Classification of goods- Payment of Central Excise

[Binu Karuthedath]

Dear Sir

Department is raised SCN regarding the classification of the product. Now Assessee is paying Central Excise duty @6 % on MRP under chapter 30 . But department view is the product is covered under chapter 33 @12.5% BCD .Can we pay the difference duty as 'under protest' to avoid the future liability .Pls explain the what are the procedure to pay the duty and How we can file ER1 return.

[MUKUND THAKKAR]

please raised your querry in details.

your product name and chapter head , sub heading etc..

[Rajagopalan Ranganathan]

Sir,

You have classified the product as P or P Medicines under Chapter 30 of CETA, 1985 whereas the Department contends that it is classifiable as Cosmetics under Chapter 33 of CETA, 1985. Therefore you have to find out what are the reasons for Department's stand and then only we can give suitable advice to you.

[Suryanarayana Sathineni]

You have to first of all get yourself confirmed whether the product manufactured and cleared on payment of duty @ 6% is a medicament or a cosmetic. Based on which you have to take a call about the payment of differential duty. If you are confident that it is a medicament, you need to reply the department with all technical information in support ou your claim that your product is a medicament.

Regards

Surya

[Ganeshan Kalyani]

Technical and quality department in your organisation will help you to understand what the product exactly is and based on that you can arrive at to clarify them under correct heading. If you are correct reply the department about your stand and prove them that they are incorrect. Otherwise you will have to take an appropriate call. Thanks.

[Binu Karuthedath]

Sir

Thanks for the reply .

Based on the SCN, the first appeal has been confirmed the 12% and we have to file appeal .My query is

1) can i collect and pay the Excise Duty on higher Rate ie 12 % to avoid the future liability

2) What is the procedure to pay the Duty Under protest scheme

3) Can i collect the 12 % duty with out changing the existing HSN code under Chapter 30

[Ganeshan Kalyani]

Sir, it is at your discretion whether to pay at higher rate or not. If you are very sure about your classification then you should continue what you are doing now. Thanks.

[KASTURI SETHI]

Sh.Binu Karuthedath Ji,

Point-wise reply is as under:-

1. Yes.

2. You can pay Central Excise duty under protest under erstwhile Rule 233 B of Central Excise Rules, 2001. There is no corresponding Rule of erstwhile Rule 233 B but there is saving Section 38 A of Central Excise Act, 1944. Go through language of Section 38 A read with Sections 131 & 132 of Finance Act, 2001(14 of 2001).(inserted w.e.f. 11.5.2001). So Rule 233 B is legally valid for payment of duty under protest. You are required to intimate the jurisdictional Range Officer (in writing) by giving the complete details/facts/reasons for payment of duty under protest. Letter to be sent to the R.O. should be properly acknowledged with date and sign and stamp of the Range Officer. Pl. ensure that the letter must be entered in the records (Receipt Register of R.O.) and have entry no of receipt register of Range Office. It is an absolutely must. You can win the case at any stage. If you pay duty under protest there will be no sword of time-bar limit for claiming refund.You must also mention the remarks, "DUTY PAID UNDER PROTEST" on the invoice.

3. You can collect duty from your buyer at higher rate. You must also mention changed classification of Chapter 33 on the invoice. The remarks, "Under Protest" will rescue everywhere. Pl. be aware that if you collect duty from buyer and if you win case at any stage, you will not get refund of duty paid in excess. It will be hit by the principles of unjust enrichment and credited into the Consumer Welfare Fund, Govt. of India under Section 12 C of Central Excise Act. Normally cases of classification travel from CESTAT to Supreme Court and it consumes a considerable period. It may take 5 or 10 years. If the department loses the case in CESTAT, the matter will travel to the Supreme Court. So be prepared for that and ponder over pros. and cons. of the case deeply.

4. By paying duty at higher rate under protest you can save interest and penalty in the event of losing case. After all later on you cannot recover the amount of interest and penalty from your buyers.

Last but not the least for the time being follow the instructions of the department as you have lost the case at the first stage.

Decision is yours.

[Binu Karuthedath]

Dear KASTURI SETHI Sir

Thanks for your reply . Your reply is very helpful to guide the Assessee

AI Summary

Classification of goods: pay higher excise duty under protest to avert interest and preserve challenge to classification. The assessee may pay central excise duty under protest to avoid interest and penalty while contesting classification; they must notify the jurisdictional range officer in writing with full facts, obtain an acknowledged receipt entry, and mark invoices 'DUTY PAID UNDER PROTEST.' Collecting higher duty from buyers is permitted but, if the assessee later prevails, excess collected may not be refundable and can be treated as unjust enrichment credited to the Consumer Welfare Fund.