payment of duty under protest, Central Excise

[felix ka]

 I have the following queries:

1. When an assessee is not sure of his duty liability, he can opt to pay excise duty under protest. Correct? the uncertainty is due to the lack of clarity in the 'deemed manufacture' as per CETA.
2. In such a situation, can we collect excise duty from our customers (product buyers) but still pay excise duty under protest?
3. Can we take CENVAT Credit of the duty paid under protest?

Posts / Replies

[Pradeep Khatri]

Replies to your queries:-

1. You may opt for payment of Central Excise Duty under protest but such intention should be intimation to the concerned authority in writing well in advance. Invoices, GAR-7 Challans and Returns should be marked with the phrase that duties are being under protest.
2. Yes, you may collect the duties from your customers and pay excise duty under protest subject to reply no. 1.
3. if you or your customer avail the benefit of cenvat credit on the duty which is being paid under protest then in the event of winning the case you would not be able to file the refund claim since you or your customs as the case may be had already been availed the CENVAT credit.  Further, if the case has not been adjudicated in your favour then if any deferential duty is required to be paid then you would not be able to avail the CENVAT credit of that particular deferential amount.  It would be deposited in the Consumer Welfare Fund.

[raj kumar shukla]

I agree with what has been stated above with a slight modification that in such cases asessee has two options .He can opt either for provisional Assessment or pay duty under protest.In provisional assessment, payment of duty can be made on lower side after execution of bond.After finalisation of dispute ,in case assessee looses the case differential with interest can be paid .If assessee wishes to pay on higher side, it should be under protest.

[NEERAJ KUMAR, RANCHI]

I request the learned experts to explain the provision under which  duty under protest can be deposited. If duty has been collected from the customers , I am sceptic about payment of duty under protest in such situation and its implications. kindly explain a little more the provisions.

[felix ka]

may I add one more query to the words of Neeraj Sir? if a SCN is not issued on the assessee and he is doubtful of the duty liability (modification in the budget), can he opt for 'payment under protest?

[raj kumar shukla]

pl see chapter 13 para3 of c.b.e.c supplementary instructions on the subject. pl also see proviso to Section 11B of Central Excise Act, 1944 whch contains reference to duty payment under protest.

payment of duty under protest has nothing to do with collctions from customers.if asessee wins thecase, hemay not be able to get refund in case it has been collected from customers and the same willbe tranferred to consumer welfare fund.

[Jayant Kuvelkar]

Neeraj Kumar is spot on, when he wants to know the provisions. Unlike the earlier rules, neither the present excise rules nor CBEC excise manual contains any rules/procedure for payment of duty under protest. So adopting of any such methods will not stand to legal test in the matters such as claiming of refund,etc. And in any case, if you are not going to get refund as has been stated in the first reply, what is the purpose of paying the duty under protest?

[raj kumar shukla]

since section 11B still contains reference to payment under protest, it would be incorrect to say it does not have any legal footing.Anyway  fruitful purpose of payment of duty under protest was not the issue here hence not replied. other wise also earlier rule 233B also laid down only procedures and refund was only govered by section 11B. I admit PRESENTLY there is no parallel to rule 233B.

[NEERAJ KUMAR, RANCHI]

I agree that in Section 11B it is mentioned that the limitation of one year shall not apply where any duty has been paid under protest.

But my point  is if duty has not been demanded by the department how duty can be paid under protest,. Under whose protest duty is to be deposited. whether such duty under protest has any legal validity.

[raj kumar shukla]

if there is any dispute regarding duty and the deparment and assessee  are at variance and the department feels higher duty is payable by the manufacturer but the assessee feels otherwise,he can pay the duty under protest ,in the meantime,and dispute the claim of the department on the higher fora.it may or may not be tranferred to buyers.if it is not transferred to the buyers,the assessee can claim refund in case he is successful in the litigation.

2. it will be a protest lodged by the person liable to pay /paying duty to the govt

[felix ka]

our dilemma lies in the fact that there is no judicial precedent in our case to decide whether we are liable to pay duty or not. Also, if we are liable, we can not delay the payment (till an OIO), since the interest and penalty can be crores. if no protest is raised, and we are not liable, how the undue payment can be justified.

is there any other option ? What we can do?

[raj kumar shukla]

Refer my first reply on the issue

[felix ka]

dear Raj Kumar Shuklaji,

An assessee can opt 'provisional assessment' when he is unable to quantify the duty liability or uncertain about the rate. correct? Is that option possible when the assessee is unable to decide whether the product is dutiable or not?

we are thinking of the 'payment under protest" option since if liable, interest penalty, etc can be avoided.If not liable 'refund' will be permitted. whether such step will amount to accepting the duty liability?  

[raj kumar shukla]

payment of duty under protest iiself indicates that you are disputing the issue and not accepting it lying down.Such payment is followed by your formal protest on the issue i.e by filing appealor otherwise

[Radha Arun]

Mr Felix, it appears that you are not sure of the excise liability. In such a situation one can choose to pay or not to pay the duty. In the choice not to pay, there is the risk of allegations of evasion at a later date. To obviate this, one can write to the department explaining one's stand, so that there is no 'suppression of fact'. One's exposure then remains limited to one year's duty.  One has to evaluate one's chances and the strength of one's case before deciding on this exposure.

If one chooses to pay, under protest, then there is no refund if collected from the customer. This option is suitable if the market can take the higher price, or if the excess duty is neutralised as Cenvat credit to the customer. Also, the customer has the option of filing for refund.