Circular No. 766/82/2003-CX
15^th December, 2003

F.No.201/45/2003-CX.6
Government of India
Ministry of Finance
Department of Revenue
Central Board of Excise & Customs

Subject:   Default in monthly payment of duty- Action to recover the dues -regarding

            I am directed to state that instances have come to the notice of the Board that even after the completion of one month period from the due date where the amount of duty outstanding and the interest payable thereon are not paid within the due date, immediate necessary action as per law to recover such arrears is not taken by the field officers.  It has also been represented to Board by Trade and Industry that in the event, the duty is not being paid by the manufacturer of the goods, the availment of credit by the user-manufacturer is being denied.  

2.         The matter has been examined.  It may be seen that as per Rule 8 of Central Excise Rules, 2002, the excise duty on the goods removed during a month shall be paid by the 5^th day of the following month (by 15^th in case of  units in small scale sector).  If the assessee fails to pay the amount of duty on goods removed within the due date, he is liable to pay the outstanding amount along with interest.  Under second proviso to rule 8(3), till such time the amount of duty outstanding and the interest payable thereon are not paid, it shall be deemed that the goods in question have been cleared without payment of duty and where such duty and interest are not paid within a period of one month within due date, the consequences and the penalties as provided in the said rules shall follow. 

3.         Therefore, after the completion of one month paid from the due date, the amount of duty outstanding and the interest payable thereon should be treated as “recoverable arrears of revenue” and all permissible action under the law including the action under section 11 of the Central Excise Act, 1944 and under section 142 of the Customs Act, 1962 should be taken.  Specific provision under rule 8 (4) is provided for application of Section 11 of the Central Excise Act, 1944  for recovery of the duty assessed under rule 6 and interest payable thereon. 

4.         Such amounts are required to be accounted for and reported as “realizable arrears of revenue” in the relevant statement.  As action under section 11 can be taken without issuance of Show Cause Notice, prompt action should be taken to recover the arrears. 

5.         On the issue of availment of credit by the user-manufacturer, it is clarified that action against the consignee to reverse/ recover the CENVAT Credit availed of in such cases need not be resorted to as long as the bonafide nature of the consignee’s transaction is not in dispute. 

6.         In case the manufacturer-supplier has received payment from the buyer (including the amount shown as duty of excise) i.e., the person taking CENVAT Credit has made payment of the invoice amount, action should also be taken against the manufacturer-supplier under section 11D and 11DD of the Central Excise Act, 1944. 

7.         In order to ensure proper monitoring of such recoveries and taking up time bound action against the defaulters, range Superintendents should be asked to maintain a separate register and identify and record the cases of default, immediately on receipt of ER-1/ ER-3 returns.  The divisional Deputy/ Assistant Commissioner should check the register regularly minimum once in two months period. 

8.         Field formations may suitably be informed. 

9.         Receipt of this Circular may be acknowledged.  

10.       Hindi version will follow.

Vijay Mohan Jain
Under Secretary to the Government of India