Tax Law Update

Coverage of this Article

1. MANDATORY PAYMENT OF DUTY BASED ON PRODUCTION CAPACITY- FOR PAN MASAL AND GUTKA
- On 01.07.2008, the Government came out with an notification making it mandatory to pay duty on Pan Masala and Gutka based on production capacity, i.e. number of packaging machines. Earlier the scheme was optional.

2. PROVISIONAL ATTACHMENT OF PROPERTY
- In the year 2006, Section 11DDA in Central Excise Act, Section 28BA in Customs Act and Section 73C in the Finance Act, 1994.

1. MANDATORY PAYMENT OF DUTY BASED ON PRODUCTION CAPACITY- FOR PAN MASAL AND GUTKA:

On 01.07.2008, the Government came out with an notification making it mandatory to pay duty on Pan Masala and Gutka based on production capacity, i.e. number of packaging machines. Earlier the scheme was optional.

In the scheme the duty is required to paid before 5^th of the current month (for July, duty is to be paid before 15^th ). The manufacturers are required to file a declaration as prescribed and after payment of duty required to inform the Range Superintendent by 10^th of Month.

The scheme appears to be illegal and may not stand the judicial scrutiny as the government is trying to overrule the legal provisions by issuance of a notification. The notification implies that duty is required to be paid even if there is no manufacture- thus the duty has become a duty on machine, rather than being a duty on manufacture.

2. PROVISIONAL ATTACHMENT OF PROPERTY

In the year 2006, Section 11DDA in Central Excise Act, Section 28BA in Customs Act and Section 73C in the Finance Act, 1994 (for Service Tax) was added providing for attachment of property pending adjudication in the Central Excise, Customs and Service Tax.

The provisions were not used in the intervening period.

However, it appears that the Government is now serious in implementing the provisions. Circular No. 874/12/2008-CX dated 30.06.2008 was issued in Central Excise, Circular No. 10/2008 dated 30.06.2008 in Customs, Circular No. 103/06/2008-ST dated 01.07.2008 in Service Tax and Notification No. 30/2008-Service Tax dated 01.07.2008 have been issued.

The net effect of these provisions is that the Government can attach property pending adjudication of Show Cause Notice.

The Board has instructed that such provision should be applied in case where the duty demand is more than 25 lakhs.

The proposal of attachment will be prepared by the Assistant/Deputy Commissioner and will be forwarded to the Commissioner- who has been empowered to order attachment of property.

Considering the fact that so many frivolous notices are issued by the department, we feel that these provisions are additional weapon in the hand of the department to harass assessee.