CBEC issues clarification regarding mandatory pre …

1 EY Tax AlertCBEC issues clarification regarding mandatory pre-depositprovisions17 September2014 Tax Alerts coversignificant tax news,developments andchanges in legislationthat affect Indianbusinesses. They actas technical summariesto keep you on top ofthe latest tax more information,please contact your summaryProvisions relating to mandatory pre-deposit payments as a pre-requisite forfiling first stage and second level appeals under Customs, central excise andService tax were introduced in the Finance Act ( ), 2014 effective from thedate of its enactment 6 August Tax alert gives an update on the Circular No. 984/ 08/2014-CX dated 16 September 2014 issued by the central Board of excise and Customs (CBEC)clarifying various issues raised by trade bodies, industry associations and fieldformations relating to payment of mandatory pre-deposit at appellate circular addresses issues such as the quantum of pre-deposit, adjustment ofpayment made during investigation, recovery proceedings, refund of pre-depositand also provides for certain modalities to be followed by the tax payer as alsothe adjudicating authority in this The Finance Act ( ), 2014 amendedSection 35f of central excise act , 1944to include mandatory pre-depositprovisions.

2 As per the said provisions,appeal against an order passed by thelower authorities will not be entertainedunless the appellant has made a pre-deposit of in case of first stageappeal and 10% in case of second stageappeal, of the duty, where duty or dutyand penalty are in dispute, or penalty,where penalty is in dispute. Similar provision for mandatory pre-deposit was introduced in the Customslegislation by the Finance Act ( ),2014 by amendment of Section 129E ofthe Customs Act, 1962. The provisions of Section 35 of theCentral excise Act, 1944 are also madeapplicable to Service tax. The amended provisions would apply toappeals filed after 6 August 2014 thedate of enactment of the Finance Act( ), 2014. Amendments have also been made toprovide for the refund of pre-depositalong with interest at the prescribedrates 6% as has been notifiedvidenotifications dated 12 August 2014.

3 CBEC clarifies the following issuesrelating to mandatory pre-depositsvideCircular No. 984/ 08/2014-CX dated 16 September 2014:CBEC ClarificationsQuantum of pre-deposit: In the event of filing an appeal before theTribunal, against the order ofCommissioner (Appeals), the pre-depositof 10% is to be paid on the amount ofduty demanded or penalty imposed bythe Commissioner (Appeals). Where penalty alone is in dispute andpenalties have been imposed underdifferent provisions of the Act, the pre-deposit shall be calculated on theaggregate of all penalties against whichappeal is to be filed. The appeal filed will be rejected in theevent of short payment or non-paymentof the pre-deposit made during investigation: Payment made during the course ofinvestigation or audit, prior to the date offiling of appeal, to the extent of or10%, subject to the limit of INR 10crores, can be considered towards thepayment of pre-deposit required to bemade.

4 Shortfall, if any, shall be paidbefore filing of the appeal. Amounts paid over and above thestipulated pre-deposit shall not betreated as deposit under Section 35F /Section 129E. Since the amount paid duringinvestigation or audit shall be treated asdeposit under Section 35F / Section129E only on filing of the appeal, thedate of filing of appeal shall be deemedto be the date of deposit of of amounts during pendency ofappeals: The circular issued by CBEC dated 1 January 20131 with regard to recoveryof the amounts due to the Governmentduring the pendency of stay applicationsor appeals with the appellate authority,would not apply to cases where appeal isfiled after the enactment of the amendedSection 35F / Section 129E. Coercive measures for recovery of thebalance amount (in excess of or10% as deposited) shall not be taken ifthe assessee furnishes to thejurisdictional authorities, the proof ofpayment of the pre-deposit along with acopy of the appeal memo filed with theappellate No.

5 967/1/2013 dated 1 Janaury 2013 The recovery action can be initiated onlyafter the disposal of the case by theappellate authorities in favour of theRevenue, unless such recovery is recovery action can be made for thebalance amount along with of pre-deposit: The assessee shall be entitled to claimrefund of the amount deposited alongwith interest, calculated at theprescribed rate from the date of makingthe deposit to the date of refund, whenthe appeal is decided in favour of theassessee. It has been clarified that refund of pre-deposit shall not be subject to theprocess for refund of duty since the pre-deposit for filing appeal does not amountto payment of duty. Hence, where the appeal is decided infavour of the assessee, refund along withinterest should be paid to the assesseewithin 15 days of the receipt of the letterfrom the assessee for seeking refund.

6 The amount of refund with interestshould be granted irrespective ofwhether the decision is proposed to bechallenged by the Revenue. In the event of a remand, pre-depositshall be refunded along with for making pre- deposits : Pre-deposit may be made by use of e-payment facility. The assessee shall be required to submita self-attested copy of the proof ofpayment of pre-deposit. For filing appeal before Commissioner(Appeals), the pre-deposit amount maybe shown in the appeal forms underdetails of duty / penalty deposited. For filing appeals before the Tribunal, thepre-deposit amount may be shown in theappeals form under the details ofpayment of duty, fine, penalty, interestalong with the challan. It shall be verifiedby the appellate authorities beforeregistering the appeal. A copy of the appeal memo along withproof of deposit made shall be filed withthe jurisdictional for refund: Refund claim can be made by way of aletter addressed to the specifiedauthorities, along with a self-attestedcopy of the order in appeal / CESTAT order and attested copy of the proof ofpayment of such to Preamble of orders.

7 The adjudicated authorities and appellateauthorities have been advised toincorporate a sentence highlighting thenew provisions relating to mandatorypre-deposit in the Preamble of the ordersissued to the assessees, in order to makethe new provisions known to Circular brings in the requisiteclarity on the provisions relating tomandatory pre-deposit, especially onthe quantum of deposit, adjustmentof amount paid during investigationand recovery concern of the tax payer onrecovery proceedings despite pre-deposit payment has been with reference to theGovernment s commitment to refundthe amount of pre-deposit within 15days of the refund application,notwithstanding that the Departmentmay prefer further appeal, is awelcome officesAhmedabad2nd floor, Shivalik IshaanNear. VidhyalayaAmbawadi,Ahmedabad 380 015 Tel: + 91 79 6608 3800 Fax: + 91 79 6608 3900 Bengaluru6th , 12th & 13th floor U B City Canberra , Vittal Mallya RoadBengaluru 560 001 Tel: + 91 80 4027 5000+ 91 80 6727 5000 Fax: + 91 80 2210 6000 + 91 80 2224 0695 Prestige Emerald, No.

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