
departmental administration structure
Section 3 06.08.2014
71. Bill of entry to be filed prior to the delivery of import
report if the vehicle in which the goods have been
imported is expected to arrive within 30 days
Section 46(3) 06.08.2014
72. Discretionary powers of CESTAT to refuse
admission of appeals enhanced from ` 50,000 to
` 2,00,000
Section 129A 06.08.2014
73. Board empowered to condone delay upto 30 days
for review by the Committee of Chief
Commissioners/Commissioner
Section 129D 06.08.2014
74. Fixed pre-deposit of 7.5%/10% of duty or penalty
mandatory for filing appeal before Commissioner
Section 129E 06.08.2014

130
(Appeals) and CESTAT
75. Interest on delayed refund of amount deposited
under section 129E (pre-deposit)
Section
129EE
06.08.2014
76. Non-fling of appeal against a particular order on
account of monetary limits to be considered by
Commissioner (Appeals) also
Section
131BA
06.08.2014
77. Customs and Central Excise Settlement
Commission rechristened as Customs, Central
Excise and Service Tax Settlement Commission
Section 127A 06.08.2014
78. Cases involving exports through land route,
baggage, import/export through post or courier
eligible for settlement
Section 127B 06.08.2014
II. Customs Tariff Act, 1975
79. Articles imported by an EOU/SEZ unit and cleared
as such into DTA or used in the manufacture of
final products that are cleared into DTA liable to
safeguard duty
Section 8B 11.07.2014
III. Baggage Rules, 1988
80. Free baggage allowance increased from ` 35,000
to ` 40,000
11.07.2014
IV. Others
28E(c)(iii) 11.07.2014

CENTRAL
EXCISE

131
1
BASIC CONCEPTS
AMENDMENTS BY NOTIFICATIONS/CIRCULARS ISSUED BETWEEN 01.05.2013 TO
30.04.2014
Clarification regarding levy of Education Cess and Secondary and Higher Education
Cess on other cesses
Education Cess and the Secondary and Higher Education Cess are not to be calculated on
cesses which are levied under Acts administered by Department/Ministries other than Ministry
of Finance (Department of Revenue) [for instance, Sugar cess levied under the Sugar Cess
Act, 1982, Tea Cess levied under Tea Act, 1953] but are only collected by the Department of
Revenue in terms of those Acts.
[Circular No. 978/02/2014-CX dated 07.01.2014]

132
3
VALUATION OF EXCISABLE GOODS
AMENDMENTS BY BUDGET NOTIFICATIONS
Transaction value to be the assessable value when excisable goods are sold at a price
below manufacturing cost and profit without any additional consideration [Rule 6]
Rule 6 of the Central Excise Valuation (Determination of Price of Excisable Goods) Rules,
2000 provides that if sale is for delivery at the time and place of removal, buyer and seller are
not related but price is not the sole consideration for sale, the value of such goods shall be
deemed to be the aggregate of such transaction value and the amount of money value of any
additional consideration flowing directly or indirectly from the buyer to the assessee.
A proviso has been inserted in the said rule vide Notification No.20/2014 CE (NT) dated
11.07.2014 to lay down that where price is not the sole consideration for sale of such
excisable goods and they are sold by the assessee at a price less than manufacturing cost
and profit, and no additional consideration is flowing directly or indirectly from the buyer to
such assessee, the value of such goods shall be deemed to be the transaction value.
It is important to note here that the Supreme Court in the case of CCEx Mumbai v. Fiat India
(P) Ltd. 2012 (283) ELT 161 (SC) held that where products were sold at losses for an overly
long period of time to penetrate the market, transaction value cannot be accepted for the
purpose of levy of excise duty. Thus, the above amendment made in rule 6 has rendered the
said decision of Supreme Court ineffective.
[Effective from 11.07.2014]
Example
XY Pvt. Ltd. is a leading manufacturer of luxury sedans. Manufacturing cost of each sedan is
` 15,56,000. In order to penetrate the market, XY Pvt. Ltd. has been selling its sedans at
` 14,00,000 since August, 2014. The average industry profit on such types of cars is 5%.
Determine the assessable value of the car manufactured by XY Pvt. Ltd.
Answer
With effect from 11.07.2014, a new proviso has been inserted in rule 6 of the Central Excise
Valuation (Determination of Price of Excisable Goods) Rules, 2000 which lays down that
where price is not the sole consideration for sale of excisable goods and they are sold by the
assessee at a price less than manufacturing cost and profit, and no additional consideration is

133
flowing directly or indirectly from the buyer to such assessee, the value of such goods shall be
deemed to be the transaction value.
In the given case, XY Pvt. Ltd. is selling its sedans below manufacturing cost to penetrate the
market. Thus, price is not the sole consideration for sale of cars and at the same time no
additional consideration is flowing either directly or indirectly from the buyer to XY Pvt. Ltd.
Hence, the assessable value of such goods shall be deemed to be the transaction value,
which in the given case is ` 14,00,000.
30.04.2014
1. Amendment in rules 8, 9 and 10 of Central Excise Valuation (Determination of Price
of Excisable Goods) Rules, 2000
Hitherto, literal interpretation of rules 8, 9 and 10 lead to a conclusion that valuation
methods prescribed therein will be applicable only in a case where ALL the goods were
either captively consumed or sold to a unrelated buyer or to/through an inter-connected
undertaking respectively. In other words, these rules did not cover the cases where
some goods were captively consumed while others were sold, or a case where goods
were partly sold to related buyers and partly to unrelated buyers.
With effect from 01.12.2013, rules 8, 9 and 10 dealing with determination of assessable
value in case of captive consumption, sale to related person and sale to/through an inter-
connected undertaking respectively have been amended to clearly state that these rules
apply irrespective of whether the whole or a part of the clearances of manufactured
goods are covered by the circumstances given in these rules. Each clearance is required
to be assessed according to section 4(1)(a) or the relevant rule dealing with the
circumstances of clearance of the goods, as the case may be.
Thus, now valuation mechanism provided in rules 8, 9 and 10 is applicable in following
the cases:
(i) Rule 8: Where whole or part of the excisable goods are not sold by the assessee
but are used for consumption by him or on his behalf in the production or
manufacture of other articles.
(ii) Rule 9: Where whole or part of the excisable goods are sold by the assessee to or
through a person who is related in the manner specified in any of the sub-clauses
(ii), (iii) or (iv) of clause (b) of sub-section (3) of section 4 of the Central Excise Act,
1944.
(iii) Rule 10: Where whole or part of the excisable goods are sold by the assessee to or
through an inter-connected undertaking.

134
For example, if an assessee clears his goods in such a way that first removal of goods is
to an independent buyer, second removal is to such a related person who is covered
under rule 9 and third removal is to a person who is covered under rule 10, while some
goods are captively consumed, then the first removal should assessed under section
4(1)(a), second removal should be assessed under rule 9 and third removal should be
assessed under rule 10, while captively consumed goods should be assessed under rule
8 of these rules. It may be noted that Central Excise Valuation (Determination of Price of
Excisable Goods) Rules, 2000 are not required to be followed sequentially.
Consequently, clarifications with regard to following issues as contained in Serial no. 5,
12 and 14 of the Circular no. 643/34/2002-CX dated 1-7-2002 containing reference to
rules 8, 9 and 10 have also been deleted:
(i) How will valuation be done in cases of captive consumption (i.e. consumed within
the same factory) including transfer to a sister unit or another factory of the same
company/firm for further use in the manufacture of goods?
(ii) How will valuation be done when goods are sold partly to related persons and partly
to independent buyers?
(iii) How will valuation be done when inputs or capital goods, on which CENVAT credit
has been taken, are removed as such from the factory?
[Notification No. 14/2013 CE (NT) dated 22.11.2013 and Circular No. 975/09/2013-CX
dated 25.11.2013]
2. Clarification on implementation of decision of Supreme Court in case of goods
sold at a price below the cost
In case of M/s Fiat India Ltd. 2012 (283) E.L.T 161, Supreme Court had held that in case
the goods were sold at a price substantially lower than the cost of the manufacture to
achieve market penetration, the transaction value declared under section 4 may be
rejected.
CBEC, vide Circular No. 979/03/20014-CX dated 15.01.2014, has clarified that the
transaction value cannot be rejected in every case where the declared value is lower
than the manufacturing cost and profit. Due care will be taken at the level of the
Commissioner to see whether the case at hand is similar to the facts and circumstances
of the Fiat case.
Further, extended period of limitation shall apply only if there is a sale in the
circumstances similar to the case of M/s Fiat and yet transaction value of goods is
declared as the correct transaction value after the date of the judgment, i.e., 29.08.2012.
Note: With effect from 11.07.2014, the decision of the Supreme Court in Fiat case has
become ineffective owing to the amendment made in rule 6 (Refer the discussion given
at the beginning of this Chapter). Therefore, the above clarification will be relevant only
for the period upto 10.07.2014.

135
4
CENVAT CREDIT
I. Following amendments have been made in CENVAT Credit Rules, 2004 [CCR] vide
Notification No. 21/2014 CE (NT) dated 11.07.2014:
1. Place of removal defined in the rules [Rule 2(qa)]
A new clause (qa) has been inserted in rule 2 to define the term ‘place of removal’ as
under:
“Place of removal” means-
(i) a factory or any other place or premises of production or manufacture of the
excisable goods;
(ii) a warehouse or any other place or premises wherein the excisable goods have
been permitted to be deposited without payment of duty;
(iii) a depot, premises of a consignment agent or any other place or premises from
where the excisable goods are to be sold after their clearance from the factory,
from where such goods are removed.
The said definition is same as the one provided in section 4(3)(c) of Central Excise Act,
1944.
2. Credit on inputs and input services to be availed within 6 months of the date of
invoice [Rule 4(1) and 4(7)]
Rule 4 has been amended to restrict the availability of credit on inputs and input services
to a period of six months from the date of the issue of invoice/bill/challan etc. A third
proviso has been inserted in rule 4(1) and a sixth proviso in rule 4(7) to restrict the
availability of credit in respect of inputs and input services respectively.
Both the provisos lay down that the manufacturer or the provider of output service shall
not take CENVAT credit after six months of the date of issue of any of the documents
specified in rule 9(1).

3. Paymen
availing
Earlier,
input se
service
proviso
The firs
value of
of servic
paid un
input se
Howeve
been in
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[Effecti
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reverse
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The pro
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[Effecti
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Ch
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t proviso to ru
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ervices even i
er, there is no
serted in sub
credit of inpu
f input service
Availa
ive from 11.0
on of revers
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the second
ought to be
months of the
d could be t
tax was mad
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A
S
G
Full
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07.2014]
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proviso to ru
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date of the i
taken back w
e.
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(7). Cases w
e newly insert
07.2014]
After payment
Service tax to
Government
136
vice to servi
ce tax paid un
d under reve
service receiv
d or payable
been substitu
vice provider
erse charge.
ayment of se
f input service
espect of par
provide the s
l be allowed
e tax paid or p
edit of Input
on failing to
ate of invoic
le 4(7) laid d
value of input
nvoice/bill/ch
whenever the
erstwhile seco
where service
ted third prov
of-
the
6
ice provider
nder full reve
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payable as ind
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t service and
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whether full o
r the paymen
ed in invoice
aw the condit
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ensure avail
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pply in case
ENVAT credit
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have now bee
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service
(ii) Serv
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e
pre-requisite
[Rule 4(7)]
or partial, cred
t of value of
/bill/challan [
tion of payme
t services in
ervice tax is t
ability of cred
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econd proviso
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is not paid w
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credit
and
third
have
put

137
Example
AB Pvt. Ltd., a manufacturer, has furnished the following information:
S.
No.
Particulars Excise
duty/Service
tax* (` )
(i) High Speed Diesel Oil Invoice dated
20.04.2015
26,240
(ii) Input ‘A’ Invoice dated
23.09.2014
1,56,000
(iii) Input ‘B’ Invoice dated
10.04.2015
1,35,000
(iv) Machinery falling under Chapter 82 Invoice dated
12.09.2014
3,54,670
(v) Cement and iron rods used in making
a structure for support of the
machinery at point (iv) above
Invoice dated
15.12.2014
1,88,290
(vi) Input ‘C’ Invoice missing 89,460
(vii) Input service ‘X’ Invoice dated
12.11.2014
45,340
(viii) Input service ‘Y’ Invoice dated
20.09.2014
68,240
(ix) GTA service for bringing raw materials
to the factory [Payment has not been
made to GTA but service tax has been
paid under reverse charge]
Invoice dated
14.04.2015
Value of service –
3,00,000
9,270
(x) Security services for guarding the
factory [Payment has not been made
to security agency but service tax has
been paid under reverse charge]
Invoice dated
10.04.2015
Value of service –
1,50,000
18,540
*Including education cess and secondary higher education cess
You are required to determine the total CENVAT credit that can be availed by AB Pvt. Ltd.
during the month of April, 2015.
Note: AB Pvt. Ltd. is not entitled to SSI exemption under Notification No. 8/2003 CE dated
01.03.2003.

138
Answer
Computation of CENVAT credit that can be availed during the month of April, 2015
Particulars `
High Speed Diesel Oil (Note 1) -
Input ‘A’ (Note 2) -
Input ‘B’ 1,35,000
Machinery falling under Chapter 82 [50% of ` 3,54,670] (Note 3) 1,77,335
Cement and iron rods (Note 4) -
Input ‘C’ (Note 5) -
Input service ‘X’ 45,340
Input service ‘Y’ (Note 6) -
GTA service (Note 7) 9,270
Security service [` 18,540 x 25%] (Note 8) 4,635
Total CENVAT credit that can be availed during the month of April, 2015 3,71,580
Notes:
1. High Speed Diesel Oil is not an input in terms of rule 2(k) of CENVAT Credit Rules, 2004
[CCR].
2. With effect from 01.09.2014, a manufacturer cannot not take CENVAT credit of inputs
after six months of the date of issue of invoice [Third proviso to rule 4(1) of CCR].
3. Machinery covered under Chapter 82 is eligible capital goods under rule 2(a) of CCR.
Since AB Pvt. Ltd. is not a SSI unit, only upto 50% of the duty paid on the machinery can
be availed as CENVAT credit in the year of purchase in terms of rule 4(2)(a) of CCR.
Time limit of six months for availment of CENVAT credit does not apply to capital goods.
4. Goods used for making of structures for support of capital goods (machinery in this case)
are excluded from the definition of inputs under rule 2(k) of CCR.
5. CENVAT credit cannot be availed without a valid invoice [Rule 9 of CCR].
6. With effect from 01.09.2014, a manufacturer cannot take CENVAT credit of input
services after six months of the date of issue of invoice [Sixth proviso to rule 4(7) of
CCR].
7. GTA service used for bringing the raw materials to the factory is an input service in terms
of rule 2(l) of CCR. As per Notification No. 30/2012 ST dated 20.06.2012, service tax on
GTA service is payable under full reverse charge. Therefore, entire ` 9,270 would have
been deposited by AB Pvt. Ltd. with the Government.

139
Further, with effect from 11.07.2014, where service tax is paid under full reverse charge,
payment of service tax ensures availability of credit of input services even if the value of
input service is not paid to the service provider [First proviso to rule 4(7) of CCR]. Since
entire service tax has been paid by AB Pvt. Ltd, it can avail credit of such tax paid even
though the payment has not been made to GTA.
8. Security services used for guarding the factory is an input service in terms of rule 2(l) of
CCR. As per Notification No. 30/2012 ST dated 20.06.2012, service tax on security
service is payable under partial reverse charge - 25% of tax to be paid by service
provider and balance 75% by service receiver. Thus, AB Pvt. Ltd. would have deposited
` 13,905 (75% of the total service tax) with the Government.
Further, with effect from 11.07.2014, where service tax is paid under partial reverse
charge, credit of input service is allowed only after payment has been made for both,
value of input service and service tax payable [Second proviso to rule 4(7) of CCR].
Since, payment has not been made to security agency, credit of 75% of tax paid by AB
Pvt. Ltd. cannot be availed. However, credit of 25% of tax to be paid by service provider
can be availed by AB Pvt. Ltd., on the receipt of the invoice.
5. Credit reversed on account of non-receipt of export proceeds within the specified
or extended period can be re-availed if export proceeds are received within one
year from the specified or extended period [Rule 6(8)]
Rule 6(8) provides that a service provided or agreed to be provided shall not be an
exempted service when:-
(a) the service satisfies the conditions specified under rule 6A of the Service Tax Rules,
1994 and the payment for the service is to be received in convertible foreign
currency; and
(b) such payment has not been received for a period of six months or such extended
period as maybe allowed from time-to-time by the Reserve Bank of India, from the
date of provision.
A proviso has been inserted in sub-rule (8) of rule 6 to lay down that if such payment is
received after the specified or extended period allowed by the Reserve Bank of India but
within one year from such period, the service provider shall be entitled to take the credit
of the amount equivalent to the CENVAT credit paid earlier in terms of rule 6(3). The
credit can be availed to the extent it relates to such payment, on the basis of
documentary evidence of the payment so received.
6. Inter-unit transfer of CENVAT credit in LTUs disallowed [Rule 12A(4)]
Rule 12A(4) allows a large tax payer to transfer, CENVAT credit available with one of his
registered manufacturing premises or premises providing taxable service to his other
such registered premises.

140
Sub-rule (4) of rule 12A has been amended to provide that a large tax payer may
transfer, CENVAT credit taken, on or before 10.07.2014 by one of his registered
manufacturing premises or premises providing taxable service to his other such
registered premises.
In other words, a large tax payer unit will not be able to transfer the credit taken from
11.07.2014 onwards by any of its registered manufacturing premises or premises
providing taxable service to his other registered premises.
II. Manner of distribution of common input service credit under rule 7(d) of the
CENVAT Credit Rules, 2004 clarified
Rule 7 of CCR provides for the mechanism of distribution of common input service credit
by the Input Service Distributor to its manufacturing units or to units providing output
services.
Rule 7(d) provides that credit of service tax attributable to service used by more than one
unit shall be distributed pro rata on the basis of the turnover of such units during the
relevant period to the total turnover of all its units, which are operational in the current
year, during the said relevant period.
On account of the words ‘such unit’ used in rule 7(d), it is possible to interpret that the
distribution of the credit would be restricted to only those units where the services are
used. Thus, the credit available for distribution would get reduced by the proportion of
the turnover of those units where the services are not used.
However, it has been clarified vide Circular No. 178/4/2014 dated 11.07.2014 that the
amended rule 7(d) seeks to allow distribution of input service credit to all units in the ratio
of their turnover of the previous year.
Example
An Input Service Distributor (ISD) has a total of 4 units namely ‘A’, ‘B’, ‘C’ and ‘D’, which
are operational in the current year. How will the credit of input service pertaining to more
than one unit be distributed?
Answer
Distribution to ‘A’= X/Y x Z
X = Turnover of unit ‘A’ during the relevant period
Y = Total turnover of all its unit i.e. ‘A’+’B’+’C’+’D’ during the relevant period
Z = Total credit of service tax attributable to services used by more than one unit
Similarly the credit shall be distributed to the other units ‘B’, ‘C’ and ‘D’.

141
Example
An ISD has a common input service credit of ` 12000 pertaining to more than one unit.
The ISD has 4 units namely ‘A’, ‘B’, ‘C’ and ‘D’ which are operational in the current year.
Unit Turnover in the previous year
(in ` )
A (Manufacturing excisable goods) 25,00,000
B (Manufacturing excisable and exempted goods) 30,00,000
C (providing exclusively exempted service) 15,00,000
D (providing taxable and exempted service) 30,00,000
Total 1,00,00,000
The common input service relates to units ‘A’, ‘B’ and ‘C’. How will the credit be
distributed?
Answer
The distribution of credit will be as under:
(i) Distribution to ‘A’
= 12,000 * 25,00,000/1,00,00,000
= 3,000
(ii) Distribution to ‘B’
= 12,000 * 30,00,000/1,00,00,000
= 3,600
(iii) Distribution to ‘C’
= 12,000 * 15,00,000/1,00,00,000
= 1,800
(iv) Distribution to ‘D’
= 12,000 * 30,00,000/1,00,00,000
= 3,600
The distribution for the purpose of rule 7(d) will be done in this ratio in all cases,
irrespective of whether such common input services were used in all the units or in some
of the units.

142
30.04.2014
1. Procedure, safeguards, conditions and limitations prescribed for refund of
CENVAT credit to service providers covered under partial reverse charge
Rule 5B of CCR stipulates that a service provider providing services taxed under reverse
charge mechanism and unable to utilize the CENVAT credit availed on inputs and input
services for payment of service tax on such output services, shall be allowed refund of
such unutilized CENVAT credit.
The procedure, safeguards, conditions and limitations to which such refund shall be
subject to have been prescribed by CBEC vide Notification No. 12/2014 CE (NT) dated
03.03.2014 as under:
A. SAFEGUARDS, CONDITIONS AND LIMITATIONS
(a) Refund is admissible, of unutilised CENVAT credit taken on inputs and input
services during the half year for which refund is claimed, for providing following
output services:
(i) renting of a motor vehicle designed to carry passengers on non-abated value,
to any person who is not engaged in a similar business;
(ii) supply of manpower for any purpose or security services; or
(iii) service portion in the execution of a works contract;
(hereinafter above mentioned services will be termed as partial reverse charge
services). The amount of refund would be computed as follows:
where
A =
Turnover of output service under partial
reverse charge duirng the half yearCENVAT credit taken on inputs and
input services during the half year Total turnover of goods and
services during the half y
×
ear
B = Service tax paid by the service provider for such partial reverse charge services
during the half year.
Unutilised CENVAT credit taken on inputs and input
services during the half year for providing partial reverse
charge services.
(A)-(B)

143
(b) Refund shall not exceed the amount of service tax liability paid/payable by the
service receiver with respect to the partial reverse charge services provided during
the period of half year for which refund is claimed.
(c) Amount claimed as refund shall be debited by the claimant from his CENVAT credit
account at the time of making the claim. However, if the amount of refund
sanctioned is less than the amount of refund claimed, then the claimant may take
back the credit of the difference between the amount claimed and the amount
sanctioned.
(d) The claimant shall submit not more than one claim of refund under this notification
for every half year.
(e) Refund claim shall be filed after filing of service tax return for the period for which
refund is claimed.
(f) No refund shall be admissible for the CENVAT credit taken on input or input
services received prior to 01.07.2012.
Half year means a period of six consecutive months with the first half year beginning
from the 1st day of April every year and second half year from the 1st day of October of
every year.
B. PROCEDURE FOR FILING THE REFUND CLAIM
(a) The output service provider shall submit an application in Form A, along with
specified documents and enclosures, to jurisdictional Assistant
Commissioner/Deputy Commissioner, before the expiry of 1 year* from the due date
of filing of return for the half year. Copies of return(s) filed for the said half year shall
also be filed along with the application.
*In case of more than one return required to be filed for the half year, 1 year shall be
calculated from due date of filing of the return for the later period.
However, last date of filing of application in Form A, for the half year ending on
30.09.2012, shall be 30.04.2014.
(b) The Assistant Commissioner/Deputy Commissioner, may call for any document in
case he has reason to believe that information provided in the refund claim is incorrect or
insufficient and further enquiry needs to be caused before the sanction of refund claim,
and shall sanction the claim after satisfying himself that the refund claim is correct and
complete in every respect.
2. Provisions relating to distribution of credit in case of input service distributor
amended
With effect from 01.04.2014, rule 7 of CCR has been amended to simplify the mechanism
of distribution of CENVAT credit in case of input service distributor as under:

144
S.
No.
Position as per
erstwhile rule 7
Position as per the
amended rule 7
1. In case of a unit
exclusively engaged in
manufacture of
exempted goods/
providing exempted
services, service tax
paid on input services
used IN such a unit
was not allowed to be
distributed as CENVAT
credit.
In case of a unit
exclusively engaged in
manufacture of
exempted goods/
providing exempted
services, service tax
paid on input services
used BY one or more
such units will not be
allowed to be
distributed as CENVAT
credit
With the substitution of word
‘IN’ with ‘BY’, credit of
services, which have been
used by such units though
not actually consumed
within such units, would also
not be distributed.
2. Credit of service tax
attributable to service
used wholly IN a unit
was to be distributed
only to that unit.
Credit of service tax
used wholly BY a
unit shall be
distributed only to that
unit.
Substitution of word ‘IN’ with
‘BY’ would increase the
scope of services pertaining
to which credit could be
distributed to a unit.
Resultantly, credit for
services like good transport
agency services, rent-a-cab
service, testing and analysis
of the product etc. would
now be available to the unit
availing them.
3. Credit of service tax
used IN more than one
unit was to be
distributed pro rata on
the basis of the turnover
during the relevant
period of the concerned
unit to the sum total of
the turnover of all the
units to which the
service related during
the same period.
Credit of service tax
used BY more than
one unit shall be
distributed pro rata on
the basis of the
turnover of such units
during the relevant
period to the total
turnover of all its
units, which are
operational in the
current year, during
the said relevant
period.
In case of common input
services, amount of
CENVAT credit attributed to
a unit may be reduced as
now turnover of all
operational units has to be
taken in denominator
instead of only the units to
which the service relates.

145
4. Relevant period was
the month/quarter
previous to the
month/quarter during
which the CENVAT
credit was distributed.
In case of an assessee
who did not have any
total turnover in the
said period, the input
service distributor was
to distribute any credit
only after the end of
such relevant period
wherein the total
turnover of its units
was available.
Relevant period shall
be the ‘financial year’
preceding to the year
during which credit is
to be distributed for
month/ quarter
provided assessee has
turnover in such
preceding financial
year.
If the assessee does
not have turnover for
some/ all the units in
the preceding financial
year, relevant period
shall be the last
quarter for which
details of turnover of
all the units are
available, previous to
the month/ quarter for
which credit is to be
distributed.
Distribution of credit is now
based on previous financial
year’s turnover instead of
previous month’s/quarter’s
turnover.
[Notification No. 5/2014-CE (NT) dated 24.02.2014]
3. Duty leviable on transaction value to be paid on removal of capital goods as waste
and scrap
Rule 3(5A) of the CCR provides for reversal of CENVAT credit in the event of removal of
capital goods after being used, whether as capital goods or as waste/ scrap. Earlier, the
quantum of credit that needs to be reversed was higher of the following two amounts:
(I) CENVAT credit taken on the said capital goods reduced by the specified percentage
points calculated by straight line method for each quarter of a year or part thereof
from the date of taking the CEVAT credit
or
(II) Duty leviable on transaction value.
However, with effect from 27.09.2013, if the capital goods are cleared as waste and
scrap, the manufacturer shall pay an amount equal to the duty leviable on transaction
value.

146
Thus, a manufacturer removing capital goods as waste and scrap will no longer be
required to compare the amount equivalent to the duty leviable on transaction value with
the amount equivalent to CENVAT credit taken on the said capital goods reduced by the
specified percentage points. However, when capital goods will be removed, after being
used, otherwise than as waste and scrap, the higher of the above-mentioned two
amounts will be required to be paid.
[Notification No. 12/2013 CE (NT) dated 27.09.2013]
4. CENVAT credit taken on input services to be reversed if duty paid on final product
remitted
Earlier, where on any goods manufactured or produced by an assessee, the payment of
duty was ordered to be remitted under rule 21 of the Central Excise Rules, 2002, the
CENVAT credit taken on the inputs used in the manufacture or production of said goods
was required to be reversed. Thus, earlier, reversal was only required in respect of
inputs and not for input services.
Rule 3(5C) of CCR has been amended to provide that CENVAT credit taken on input
services used in or in relation to the manufacture or production of said goods is also
required to be reversed.
5. Amount payable under sub-rules (5), (5A), (5B) and (5C) of rule 3 to be paid on or
before the 5th day of the following month by utilizing CENVAT credit or otherwise
As per explanation 1 inserted after rule 3(5C) of CCR, the amount payable under
following sub-rules of rule 3 shall be paid by the manufacturer of goods or the provider of
output service
(i) Rule 3(5) Reversal of credit in case of removal of inputs or capital goods
as such from the factory/premises of the output service provider
(ii) Rule 3(5A) Reversal of credit in case of removal of capital goods after
being used, whether as capital goods or as scrap or waste
(iii) Rule 3(5B) Reversal of credit in case of full or partial writing off of the value
of input or capital goods before being put to use
(iv) Rule 3(5C) Reversal of credit in case of remission of duty on final product
• by debiting the CENVAT credit or otherwise
• on or before the 5th day of the following month except for the month of March,
where such payment shall be made on or before the 31st day of the month of
March.

147
6. Failure to reverse the credit taken on inputs and input services used in goods on
which duty is ordered to be remitted also to attract recovery provisions under rule
14 [Explanation 2 to rule 3(5C)]
Hitherto, as per explanation occurring after proviso to rule 3(5B) of CCR, recovery
provisions under rule 14 of CCR were applicable if the manufacturer of goods or the
provider of output service fails to pay the amount payable under sub-rules (5), (5A) and
(5B) of rule 3.
The said explanation has been omitted and a new explanation 2 has been inserted after
rule 3(5C). As per the new explanation 2, in addition to sub-rules (5), (5A) and (5B) of
rule 3, recovery provisions under rule 14 will also apply to sub-rule (5C) of rule 3.
In other words, even in a case where the manufacturer of goods or the provider of output
service fails to reverse the CENVAT credit taken on inputs and input services used in
goods on which duty has been ordered to be remitted, it would be recovered, in the
manner provided under rule 14, for recovery of CENVAT credit wrongly taken.
7. Importer required to file quarterly return
Earlier, rule 9(8) of the CCR required a first stage dealer and a second stage dealer to
submit a return (electronically) within 15 days from the close of each quarter of a year to
the Superintendent of Central Excise.
With effect from 01.04.2014, said rule has been amended. Thus, now a registered
importer is also required to submit such quarterly return.
Consequently, the return form prescribed for the same has also been accordingly
amended.
[Notification Nos. 9 and 11/2014 CE(NT) dated 28.02.2014]
8. Good cleared against specified duty credit scrips not to be treated as exempted
goods
Notifications Nos. 29/2012-CE, 30/2012-CE, 31/2012-CE, 32/2012-CE and 33/2012-CE
all dated 09.07.2012 provide exemption to certain manufactured goods when cleared
against the specified duty credit scrips issued to an exporter. The specified duty credit
scrips are:
Focus Product Scheme (FPS) duty credit scrip,
Focus Market Scheme (FMS) duty credit scrip
VKGUY (Special Agriculture and Village Industry Scheme) duty credit scrip
Agri Infrastructure Incentive Scrip duty credit scrip
Status Holder Incentive Scheme duty credit scrip

148
One of the conditions for availing of these exemptions is that duties leviable, but for
these exemptions, are debited in or on the reverse of said scrip and the scrip holder is
permitted to avail of CENVAT credit of the duties debited in the scrip.
In view of these provisions it has been clarified that such debit of duty in these scrips
shall be treated as payment of duty for the purpose of determining the applicability of rule
6 of CCR. The clearance of excisable goods against such specified duty credit scrips
cannot be considered as clearances of exempted goods and therefore, the provisions
regarding payment of amount under rule 6(3) of CCR will not apply in such a case.
[Circular No. 973/07/2013-CX dated 04.09.2013]

149
5
GENERAL PROCEDURES UNDER CENTRAL
EXCISE
AMENDMENTS BY FINANCE (NO. 2) ACT, 2014
1. Submission of Information Return to prescribed authority by assessee or specified
authorities [New section 15A]
New section 15A – Obligation to furnish information return
(1) A new section 15A has been inserted in Central Excise Act, 1944 to empower the
Central Government to prescribe an authority or agency with whom an Information
Return shall be filed by the specified persons. Information can be collected for the
purposes of the Act, such as, to identify tax evaders or recover confirmed dues.
The specified persons required to file the said return are
(a) an assessee; or
(b) a local authority or other public body or association; or
(c) any authority of the State Government responsible for the collection of value
added tax or sales tax; or
(d) an income tax authority appointed under the provisions of the Income-tax Act,
1961; or
(e) a banking company within the meaning of section 45A(a) of the Reserve Bank
of India Act, 1934; or
(f) a State Electricity Board; or an electricity distribution or transmission licensee
under the Electricity Act, 2003, or any other entity entrusted, as the case may
be, with such functions by the Central Government or the State Government;
or
(g) the Registrar or Sub-Registrar appointed under section 6 of the Registration
Act, 1908; or
(h) a Registrar within the meaning of the Companies Act, 2013; or
(i) the registering authority empowered to register motor vehicles under Chapter
IV of the Motor Vehicles Act, 1988; or

150
(j) the Collector referred to in section 3(c) of the Right to Fair Compensation and
Transparency in Land Acquisition, Rehabilitation and Resettlement Act, 2013;
or
(k) the recognised stock exchange referred to in section 2(f) of the Securities
Contracts (Regulation) Act, 1956; or
(l) a depository referred to in section 2(e)(1) of the Depositories Act,1996; or
(m) an officer of the Reserve Bank of India, constituted under section 3 of the
Reserve Bank of India Act, 1934,
who is responsible for maintaining record of registration or statement of accounts or
any periodic return or document containing details of payment of tax and other
details or transaction of goods or services or transactions related to a bank account
or consumption of electricity or transaction of purchase, sale or exchange of goods
or property or right or interest in a property, under any law for the time being in
force.
(2) Such persons shall furnish an information return of the details given above in
respect of such periods, within such time, form (including electronic form) and
manner, to the prescribed authority or agency.
(3) Any defect found in the return by the prescribed authority can be rectified within a
period of 30 days from the date of intimation of such defect to the said person. The
period of 30 days can be extended further by the prescribed authority on request.
(4) However, if the defect is not rectified within 30 days or the extended period, such
information return shall be treated as not submitted and the provisions of this Act
shall apply.
(5) If the return, including return after rectification of defect, is not submitted within the
specified time, the prescribed authority may issue a notice requiring furnishing of
such information return within a period not exceeding 90 days from the date of
service of the notice.
2. Penalty for failure to furnish information return [New Section 15B]
If a person who is required to furnish an information return under section 15A of Central
Excise Act, 1944 fails to do so within the period specified in the notice issued thereunder,
the prescribed authority may levy a penalty of ` 100 for each day of the default.

151
Following amendments have been made in rule 8 of Central Excise Rules, 2002 [CER] vide
Notification No. 19/2014 CE(NT) dated 11.07.2014:
1. E-payment of excise duty mandatory for all assessees irrespective of the duty paid
during previous year [Rule 8(1B)]
With effect from 01.01.2014, third proviso to rule 8(1) of CER had been amended vide
Notification No. 15/2013 CE(NT) dated 22.11.2013 to reduce the threshold limit for e-
payment of central excise duty from ` 10 lakh to ` 1 lakh. Thus, with effect from
01.01.2014, where an assessee had paid an excise duty of ` 1 lakh or more including the
amount paid by utilization of CENVAT credit, in the preceding financial year, he was
required to deposit the excise duty liable to be paid by him electronically through internet
banking.
The said proviso has however been omitted with effect from 01.10.2014 and a new sub-
rule (1B) inserted in rule 8 to provide that every assessee shall electronically pay the
duty through internet banking. However, the Assistant/Deputy Commissioner of Central
Excise may for reasons to be recorded in writing, allow the assessee to deposit excise
duty by any mode other than internet banking.
Thus, under the amended provisions, e-payment of excise duty would be compulsory for
all assessees irrespective of the quantum of excise duty paid in the previous financial
year.
Example
GH Enterprises has paid excise duty of ` 85,900 in the financial year 2013-14. Its excise
duty liability for the month of October, 2014 is ` 23,200. GH Enterprises has availed SSI
exemption under Notification No. 8/2003 CE dated 01.03.2003 in the financial year 2013-
14 and 2014-15. What is the due date of payment of excise duty for GH Enterprises?
Answer
Prior to 01.10.2014, e-payment of excise duty was liked with the qantum of duty paid in
the preceding financial year – duty payment of ` 1,00,000 or more in the previous
financial year necessitated e-payment. However, with effect from 01.10.2014, every
assessee (including SSI units) has to electronically pay the duty through internet banking
without having any regard to the amount of excise duty paid during the preceding
financial year [Rule 8(1B) of Central Excise Rules, 2002].
Therefore, with effect from 01.10.2014, GH Enterprises will be required to deposit excise
duty through internet banking. In case of SSI units, excise duty is paid on quarterly basis
and the due date for e-payment for a quarter is 6th day of the month immediately

152
following the said quarter. Thus, due date of payment of excise duty for quarter October-
December, 2014 for GH Enterprises will be 6th January, 2015.
2. Default in payment of duty to attract a penalty of 1% per month or part thereof on the
unpaid duty [Rule 8(3A]
Earlier, under rule 8(3A), when the assessee defaulted in payment of duty beyond 30
days from due date, he had to pay duty for each consignment without utilizing CENVAT
credit till the whole duty along with interest was paid. In the event of any failure, goods
were deemed to be cleared without payment of duty thereby attracting confiscation and
penalty provisions under rule 25 of the CER.
Sub-rule (3A) of rule 8 has now been substituted with a new rule to provide that if the
assessee fails to pay the duty declared as payable by him in the return within a period of
1 month from the due date, then he would be liable to pay penalty @ 1% on such amount
of the duty not paid, for each month or part thereof calculated from the due date, for the
period during which such failure continues.
Here, “month” means the period between two consecutive due dates for payment of duty.
Example
Excise duty liability of ST Pvt. Ltd. for the month of October, 2014 is ` 12,36,000. It paid
the said duty along with applicable interest on 10.01.2015. Whether ST Pvt. Ltd. is liable
to any penal action? Explain.
Note: ST Pvt. Ltd. is not eligible for SSI exemption under Notification No. 8/2003 CE
dated 01.03.2003.
Answer
With effect from 01.10.2014, all assessees are mandatorily required to pay excise duty
through internet banking. In case of assessees not entitled to SSI exemption, duty is
paid on monthly basis and the due date for e-payment of excise duty of a month is 6th
day of the month immediately following the said month. Thus, ST Pvt. Ltd. should have
paid the excise duty liability for the month of October, 2014 by 06.11.2014. However, ST
Pvt. Ltd. defaulted in payment of duty and paid the same after a delay of more than two
months.
With effect from 11.07.2014, sub-rule (3A) of rule 8 of Central Excise Rules, 2002 has
been substituted with a new rule to provide that if the assessee fails to pay the duty
declared as payable by him in the return within a period of 1 month from the due date,
then he would be liable to pay penalty @ 1% on such amount of the duty not paid, for
each month or part thereof calculated from the due date, for the period during which such
failure continues. Here, “month” means the period between two consecutive due dates
for payment of duty.

153
Thus, ST Pvt. Ltd. would be liable to penalty @ 1% on ` 12,36,000 for 3 months [2 full
months till 06.01.2015 and part of a month till 10th January, 2015]. The penalty leviable
would be ` 37,080.
30.04.2014
1. Rule 12CCC of Central Excise Rules 2002 & Rule 12AAA of CENVAT Credit Rules,
2004 substituted with new rules-restriction to be imposed, facilities to be
withdrawn and procedure for the same amended
Rule 12CCC of the CER and 12AAA of the CENVAT Credit Rules, 2004 (hereinafter
referred to as CCR) empower the Central Government to provide for certain measures
including restrictions on a manufacturer, first stage dealer, second stage dealer and an
exporter and specify, by a notification in the Official Gazette, the nature of restrictions to
be imposed, types of facilities to be withdrawn and procedure for issuance of such order.
Rule 12CCC of the CER is invoked to prevent evasion of or default in payment of excise
duty while rule 12AAA of the CCR is invoked to prevent the misuse of the provisions of
CENVAT credit.
With effect from 21.03.2014, said rules [Rule 12CCC of the CER and rule 12AAA of the
CCR] have been substituted with new rules respectively. As per the new rules, only
Chief Commissioner of Central Excise can pass an order for imposing the restrictions on
manufacturer, first stage dealer, second stage dealer and exporter, and for withdrawing
the facilities provided to them. Earlier, any officer authorised by the Board was
empowered to pass such an order.
The aforesaid rules empower the Central Government to specify, by a notification in the
Official Gazette, the nature of restrictions, types of facilities to be withdrawn and
procedure for issue of such order. Earlier, in pursuance of this power, Notification No.
5/2012-CE(NT) dated 12.03.2012 had been issued. Now, the said notification has been
superseded by Notification No. 16/2014-C.E. (N.T.) dated 21.03.2014.
A comparison between the erstwhile notification and the new notification is
outlined as below:
Particulars Notification No. 5/2012 Notification No. 16/2014
1. Specified offences Same under both the notifications
2. Who is authorized to
order the withdrawal
of facilities &
imposition of
restrictions?
An officer authorized by
CBEC
Chief Commissioner of Central
Excise

154
3. Time period for
which restrictions
could be imposed on
the commission of
specified offences
Earlier, no time – limit was
prescribed for which
restrictions might be
imposed/ facilities might
be withdrawn for the
offences committed-
whether for the first time
or subsequently.
Restrictions
could be
imposed for a
period upto
for the
offence
committed
(i) 6 months for the first
time
(ii) 1 year subsequently
4. Restrictions that
could be imposed on
the commission of
specified offences
for second time or
subsequently
Earlier, in such case out
of all the specified
restrictions, following two
restrictions may not be
imposed:
(i) the assessee may
be required to maintain
records of receipt,
disposal, consumption
and inventory of the
principal inputs on which
CENVAT credit has not
been taken.
(ii) the assessee may
be required to intimate
the Superintendent of
Central Excise regarding
receipt of principal inputs
in the factory on which
CENVAT credit has or
has not been taken,
within a period specified
in the order and the said
inputs shall be made
available for verification
upto the period specified
in the order.
Any of the specified restrictions
may be imposed.
5. Monetary limit Same under both the notifications
6. Procedure Earlier, proposal to
withdraw the facilities and
impose restrictions was
forwarded by Commissioner
Now, proposal to withdraw the
facilities and impose
restrictions is to be forwarded
by CCE/ ADGCEI to Chief

155
of Central Excise
(CCE)/Additional Director
General of Central Excise
Intelligence (ADGCEI) to
Chief CCE/ DGCEI who,
after giving the defaulter an
opportunity of being heard,
might forward it to CBEC
along with its
recommendations.
Thereafter, an officer
authorized by CBEC might
pass the order withdrawing
facilities and imposing
restrictions for the period
specified in the order.
CCE who, after giving the
defaulter an opportunity of
being heard, would pass the
order withdrawing facilities and
imposing restrictions for the
period specified in the order.
[Notification Nos 14 to 16/2014-Central Excise (N.T.) all dated 21.03.2014]
2. Importer issuing CENVATable invoices now required to obtain registration
Hitherto, every person, who produces, manufactures, carries on trade, holds private
store-room or warehouse or otherwise uses excisable goods, was required to get
registration under central excise.
With effect from 01.04.2014, rule 9(1) of the CER has been amended to provide that an
importer who issues an invoice on which CENVAT credit can be taken is also required to
obtain such registration. Thus, such importer will have to obtain registration as a
‘registered importer’ with the central excise authorities to pass on the credit on the
imported goods.
Consequently, Form A [Application for Central Excise Registration] has also been
accordingly amended.
[Notification Nos. 8 & 10/2014 CE(NT) dated 28.02.2014]
3. Unregistered premises used solely for affixing lower ceiling prices on
pharmaceutical products to comply with DPCO, 2013 exempted from obtaining
central excise registration
Unregistered premises used solely for affixing a sticker/re-printing/re-labeling/re-packing
of pharmaceutical products falling under Chapter 30 of the Central Excise Tariff Act,
1985 with lower ceiling price to comply with the notifications issued under Drugs (Prices
Control) Order, 2013 have been exempted from obtaining registration under central
excise. However, the exemption from registration will be available subject to the

156
conditions specified in Notification No. 22/2013 CE dated 29.07.2013 exempting the
pharmaceutical products from payment of central excise duty.
Note: Ministry of Chemicals and Fertilizers (Department of Pharmaceuticals) issued the
new Drug Price Control Order (DPCO) on May 15, 2013 which required existing
manufacturers/traders, selling medicines at a price higher than the ceiling price fixed by
the Government to execute downward revision of prices. The Government mandated
that the prices of scheduled drugs be changed within 45 days from the date the price
notification came into force. For this purpose, the drugmakers had to re-print/re-label/re-
pack the medicines which had already been sent out of their factories at sites other than
the facilities registered under the Central Excise Act.
As pharmaceutical products falling under Heading 3004 of the Central Excise Tariff
(scheduled formulations) are included in the Third Schedule to the Central Excise Act,
1944, labeling or re-labeling of containers including the declaration or alteration of retail
sale price on it amounts to manufacture in terms of section 2(f)(iii) of the Central Excise
Act, 1944. So, as not to impose any duty liability that may arise on account of re-printing/
re-labeling/ re-packing mandated by the DPCO, the Central Government has exempted
scheduled formulations as defined under DPCO, 2013 which are subjected to re-
labelling, reprinting, repacking or stickering, in unregistered premises from payment of
excise duty.

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8
DEMAND ADJUDICATION AND OFFENCES
30.04.2014
Guidelines for arrest and bail under the Central Excise Act, 1944
In view of the amendments made in sections 9A, 20 and 21 of the Central Excise Act, 1944
vide the Finance Act, 2013, certain offences have been made cognizable and non-bailable.
The following significant guidelines have been issued by CBEC vide Circular No. 974/08/2013
CX dated 17.09.2013 with regard to implementation of arrest and bail provisions under the
amended central excise law:
(i) A person can be arrested for both bailable and non-bailable offences. Since arrest takes
away the liberty of an individual, the power must be exercised with utmost care and
caution and only when the exigencies of the situation demand arrest.
(ii) Decision to arrest needs to be taken on case-to-case basis considering various factors,
such as, nature & gravity of offence, quantum of duty evaded or credit wrongfully availed,
nature & quality of evidence, possibility of evidences being tampered with or witnesses
being influenced, cooperation with the investigation, etc. Thus, power to arrest has to be
exercised after careful consideration of the facts of the case and the above factors.
(iii) A person can be arrested for non-bailable offence only when the offence committed by
him is covered under clause (b) or clause (bbbb) of sub-section 9(1) and the duty
involvement exceeds ` 50 lakh. Any person arrested for offences under these clauses
should be informed of the grounds of arrest and produced before a magistrate without
unnecessary delay and within 24 hours of arrest.
(iv) In respect of the following non-bailable offences, decision to arrest may be taken by the
Commissioner:
(a) clandestine removal of manufactured goods;
(b) removal of goods without declaring the correct assessable value and receiving a
portion of sale price in cash which is in excess of invoice price and not accounted
for in the books of account;
(c) taking CENVAT credit without receiving the goods specified in the invoice;
(d) taking CENVAT credit on fake invoices;

158
(e) issuing Cenvatable invoices without delivering the goods specified in the said
invoice.
(v) In all other cases of cognizable and non-bailable offences, not referred above, the
decision to arrest shall be taken by the Commissioner only with the approval of the
jurisdictional Chief Commissioner. Examples of such cases are:
(a) removal of inputs as such, without reflecting such removal in records, on which
CENVAT credit has been taken, without payment of amount equal to the credit
availed on such inputs
(b) irregular and wrongful availment of benefit of central excise duty exemption by
reason of fraud, collusion, willful misstatement, suppression of facts, or
contravention of the provisions of the Act or the rules with intent to evade payment
of duty, etc.
(vi) Chief Commissioners/ Commissioners of Central Excise are required to ensure that
approval for arrest for non-bailable offence is granted only where the intent to evade duty
is evident and element of mens rea/guilty mind is palpable.
(vii) Any person arrested for non-cognizable and bailable offence shall have to be released on
bail, if he offers bail, and in case of default of bail, he is to be forwarded to the custody of
magistrate. In terms of Notification no 9/99-C.E.(N.T.) dated 10-2-99, an officer not
below the rank of Superintendent of Central Excise can exercise powers under section
21 including powers to grant bail.
(viii) Bail should be subject to the condition(s), as deemed fit, depending upon the facts and
circumstances of each individual case. It has to be ensured that the amount of bail bond/
surety should not be excessive and should be commensurate with the financial status of
the arrested person. Further the bail conditions should be informed by the arresting
officer in writing to the person arrested and also informed on telephone to the nominated
person of the person(s) arrested. Arrested person should be allowed to talk to the
nominated person.
(ix) If the conditions of the bail are fulfilled by the arrested person, he shall be released by
the officer concerned on bail.
(x) The arresting officer may, and shall if such a person is indigent and unable to furnish
surety, instead of taking bail, discharge him on executing a bond without sureties to his
appearance as provided under section 436 of Cr PC. However, in cases where the
conditions for granting bail are not fulfilled, the arrested person shall be produced before
the appropriate magistrate within 24 hours of arrest.
(xi) Only in the event of circumstances preventing the production of the person arrested
before a Magistrate without unnecessary delay, the arrested person may be handed over
to nearest Police Station for his safe custody during night, under proper Challan and
produced before the magistrate the next day. These provisions shall apply for non-
bailable offence also. The nominated person of the arrested person may also be
informed accordingly.

159
10
APPEALS
1. Discretionary powers of CESTAT to refuse admission of appeals enhanced from
` 50,000 to ` 2,00,000 [Section 35B]
Following amendments have been made in section 35B of Central Excise Act, 1944:
(i) Second proviso to section 35B(1) laid down that CESTAT may, in its discretion,
refuse to admit an appeal in respect of an order passed by the Commissioner
(Appeals) under section 35A where
(a) in any disputed case, (other than a case relating to the determination of rate of
duty or valuation of goods) the difference in duty involved or the duty involved;
or
(b) the amount of fine or penalty determined by such order,
does not exceed ` 50,000.
The second proviso to section 35B(1) has been amended to increase the
discretionary powers of the CESTAT to refuse admission of appeal from the existing
` 50,000 to ` 2,00,000.
(ii) Sub-section (1B) provided that the Central Board of Excise and Customs may
constitute such Committees as may be necessary for the purposes of the Act by
notification in the Official Gazette.
Sub-section (1B) has now been amended to substitute the words “by notification
in the official gazette” with the words “by order” so as to enable the Board to
constitute a Review Committee by way of an order instead of a notification.
Parallel amendments have been made in the Customs Act, 1962 in section 129A.
[Effective from 06.08.2014
2. Board empowered to condone delay upto 30 days for review by the Committee of
Chief Commissioners/Commissioner [Section 35E]
Section 35E(1) of Central Excise Act, 1944 empowers the Committee of Chief
Commissioners of Central Excise to review the orders passed by Commissioner of

160
Central Excise and pass an order directing such Commissioner or any other
Commissioner to apply to the Appellate Tribunal. Similarly, section 35E(2) empowers the
Commissioner of Central Excise to review the orders passed by the adjudicating authority
subordinate to him and pass an order directing such authority or any Central Excise
Officer subordinate to him to apply to the Commissioner (Appeals).
Sub-section (3) of section 35E provides that the order of Committee of Chief
Commissioners of Central Excise/ Commissioner of Central Excise directing the
adjudicating authority to apply to CESTAT/Commissioner (Appeals) shall be made within
a period of 3 months from the date of communication of the decision or order of the
adjudicating authority.
A proviso has been inserted in sub-section (3) of section 35E which lays down that the
Board may, on sufficient cause being shown, extend the said period by another 30 days.
Thus, the Board has now been vested with the powers to condone the delay of upto 30
days for review by the Committee of Chief Commissioners/Commissioner of the orders in
original passed by the adjudicating authority.
Parallel amendment has been made in the Customs Act, 1962 in section 129D.
3. Fixed pre-deposit of 7.5%/10% of duty or penalty mandatory for filing appeal before
Commissioner (Appeals) and CESTAT [Section 35F]
Position prior to 06.08.2014
Section 35F of Central Excise Act, 1944 mandated that an appeal could be filed before
Commissioner (Appeals) and/or CESTAT only when the duty demanded or the penalty
levied in the order being appealed against was deposited with the adjudicating authority.
However, Commissioner (Appeals) and CESTAT were empowered to waive off such pre-
deposit if the same caused undue hardship to the appellant. Due to this provision, the
appellants invariably opted to file an application seeking two reliefs namely:
(a) Waiver of the condition of pre-deposit; and
(b) Staying the recovery proceedings till appeal is disposed of
This provision had become a ball and chain for CESTAT keeping it from hearing and
disposing regular appeals and thus, adding to its pendency. The Finance Minister, while
presenting Union Budget 2014-15 in the Parliament, said that “To expedite the process of
disposal of appeals, amendments have been proposed in the Customs and Central
Excise Acts with a view to freeing appellate authorities from hearing stay applications
and to take up regular appeals for final disposal.”
Position with effect from 06.08.2014
Deposit of certain percentage of duty demanded or penalty imposed before filing
appeal - Section 35F

161
Section 35F of Central Excise Act, 1944 has been substituted with a new section to
provide as under:
(i) The Commissioner (Appeals) shall not entertain any appeal under section 35(1),
unless the appellant has deposited 7.5% of the duty, in case where duty or duty and
penalty are in dispute, or penalty, where such penalty is in dispute, in pursuance of
a decision or an order passed by an officer of Central Excise lower in rank than the
Commissioner of Central Excise;
(ii) The Tribunal shall not entertain any appeal against the decision or order passed by
Commissioner of Central Excise under section 35B(1)(a), unless the appellant has
deposited 7.5% of the duty, in case where duty or duty and penalty are in dispute,
or penalty, where such penalty is in dispute, in pursuance of the decision or order
appealed against;
(iii) The Tribunal shall not entertain any appeal against the decision or order passed by
Commissioner (Appeals) under section 35B(1)(b), unless the appellant has
deposited 10% of the duty, in case where duty or duty and penalty are in dispute, or
penalty, where such penalty is in dispute, in pursuance of the decision or order
appealed against:
(iv) The amount of pre-deposit shall not exceed ` 10 crores.
(v) Duty demanded shall include,—
(i) amount determined under section 11D;
(ii) amount of erroneous CENVAT credit taken;
(iii) amount payable under rule 6 of the CENVAT Credit Rules, 2004.
(vi) All pending appeals/stay applications filed prior to 06.08.2014 (the date of
enactment of the Finance (No. 2) Bill, 2014) shall be governed by the erstwhile
provisions.
Parallel amendments have been made in the Customs Act, 1962 in section 129E.
The provisions relating to making pre-deposits at first and second appellate stages are
summarized as under:
Stage of appeal Appellate
Authority
Quantum of pre-deposit
First Appeal Commissioner
(Appeals)
or
CESTAT
7.5% of the duty where only duty or both duty
and penalty are in dispute
OR
7.5% of the penalty where only penalty is in
dispute

162
Second Appeal CESTAT 10% of the duty where only duty or both duty
and penalty are in dispute
OR
10% of the penalty where only penalty is in
dispute
Points to be noted:
• Pre-deposit shall be computed as a percentage of only duty demanded even in
cases where dispute involves both duty demanded and penalty levied. Only when
penalty alone is in dispute, would the pre-deposit be computed on the basis of
penalty.
• As against the erstwhile scheme of section 35F, new section 35F does not include
interest payable within the ambit of duty demanded. Thus, pre-deposit of 7.5%/10%
would exclude interest, if any, payable on the duty demanded.
• By virtue of section 83 of Finance Act, 1994, this provision would apply to service tax
also.
• It has been clarified by CBEC vide its Letter DOF No. 334/15/2014 TRU dated
10.07.2014 that another 10% of the duty or penalty is to be paid at the time of filing
second appeal before CESTAT.
The objective of substituting section 35F is to do away with the practice of filing stay
applications with CESTAT. Therefore, following additional amendments have been made
in Central Excise Act, 1944 as offshoots of new section 35F:
(i) First, second and third provisos of section 35C(2A) which empowered CESTAT to
pass stay orders and grant extension thereof have been omitted by Finance (No. 2)
Act, 2014.
(ii) Sub-section (7) of section 35B has been amended to omit the reference to words
‘grant of stay’. Sub-section (7) prescribes the fee to be paid while making an
application before the Appellate Tribunal.
Parallel amendments have been made in the Customs Act, 1962 in section 129B(2A) and
129A(7).
CBEC has issued Circular No. 984/08/2014 CX dated 16.09.2014 which clarifies the
following:
Quantum of pre-deposit
• Where an appeal is made against the order of Commissioner (Appeals) before the
Tribunal, 10% is to be paid on the amount of duty demanded or penalty imposed by

163
the Commissioner (Appeals). This amount may or may not be same as the amount
of duty demanded or penalty imposed in the Order-in-Original in the said case.
• Where penalty alone is in dispute and penalties have been imposed under different
provisions of the Act, pre-deposit would be calculated based on the aggregate of all
penalties imposed in the order sought to be appealed against.
Payments made during investigation
• Payment made during the course of investigation or audit, prior to the date on which
appeal is filed, to the extent of 7.5% or 10% (subject to a limit of ` 10 crore), will be
considered as payments towards pre-deposit for filing the appeals.
• Date of filing of appeal will be deemed to be the date of deposit of such payments.
Recovery of the amounts during the pendency of appeal
• In respect of appeals filed on or after 06.08.2014, no coercive measures for the
recovery of balance amounts of demands of tax and penalties can be taken if the
party/ assessee shows the proof of payment of pre-deposit (7.5% / 10%) and the
copy of appeal memo.
• Recovery can be initiated only after the disposal of the case by the Commissioner
(Appeals)/Tribunal in favour of the Department unless order of Commissioner
(Appeals) or CESTAT is stayed by authority/higher court. The amount to be
recovered will include interest calculated from the date duty became payable till the
date of payment.
Refund of Pre-Deposit
• Refund of pre-deposit is not refund of duty and hence the same will not be governed by
provisions of section 11B of Central Excise Act/section 27 of Customs Act, 1962.
Therefore, once the appeal is decided in favour of the assessee, he can apply for refund
of pre-deposit.
• Refund of pre-deposit along with interest will have to be made within 15 days of receipt
of the letter of the appellant seeking refund, irrespective of whether order of the
appellate authority is proposed to be challenged by the Department or not.
• Refund of pre-deposit should not be withheld on the ground that Department is
proposing to file an appeal or has filed an appeal against the order granting relief to the
party.
• In the event of a remand, refund of the pre-deposit shall be payable along with interest.
Example
In an order dated 20.08.2014 issued to M/s. GH & Sons, the Joint Commissioner of
Central Excise has confirmed a duty demand of ` 10,50,000 and imposed a penalty of
equal amount under section 11AC of the Central Excise Act, 1944 plus a penalty of
` 2,50,000 under rule 26 of Central Excise Rules, 2002. M/s GH & Sons intends to file

164
an appeal with the Commissioner (Appeals) against the said adjudication order.
Compute the quantum of pre-deposit required to be made by M/s. GH & Sons for filing
the appeal with the Commissioner (Appeals).
Answer
With effect from 06.08.2014, section 35F of Central Excise Act, 1944 has been
substituted with a new section to provide, inter alia, that an appeal cannot be filed with
the Commissioner (Appeals) unless the appellant has deposited 7.5% of the duty, in
case where duty or duty and penalty are in dispute, or penalty, where such penalty
is in dispute, in pursuance of a decision or an order passed by an officer of Central
Excise lower in rank than the Commissioner of Central Excise. The amount of such pre-
deposite, however, will not exceed ` 10 crores.
In the given case, though both duty and penalty are in dispute, quantum of pre-deposit
will be 7.5% of only the disputed duty amount i.e., 7.5% of ` 10,50,000 which is
` 78,750.
Example
In the above example, what would be the quantum of pre-deposit if the adjudication order
imposed only the penalties under section 11AC of the Central Excise Act, 1944 and rule
26 of Central Excise Rules, 2002 (no duty is demanded)?
Answer
As per section 35F of Central Excise Act, 1944, 7.5% of the penalty has to be paid as
pre-deposit where such penalty only is in dispute for filing an appeal with the
Commissioner (Appeals).
Further, Circular No. 984/08/2014 CX dated 16.09.2014 issued by CBEC has clarified
that where penalty alone is in dispute and penalties have been imposed under different
provisions of the Act, pre-deposit would be calculated based on the aggregate of all
penalties imposed in the order sought to be appealed against.
Thus, in the given case, quantum of pre-deposit will be 7.5% of ` 13,00,000 [` 10,50,000
under section 11AC plus ` 2,50,000 under rule 26] which is ` 97,500.
Example
In an order dated 30.08.2014 issued to M/s. JK & Sons, the Commissioner of Central
Excise has confirmed a duty demand of ` 50,50,000 and imposed a penalty of equal
amount under section 11AC of the Central Excise Act, 1944 plus a penalty of ` 5,50,000
under rule 26 of Central Excise Rules, 2002. M/s JK & Sons intends to file an appeal
with the CESTAT against the said adjudication order. Compute the quantum of pre-
deposit required to be made by M/s. JK & Sons for filing the appeal with the CESTAT.

165
Answer
With effect from 06.08.2014, section 35F of Central Excise Act, 1944 has been
substituted with a new section to provide, inter alia, that an appeal cannot be filed with
CESTAT against an order passed by the Commissioner of Central Excise unless the
appellant has deposited 7.5% of the duty, in case where duty or duty and penalty are
in dispute, or penalty, where such penalty is in dispute, in pursuance of the decision
or order appealed against. The amount of such pre-deposite, however, will not exceed
` 10 crores.
In the given case, though both duty and penalty are in dispute, quantum of pre-deposit
will be 7.5% of only the disputed duty amount i.e., 7.5% of ` 50,50,000 which is
` 3,78,750.
4. Interest on delayed refund of amount deposited under section 35F (pre-deposit)
[Section 35FF]
Section 35FF of Central Excise Act, 1944 which provides for interest on delayed refund
of pre-deposit has been substituted with a new section. Under the earlier provisions,
interest @ 6% p.a. (as notified under section 11BB) was payable on the refund of pre-
deposit after three months from the date of communication of the order of the appellate
authority till the date of refund of such amount. Thus, no interest was payable during the
period the appeal was heard and disposed off.
However, new section 35FF provides for payment of interest on the refund of such pre-
deposit from the date of its payment to the date of refund. Also, the rate of interest would
be anywhere between 5% to 36% and would be notified separately. In effect, the rate of
interest on delayed refund of pre-deposit has been de-linked from the interest payable on
delayed refund of duty under section 11BB of Central Excise Act, 1944.
However, interest on delayed refund of pre-deposit made prior to 06.08.2014 will
continue to be governed by the erstwhile provisions of section 35FF.
Notification No. 24/2014 CE (NT) dated 12.08.2014 has been issued to specify 6% as the
rate of interest payable on delayed refund of pre-deposit.
Parallel amendments have been made in the Customs Act, 1962 in section 129EE.
Notification No. 70/2014 Cus (NT) dated 12.08.2014 has been issued to specify 6% as
the rate of interest payable on delayed refund of pre-deposit under customs laws.
Example
Continuing the facts in the above example, M/s. JK & Sons deposits the required amount of
pre-deposit on 10.09.2014 and files an appeal with CESTAT. CESTAT decides the appeal in
favour of M/s. JK & Sons on 10.11.2014. M/s. JK & Sons submits a letter seeking refund of
the pre-deposit on 30.11.2014. The pre-deposit is refunded to M/s JK & Sons on 15.12.2014.
Compute the amount of interest payable on refund of such pre-deposit, if any.

166
Answer
With effect from 06.08.2014, section 35FF of Central Excise Act, 1944 which provides for
interest on delayed refund of pre-deposit has been substituted with a new section. The
substituted section 35FF provides for payment of interest @ 6% per annum on the refund
of such pre-deposit from the date of its payment to the date of refund.
Thus, interest payable on refund of pre-deposit of ` 3,78,750 will be ` 5977 (rounded off)
[` 3,78,750 x 6% x 96/365].
5. Determination of taxability or excisability of goods is determination of a question
having a relation to rate of duty [Section 35L]
Under section 35L of Central Excise Act, 1944, an appeal lies to the Supreme Court from
inter alia any order passed by the Appellate Tribunal relating, among other things, to the
determination of any question having a relation to the rate of duty of excise or to the
value of goods for purposes of assessment.
Sub-section (2) has been inserted in section 35L to clarify that for the purposes of this
Chapter, the determination of any question having a relation to the rate of duty shall
include the determination of taxability or excisability of goods for the purpose of
assessment. Therefore, appeal against orders of Tribunal in such matters would lie
before the Supreme Court.
Recently, the High Court also ruled on the similar lines in the case of Commissioner of
Service Tax v. Ernst & Young Pvt. Ltd. 2014 (34) S.T.R. 3 (Del.). In this case, Delhi High
Court held that question of chargeability or levy of service tax on a particular activity
would be covered within the term “determination of any question relating to rate of duty
(for service tax) or value (of service) for the purpose of assessment”. Section 35L is
applicable in case of service tax also vide section 83 of the Finance Act, 1994.
Therefore, if the order of Tribunal relates to such issues, the appeal would lie to Supreme
Court and not to High Court. The above clarificatory amendment conforms to the stand
taken by the Delhi High Court.
6. Non-fling of appeal against a particular order on account of monetary limits to be
considered by Commissioner (Appeals) also [Section 35R]
The erstwhile section 35R(4) of Central Excise Act, 1944 provided that the Appellate
Tribunal or Court hearing an appeal, application, revision or reference shall have regard
to the circumstances under which appeal, application, revision or reference was not filed
by the Central Excise Officer in pursuance of the orders or instructions or directions
issued in relation to fixing of monetary limits for regulating the filing of appeals by Central
Excise Officers.

167
Sub-section (4) of section 35R has been amended to enable Commissioner (Appeals)
also [apart from CESTAT and Court] to take into consideration the fact that a particular
order being cited as a precedent decision on the issue has not been appealed against for
reasons of low amount.
Parallel amendment has been made in the Customs Act, 1962 in section 131BA.

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12
WAREHOUSING
30.04.2014
1. Facility of removal without payment of duty extended to excisable goods stored
and sold from Duty Free Shops at International Airports
The facility of removal without payment of duty provided under rule 20(1) of CER has
been extended to all excisable goods intended for storage in godown/retail outlet of a
Duty Free Shop in the Departure Hall/Arrival Hall of International Airport,
appointed/licensed as ‘warehouse’ under sections 57 or 58 of the Customs Act, 1962 and
for sale therefrom, against foreign exchange to passengers going out of India or to the
passengers or members of crew arriving from abroad. The facility will be subject to
specified limitations, conditions and safeguards
[Notification No. 07/2013 CE (NT) dated 23.05.2013].
Consequently, godown or retail outlets of the above-mentioned Duty Free Shops will be
deemed to be registered as a warehouse under rule 9 of CER [Notification No. 09/2013
CE (NT) dated 23.05.2013].
CBEC, vide Circular No. 970/04/2013-CX dated 23.05.2013 has specified conditions,
limitations, safeguards and procedures for removal of such excisable goods to
godowns/retail outlets of Duty Free Shops to which warehousing provisions have been
extended vide Notification No. 07/2013 CE (NT) dated 23.05.2013.
Note: Hitherto only foreign goods were sold in Duty Free Shops (DFS) located in the
International Airports. A passenger going abroad or coming from a foreign country could
buy foreign goods without customs duty and the incoming passenger could clear those
goods without duty within his available limits as per the baggage rules.
The Central Government has now allowed excise duty-free sale of goods manufactured
in India to international passengers or crew arriving from abroad at the DFS located in
the arrival halls of international airports. Such exemption from excise duty is subject to
limitations, conditions and safeguards as may be specified by the CBEC. Therefore, now
a passenger arriving from abroad shall have the choice to buy either duty-free imported
goods or duty-free indigenous goods within his overall permissible baggage allowance.

169
2. Extension of warehousing and acceptance of Letter of undertaking in place of Bank
Guarantee for export warehousing
Circular No. 976/10/2013-CX dated 12.12.2013 has made following amendments in
Circular No. 579/16/2001-CX. dated 26-6-2001 and Circular No. 581/18/2001-CX dated
29-6-2001 which prescribe conditions, procedures and safeguards applicable for storage
in a warehouse registered at such places as may be specified by the Board and export
therefrom regarding all excisable goods specified in the First Schedule to the Central
Excise Tariff Act, 1985:
S.No. Basis Circular No. 579/16/2001 Circular No. 976/10/2013
1. Period of
warehousing
Any goods warehoused
may be left in the
warehouse in which they
are deposited, or in any
warehouse to which such
goods have been
removed, till the expiry of
3 years from the date on
which such goods were
first warehoused.
• Warehousing of goods shall
initially be allowed for a
period upto 6 months, which
may be further extended by
Assistant/ Deputy
Commissioner, each
extension being for a period
not exceeding 6 months,
subject to verification that the
goods have not deteriorated
in quality.
• The maximum period, for
which goods may be left in
the warehouse in which they
are deposited, or in any
warehouse to which such
goods have been removed,
shall be three years from the
date on which such goods
were first warehoused.
• Excisable goods shall be
deemed to be cleared for
home consumption on expiry
of warehousing period
including extensions granted,
if any.
• Duty and interest @ 24% per
annum shall be charged on
such deemed removal.
2. Revocation/
suspension
The excisable goods
lodged therein shall either
The excisable goods lodged
therein shall either be cleared for

170
of
warehouse
registration
be cleared for home
consumption on payment
of duty or be removed to
another warehouse
without payment of duty.
home consumption on payment of
duty and interest @ 24% per
annum or shall be removed to
another warehouse without
payment of duty.
S.No. Basis Circular No. 581/18/2001 Circular No. 976/10/2013
3. Requirement
to furnish
security
equal to
25% of the
Bond
amount
An exporter is required to
furnish security equal to
25% of the Bond amount
for availing the facility of
export warehousing.
Now, where exporter is a
manufacturer and a Status Holder
with a clean track record,
requirement to furnish security
equal to 25% of bond amount shall
be replaced by the requirement of
furnishing an LUT initially for a
period upto 6 months which may
be extended by a further period not
exceeding 6 months.
Further, extensions in the warehousing
period as provided in point 1. above
shall be allowed to such exporter only
on furnishing security of 25% of the
bond amount.

171
15
ADVANCE RULING
Benefit of advance ruling extended to resident private limited companies [Section
23A(c)(iii)]
Earlier, public sector companies and resident public limited companies were notified under
section 23A(c)(iii) of Central Excise Act, 1944 as the class or category of resident persons
who can apply for advance ruling in case of specified matters relating to central excise duty.
Notification No.18/2014 CE (NT) dated 11.07.2014 has expanded the scope of advance
ruling by additionally notifying resident private limited companies as class or category of
residents who can apply for advance ruling in case of specified matters relating to central
excise duty.
Meaning of important terms
(i) Private limited company shall have the same meaning as is assigned to “private
company” in clause (68) of section 2 of the Companies Act, 2013.
As per section 2(68) of Companies Act, 2013, “private company means a company having a
minimum paid-up share capital of ` 1,00,000 or such higher paid-up share capital as may be
prescribed, and which by its articles,-
(i) restricts the right to transfer its shares;
(ii) except in case of One Person Company, limits the number of its members to 200:
Provided that where two or more persons hold one or more shares in a company jointly, they
shall, for the purposes of this clause, be treated as a single member.
Provided further that-
(A) persons who are in the employment of the company; and
(B) persons who, having been formerly in the employment of the company, were members of
the company while in that employment and have continued to be members after the
employment ceased,
shall not be included in the number of members; and
(iii) prohibits any invitation to the public to subscribe for any securities of the company.

172
(ii) Resident shall have the same meaning as is assigned to it in section 2(42) read with
section 6(3) of the Income-tax Act, 1961.
Parallel amendment has been made in advance ruling provisions under customs law vide
Notification No.51/2014 Cus (NT) dated 11.07.2014.

173
16
ORGANISATION STRUCTURE OF THE EXCISE
DEPARTMENT
Two additional designations introduced in departmental administration structure
[Section 2(b)]
Definition of ‘Central Excise Officer’ as contained in section 2(b) of the Central Excise Act has
been amended to include new designations of Principal Chief Commissioner and Principal
Commissioner of Central Excise. Therefore, now the hierarchy of the Central Excise
Officers would be as under:
Principal Chief Commissioner of Central Excise
Chief Commissioner of Central Excise
Principal Commissioner of Central Excise
Commissioner of Central Excise
Pursuant thereto, any reference in the Central Excise Act, 1944 or Chapter V of Finance Act,
1994 (Service Tax Law) to a Chief Commissioner of Central Excise or a Commissioner of
Central Excise may also include a reference to the Principal Chief Commissioner of Central
Excise or the Principal Commissioner of Central Excise respectively.
Parallel amendments have been made in the Customs Act, 1962 in section 3 and
consequently any reference in the Customs Act, 1962 to a Chief Commissioner of Customs or
a Commissioner of Customs may also include a reference to the Principal Chief Commissioner
of Customs or the Principal Commissioner of Customs respectively.

174
18
SETTLEMENT COMMISSION
1. Customs and Central Excise Settlement Commission rechristened as Customs,
Central Excise and Service Tax Settlement Commission [Sections 31(g) and 32(1)]
Settlement Commission started settling service tax cases since 28.05.2012 consequent
to the enactment of the Finance Bill, 2012. [Section 83 of Finance Act, 1994 was
amended to give effect to this change]. Resultantly, section 31(g) and section 32(1) of
Central Excise Act, 1944 have been amended to change the name of the “Customs and
Central Excise Settlement Commission” to “Customs, Central Excise and Service
Tax Settlement Commission”. Section 31(g) defines Settlement Commission and
section 32 contains the provisions relating to constitution of Settlement Commission.
Parallel amendment has been made in the Customs Act, 1962 in section 127A.
2. Cases involving non-filing of returns eligible for settlement [Section 32E]
Following amendments have been made in section 32E of Central Excise Act, 1944:
(i) Clause (a) of first proviso to sub-section (1) lays down that an applicant who has not
filed returns showing production, clearance and central excise duty paid in the
prescribed manner cannot file an application for settlement.
However, second proviso to sub-section (1) has been amended to provide that if
Settlement Commission is satisfied that circumstances exist for not filing the
returns, it may allow the applicant to make an application for settlement after
recording reasons for the same. Thus, Settlement Commission has been granted
discretion to allow such applications after recording reasons therefor.
(ii) Finance Act, 2011 omitted section 11AB and substituted new section 11AA to
prescribe the provisions relating to interest on delayed payment of duty. However,
clause (d) of first proviso to sub-section (1) of section 32E continued to refer to the
non-existent section 11AB. This has been set right by substituting the said
reference by section 11AA.

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