Powers of Central Excise Department

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[font=""trebuchet ms""]Visit and Inspection by Central Excise Officers

As per rule 22(1) of Central Excise Rules, an officer empowered by Commissioner shall have access to any premises registered under CE Rules for purpose of carrying out any scrutiny, verification and checks as may be necessary to safeguard the interest of revenue. All officers in the rank of Inspector and above are authorised for this purpose. All officers of rank of an Inspector and above have been authorised under rule 22(1) within their jurisdiction. [/font]

They should be in uniform or carry their identity card. The officers should carry their identity cards and should produce them[color=black] [/color][size=2 RURH8=""0"" pB8Q6=""0""]on demand[size=2 RURH8=""0"" pB8Q6=""0""]. The officers can check the records and verify the stock under these rules. Under rule 22(2) of CE Rules; the assessee is required to produce account books and returns (whether maintained under Central Excise rules or otherwise) for scrutiny of excise officers or audit purposes. The inspection can be done of registered premises only.

Visit Book of Excise Officers - Each factory is required to maintain a visit book in prescribed form. Inspector and Superintendent visiting the factory are required to fill in the book. The visit book should contain name and address of the factory, excisable items manufactured, Central Excise Commissionerate, division and range at the top. - [CBE&C Circular No 3/90-CX dated 24-1-1990].

Restricted visits to SSI Units - Excise Officers and departmental audit parties can visit small scale industries (SSI units) for specific purposes only and on specific written permission of Assistant / Deputy Commissioner. Assessee can ask for the written permission. The visiting officer should make entry in visit book. However, these restrictions are not applicable to visits of audit parties of Comptroller and Auditor General of India (CAG). This audit, called CERA audit (Central Revenue Audit), is under Constitutional authority and hence obviously, their powers cannot be curtailed by any executive instructions.

Power to Stop conveyance, search and seize

Excise officers are empowered under Rule 23 of Central Excise Rules [earlier rules 199] to search any conveyance carrying excisable goods in respect of which he has reason to believe that the goods are being carried with the intention of evading duty.

Power to detain or seize the goods ΓÇô If Central Excise Officer has reason to believe that any goods, which are liable to excise duty but no duty is paid thereon or the said goods are removed with intention of evading the duty payable theron, the Central Excise Officer may detain or seize the goods - Rule 24 of Central Excise Rules [earlier rule 200].

Vehicle carrying the goods can also be seized under section 110 of Customs Act as made applicable to Excise.

For a registered premises or for stopping and searching any conveyance in transit, no search warrant is required. - Chapter 17 Part I Para 2.3 of CBE&CΓÇÖs CE Manual, 2001. [Visit to registered premises is permissible, but search without warrant ?]

Powers to search premises and arrest a person are discussed later in this chapter.

Power to Summons

Section 14 of CEA authorises Excise officers to issue summons. The term 'summons' means asking a person to appear before the named authority and give evidence and produce documents or other things. Person summoned is bound to attend and state the truth upon any subject respecting which they are examined. [section 14(2) of CEA - similar section 108(3) of customs Act]. The enquiry are ΓÇÿjudicial proceedingsΓÇÖ.

Exceptions u/ss 132 and 133 of CPC (Code of Civil Procedure) are applicable to requisitions for attendance under this section.

Excise Officers of Superintendent and above rank are empowered to issue summons - Notification 9/99 - CE (NT) dated 10-2-1999.

These power of 'summons' are different than powers of Courts to issue summons under CPC or CrPC. The power of 'summons' to investigating officer only means ΓÇÿdemand presence ofΓÇÖ or ΓÇÿcall upon a person to appearΓÇÖ. The investigation officer cannot administer oath to person being interrogated.

As per section 174 of Indian Penal Code, non-attendance in obedience of an order from public servant is an offense punishable with imprisonment upto 6 months and fine upto Rs 1,000/-

Summons for documents should specify the documents called - Summons for producing documents should specify which documents are required. Authority issuing summons should apply his mind with regard to necessity to obtain and examine documents mentioned in the order. - Barium Chemicals v. A J Rana - AIR 1972 SC 591 - in this case, summons was set aside on ground of vagueness. All documents pertaining to appellant were called, which were in custody of Registrar of Court and also those which had no bearing on the matter.

Provisions regarding taking a statement - Statement can be recorded during such enquiry. It should be recorded before a Gazetted Officer. (Superintendent is the lowest rank of Gazetted Officer in excise department. Inspector is not a Gazetted Officer). Such statement can be used against the person during any legal proceedings. Statement should be signed by the person - Amba Lal v. UOI AIR 1961 SC 264 = 1984(13) ELT 1321 (SC). The statement should be in writing and signed by the maker, as it safeguards interests of the maker as well as department and eliminates the possibility of making a complaint subsequently that the statement was not correctly recorded by the authorities - C Sampath Kumar v. Enforcement Officer 1997(6) SCALE 140 = 1997(96) ELT 511 = (1998) 92 Comp Cas 313 (SC).

Statement should be voluntary - Excise officer cannot compel a person to give incriminating statement without reasonable, fair and just procedure. Statement should be voluntary and not under threat. However, a warning that giving false evidence will attract penalty under section 193 of Indian Penal Code does not amount to threat and that provision is made in the statute itself.

No right to advocateΓÇÖs presence -  In Poolpandi v. Superintendent, C Ex, [ (1992) 62 Taxman 447 = AIR 1992 SC 1795 = 1992 (1) SCALE 1114 = 1992 (60) ELT 24 (SC) = (1992) 75 Comp. Cas. 504 = (1992) 3 SCC 259 = JT 1992 (4) SC 119 = (1992) 3 SCR 247 = 1992 AIR SCW 2012 (SC 3 member bench) it has been held that person being interrogated is not an accused nor can he plead that there is a possibility of his being made an accused in future. Hence, he has no right to ask for his AdvocateΓÇÖs presence during the enquiry. Interrogating officer may permit presence of advocate, but even in such case, the advocate cannot interrupt the investigations. (This decision is applicable in all matters under Customs Act, FEMA, Income-tax etc.) - followed in Prakash Kumar v. UOI - (1996) 83 ELT 45 (Ker HC DB).

Power to arrest

An excise officer not below the rank of Inspector, to arrest a person whom they have ΓÇÿreason to believeΓÇÖ to be liable to be punished under provisions of the Act. Such arrest can be only with prior approval of Commissioner of Central Excise. [section 13]. - - There is no specific provision that the approval letter should be shown to the person being arrested.

In case of customs, as per section 104 of Customs Act, an officer of customs who has been empowered by Commissioner of Customs by general or special order, can arrest a person whom they have ΓÇÿreason to believeΓÇÖ to be liable to be punished under section 135 - i.e. for evasion of duty or importing prohibited goods or dealing in goods liable to confiscation.

Forward to magistrate or Police custody - The person arrested has to be forwarded to the Central Excise officer who is empowered to send the arrested person to a Magistrate. If such empowered excise officer is not available within reasonable distance, the person may be sent to Officer-in-Charge of nearest Police Station [section 19 of CEA]. Superintendent of CE has been empowered for this purpose.

Arrested person must be produced before Judicial Magistrate within 24 hours of arrest. Power to grant bail is normally exercised by a Judicial Magistrate.

Granting a 'Bail' - 'Bail' means a 'security for prisoner's appearance, on giving which, he is released pending trial'. If offence is 'bailable', grant of bail is automatic and can be given by police officer in charge of police station or by Court, on bond or without bond. Court has no discretion in the matter. In case of non-bailable offence, accused can be released on bail, unless the offence is punishable with death or imprisonment for life. Court has discretion whether to release on bail or not, in respect of non-bailable offences.

The basic rule is in favour of granting a bail, except where the course of justice being affected, gravity or heinous of the crime, risk of nonappearance at the trial, influencing or intimidation of witnesses and similar other possibilities exist - State of Rajasthan v. Balchand AIR 1977 SC 2447. - similar views in State of Delhi v. Jaspal Singh AIR 1984 SC 1503.

Enquiry after arrest - The Excise Officer can also make enquiry after arrest (section 21 of CEA). The procedures as prescribed under Criminal Procedure Code have to be followed after the arrest.

Offences non-cognizable - Offences under section 9 of CEA are non-cognizable. As per section 155 of Criminal Procedure Code, a police officer cannot investigate a non-cognizable case without the order of a Magistrate. A police officer cannot arrest a person who has committed a non cognizable offence, without a warrant, as per section2(1) of Code of Criminal Procedure.

Powers of Search

Search and seizure are coercive measures designed to be enforced forcibly against persons unwilling to be subjected to these operations.

Some provisions of Customs Act applicable - Section 12 of CEA authorises Central Government to apply provisions of Customs Act regarding levy, [url=https://www.firstappeal.com/edit_post.php#][font=""trebuchet ms""][color=blue]exemption[/color][/font][/url][font=""trebuchet ms""], drawback, warehousing, offences, penalties, confiscation and procedure relating to offences and appeal to Central Excise, making suitable modifications and alterations to adapt them to circumstances. Under these powers, notification dated 4th May, 1963 has been issued making some provisions of Customs Act applicable to Central Excise subject to some modifications. These are (a) section 105(1) - Powers of search (b) section 110 - seizure of goods, documents and things (c) section 115 - confiscation of conveyances (d) section 118(a) - confiscation of packages containing goods (e) section 119 - confiscation of goods used for concealing goods (f) section 120 - confiscation of goods even if form changes (g) section 121 - confiscation of sale proceeds of contravening goods (h) section 124 - issue of show cause notice before confiscation of goods (i) section 142(1)(b) - Recovery of duty (j) section 150 - procedure for sale of goods.

Search as per CrPC - Section 18 of CEA provides that all searches and seizures must be as per provisions of Code of Criminal Procedure. Under section 165 of CrPC, the requirements are : (a) The officer making investigation should have reason to

believe that anything necessary for investigation may be found in a place within his jurisdiction (b) such thing cannot be otherwise obtained without undue delay (c) grounds of such belief should be recorded in writing and specifying the things for which search is to be made (d) the officer should search himself, if practicable or require any officer subordinate to him to make the search (e) authority to subordinate officer should be in writing, specifying the place to be searched and things for which search is to be made (f) copy of record made should be sent to Magistrate and should be furnished to the owner or occupier of the place searched, if he applies for the copies. The copies should be supplied free of cost.

Power to Search - Under section 105 of Customs Act (as modified to Excise), Assistant / Deputy Commissioner of Central Excise, who has reasons to believe that any goods liable to confiscation or any document or thing relevant to any proceeding under CEA are secreted in any place, can authorise any Central Excise Officer upto rank of Inspector to search or he may himself search for such goods, documents or things ( in common discussions ΓÇÿsearchΓÇÖ is called ΓÇÿraidΓÇÖ ). Such authority will be by way of a search warrant signed by him under his seal. However, in urgent necessity, search can be carried out without a search warrant. Search warrant should be shown to the person in charge of the premises and his signature should be obtained. Search warrant should indicate the place to be searched, but name of person need not be mentioned as the search warrant is in respect of place and not person.

Search before magistrate or gazetted officer - In case of search of a person under Customs Act, Narcotics Act, COFEPOSA etc., if the person requires, the search should be before a gazetted officer or magistrate. However, this provision has not been made applicable to searches under Central Excise Act.

Vexatious search - Section 22 of CEA provides that in case of vexatious search and seizure, the officer is punishable upto Rs. 2,000/-. Vexatious search means (a) searching without any reasonable ground (b) unnecessarily detaining, searching or arresting a person (c) unnecessarily seizing any movable property (d) committing injury to a person without reason. The wordings are such that this charge is almost impossible to prove.

Any person giving false information causing such search or arrest is also punishable with fine upto Rs. 2,000 and imprisonment upto two years or both.

Powers of Seizure

If, during search, some goods are found, which are liable for confiscation, the same can be seized by excise officers. Seizure means to take possession of goods in pursuance of demand under legal right. Seizure is only taking goods in custody or detention. Ownership of goods remains with the owner even after seizure and he can get the goods released under bond. [Confiscation means the goods become property of Central Government].

Seizure under the Act - Vide section 110 of Customs Act, as made applicable to Central Excise, Excise Officer is empowered to seize the goods if he has reasons to believe that such goods are liable for confiscation under Central Excises Act, 1944. Vehicle carrying the contraband goods can also be seized. Goods can be seized by officer of rank of Superintendent and above.

List of seized goods must be prepared. These should be signed by independent witnesses (called panch in Hindi. The document prepared after seizure is called panchanama). Copy of panchanama must be handed over on the spot to the person from whom goods were seized.

Seized goods should be carried away and handed over to Police Station. If police station does not have enough space, these can be kept in the custody of officer of Central Excise department. If they are bulky, they can be kept in possession of the owner himself on obtaining guarantee from him regarding safe custody. In such cases, at least 4 samples should be taken.

Seizure of heavy goods - If it is not practicable to seize the goods, excise officer can order that the goods should not be removed or dealt with; without previous permission of the officer.

Detention and seizure - Detention and seizure are not same. Detained goods can be released without any formality after excise officer is satisfied that goods are not contraband. The release can be made by Superintendent also. However, after goods are seized, these can be released only after following proper procedure. Goods can be seized even if they are bulky. In such cases, the seized goods, instead of physically carrying to excise custody, are handed over and kept in the possession of the owner for safe custody, by way of a ΓÇÿsupurta-namaΓÇÖ. After the goods are seized and handed over to the owner for safe custody, he cannot deal with them without permission of Excise officer.

Provisional Release of seized goods - Seized goods and vehicles can be released by the excise officer on such conditions as he may deem fit. Normally [/font][url=https://www.firstappeal.com/edit_post.php#][font=""trebuchet ms""][color=blue]cash[/color][/font][/url][font=""trebuchet ms""] security of about 25% of value of goods may be asked for release of goods under bond. However, this percentage can vary widely depending on gravity of offence. Bond in form B-4 (earlier B-11) should be executed. Bond amount is to be decided by adjudicating authority, while bond can be accepted by Superintendent. Vehicle can be released by Assistant / Deputy Commissioner while goods can be released on bond by the Adjudicating Authority (depending on value - it may be Assistant / Deputy Commissioner, Additional Commissioner or Commissioner).

In case of conveyance, as per departmental instructions, bond amount should be equal to estimated value of vehicle and [/font][url=https://www.firstappeal.com/edit_post.php#][font=""trebuchet ms""][color=blue]security[/color][/font][/url][font=""trebuchet ms""] deposit will depend on gravity of offence. Department has clarified that u/s 112 of Customs Act, penalty can be heavy. Hence, security deposit should depend upon gravity of the offence. - MF(DR) letter No. 591/40/98-Cus (AS) dated 1-9-1999.

Return goods within 6 months if no SCN - If goods are felt to be liable for confiscation, a show cause notice has to be served giving him grounds for confiscation, asking his representation and giving him opportunity of personal hearing as per section 124 of Customs Act, as made applicable to Central Excise. Vide section 110(2) of Customs Act, as made applicable to excise, if no show cause notice is issued within six months, the goods shall be returned to person from whose possession they were seized. This period can be further extended by six months on sufficient cause, by Commissioner of Central Excise. Since the words used are ΓÇÿshall be returnedΓÇÖ, it has been held that it is a mandatory requirement. The owner of goods gets a civil right and goods must be returned even if no [/font][url=https://www.firstappeal.com/edit_post.php#][font=""trebuchet ms""][color=blue]application[/color][/font][/url][font=""trebuchet ms""] is made. In Overseas Paints Linkers v. UOI 2001(127) ELT 42 (All HC DB), it was held that notice must be given i.e. ΓÇÿservedΓÇÖ. Mere ΓÇÿissueΓÇÖ of notice is not enough. If not so served, goods must be returned, unless time is extended by Commissioner.

This period of 6 months can be further extended by six months on sufficient cause by Commissioner of Customs.

Departmental Adjudication

Excise authorities are empowered to determine classification, valuation, refund claims and the [/font][url=https://www.firstappeal.com/edit_post.php#][font=""trebuchet ms""][color=blue]tax[/color][/font][/url][font=""trebuchet ms""]/duty payable. They are also empowered to grant various permissions under rules and impose fines, penalties, etc. This is called ΓÇ£departmental adjudicationΓÇ¥. Adjudicate means to hear or try and decide judicially and adjudication means giving a decision.

These are 'quasi judicial authorities' and they are not bound by any trade notice or instructions of superiors.

Uncontrolled authority may cause great damage to an assessee and hence opportunity of appeal against the order has been provided. The topmost authority of departmental appeal is ΓÇ£TribunalΓÇ¥ in excise and customs. The decision of the Tribunal is final as far as the departmental remedy of appeal is concerned. Provisions are available for appeal/reference to High Court/Supreme Court in limited cases. Needless to mention, writ jurisdiction of High Court and Supreme Court is independent of any provision/s of the Excise Act and Writ Petition can be filed in High Court/SLP in Supreme Court irrespective of any provision of Excise Act.

Principles of Natural justice - The adjudicating authorities are quasi judicial authorities. [Quasi means 'not exactly', 'almost' or 'as if it were']. Adjudication is a quasi-judicial process and principles of natural justice must be followed. Section 11A for recovery of duty specifically provide for issue of show cause notice and considering representation of assessee. Even otherwise, principles of natural justice (giving show cause notice indicating charges against him and proofs available, giving personal hearing, giving reasoned order, same person who heard the matter should pass the order etc.), must be followed unless they are specifically excluded in relevant Act. These principles have been discussed in a separate chapter.

Summary of Original Jurisdictions - Departmental authorities have original adjudication powers as briefed below : [refer - [/font][url=https://www.firstappeal.com/edit_post.php#][color=blue][font=""trebuchet ms""]Chapter 13[/font][/color][/url][font=""trebuchet ms""] Part II Para 2 of CBE&CΓÇÖs CE Manual, 2001. ΓÇô earlier MF(DR) circular No 299/15/97-CX dated 27.2.1997 as amended vide circular No 328/44/97-CX dated 13.8.1997]

Superintendent of Central Excise - Remission of duty for loss of goods if duty involved is up to Rs. 1,000/-. [The only power with his is to  issue frivolous show cause notices to assessee and cause the assessee lot of harassment, costs and troubles. This nuisance value is still with him].

Deputy/Assistant Commissioner of Central Excise - (a) Refund claims, permissions under various rules (b) If amount of duty involved is upto Rs. 2,00,000/- and demand is for less than one year where there is no allegation of fraud, suppression of facts etc. (c) Demand of duty or differential duty without any ceiling on amount when the show cause notice is raised within one year, for demand of duty on account of determination of valuation and / or classification, when no issue of suppression of facts or intention to evade duty is involved (d) Demands on account of Cenvat disputes without any limit on amount if demand raised within one year and no issue of suppression of facts or intention to evade duty or collusion is involved [vide CBE&C circular No. 592/29/2001-CX dated 19.10.2001] (e) Remission of duty for loss of goods if duty involved is upto Rs. 2,500/-. [Note : The demand can be adjudicated by Assistant / Deputy Commissioner only if it is raised within one year of relevant date].

Joint Commissioner of Central Excise - (a) Demand raised within One year, if amount of duty involved is above 2 lakhs and upto Rs. 20,00,000/-, when no issue of suppression of facts or intention to evade duty is involved and show cause notice is issued within One year ΓÇô same limit in case of customs ΓÇô CBE&C circular No. 87/2002-Cus dated 17-12-2002 (b) If amount of duty involved or Cenvat [/font][url=https://www.firstappeal.com/edit_post.php#][font=""trebuchet ms""][color=blue]credit[/color][/font][/url][font=""trebuchet ms""] involved is upto Rs. 10,00,000 (if the demand pertains to fraud, suppression of facts, wilful misstatement etc., where notice can be issued within a period of five years) ΓÇô same limit in case of customs ΓÇô CBE&C circular No. 87/2002-Cus dated 17-12-2002 (c) cases relating to export under bond or under claim of [/font][url=https://www.firstappeal.com/edit_post.php#][font=""trebuchet ms""][color=blue]rebate[/color][/font][/url][font=""trebuchet ms""] - without upper monetary limit - presumably the SCN has to be issued within One year (d) Remission of duty for loss of goods if duty involved is upto Rs. 5,000.

Additional Commissioner of Central Excise - (a) If amount of duty involved or Cenvat credit involved is upto Rs. 20,00,000/- (the demand may pertain to fraud, suppression of facts, wilful misstatement etc. or the demand may be without any such allegation) - (Same limit in customs cases - CBE&C circular No 87/2002-Cus dated 17-12-2002) (b) cases relating to export under bond or under claim of rebate - without upper monetary limit - Board Circular No. 13/93-CX.6 dated 15.10.93 (c) remission of duty for loss of goods if duty involved is upto Rs. 5,000.

Commissioner of Central Excise - (a) Demand of duty or differential duty or demand Cenvat credit of any amount (without upper limit) when the demand is raised within a period of one year and there is no allegation of suppression of facts, fraud etc. (b) Demand of duty or differential duty or demand Cenvat credit of any amount (without upper limit) when the demand is raised beyond a period of one year but within five years for suppression of facts, fraud etc. (c) remission of duty for loss of goods without any limit in respect of duty involved.

 [Note - It has been clarified that value of goods/conveyance, plants, machinery, land, building etc. liable to confiscation will not alter the powers of adjudication as the powers solely depend upon the amount of duty/Cenvat credit involved on the offending goods].

Adjudication powers in customs ΓÇô Adjudication powers in case of Customs Act are specified in section 122 of Customs Act.

Different cases of same assessee involving same issue - If there are simultaneously different cases of the same noticee involving the same issue, all such cases will be adjudicated by an officer competent to decide the cases where duty involved is of highest amount. - CBE&C circular No 362/78/97-CX dated 9.12.97 - similar TN 162/97 dated 31.12.97 of Pune Commissionerate. [i.e. only highest amount in all Show Cause Notices will be considered and not the total amount of all notices].

Area Jurisdiction of Officers - In case of seizure of goods, case will be adjudicated by officer in whose jurisdiction the offence is committed (i.e. where the goods were actually manufactured) and not where the goods were seized (during [url=https://www.firstappeal.com/edit_post.php#][color=blue]raid[/color][/url] or road checking). Officer in whose jurisdiction goods were seized will have jurisdiction only when the manufacturer is not traceable or cannot be identified. It may be noted that authority granted to an officer can be exercised by any officer above that grade.

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