Issuance of SCN based on Best judgement under Central Excise provisions

[Rajesh Kumar]

Please let me know the right provisions under which SCN can be issued under central excise when party did not submit documents/figures asked by the department. Can Department issue SCN based on Best judgement method ? What will be the method of calculation ?

[Rajagopalan Ranganathan]

Sir,

Under Central Excise, if the assessee did not produce the requisite documents to deter mine his duty liability, the officer can issue the SCN after quantifying the duty amount based on records available with him. He can also used reasonable means to arrive at the duty liability. However since the SCN is issued on the basis of records available the assessee will have an opportunity to contest the notice and he can furnish the correct duty liability according to his calculation. While furnishing the reply to SCN the assessee has furnish the documents relied upon to arrive at the duty liability. However if summons were issued for producing the documents and if the assessee fails to do so he can be prosecuted under IPC.

[KASTURI SETHI]

Earlier Show cause Notice could be issued on basis of the best judgement in terms of Rule 7 of Central Excise (Valuation) Rules, 1975 which is extracted below :Rule 7 :

"If the value of excisable goods cannot be determined under the foregoing rules, the proper officer shall determine the value of such goods according to the best of his judgment, and for this purpose he may have regard, among other things, to any one or more of the methods provided for in the foregoing rules."

These valuation rules were superseded by Central Excise (Determination of price of excisable goods) Rules, 2000 vide Notification No.45/2000-CE (NT) dated 30.6.2000 as amended. These new rules had no provision of 'Best Judgement Assessment'.

However, it is worthwhile to go through Chapter 3 Part IV Para No.3.1 of CBE & C's Central Excise Manual of Supplementary Instructions, 2005 which extracted below :

" -------------- Where the assessee fails to provide records or information and the department is unable to issue demand , best judgement method may be used to raise demand on collateral evidence. Burden to prove information for re-determination of duty is on assessee."

[Rajesh Kumar]

Sir, is there any provision in central excise rules/act to issue a SCN with best judgement assessment like section 72 for Service tax matters ? Secondly, is it possible that an officer can issue SCN of Central Excise with invoking Service tax provisions like Section 72 ?

[KASTURI SETHI]

Q. Is there any provision in central excise rules/act to issue a SCN with best judgement assessment like section 72 for Service tax matters ?

Ans. De facto, your question is not proper. You should not forget that the department has so many legal means to issue SCN. You can not refuse to supply any information which the department has reason to believe that you possess. See Rule 22 (3) of Central Excise Rules, 2002. I also endorse the views of Sh.Ranganathan, Sir.

Q Is it possible that an officer can issue SCN of Central Excise with invoking Service tax provisions like Section 72 ?

Ans. NO. In terms of Section 83 of the Finance Act, 1994 as amended, some Sections of Central Excise Act were made applicable to Service Tax law and NOT vice versa.

[Himansu Sekhar]

Please go through this:

Part-IV

Provisional assessment

CBEC's Central Excise Manual

Initiation of Provisional Assessment by Department

3.1 Rule 7 of the said Rules does not provide for the Department, suo moto, issuing directions for resorting to provisional assessment. Therefore, when the Central Excise Officers, during scrutiny or otherwise, find that self-assessment in not in order the assessee may be asked for all necessary document, records or other information for issue of duty demand for differential duty, if any, after conducting inquiry. Where the assessee fails to provide the records or information and Department is unable to issue demand, ‘Best Judgement’ method may be used to raise demand based on collateral evidences. The burden will be on the assessee to provide information for appropriate re-determination of duty,

[Himansu Sekhar]

SwCN can be issued under Section 11A readith Section 4 and Rule 11 of the valuation Rules,2000, Rule 4,6,8,10,11,12 of the Central Excise Rules,2002

[KASTURI SETHI]

Yes. SCN can be issued on the basis of whatever records are available with the department. Records are available with Range Office, Division Office (Technical Branch), Preventive Branch of Head Office. Moreover, the department has vast powers to extract information from the books of accounts and other records of the party by visiting the units. The department has also power to procure any formation from Income Tax Department and various department of Central Govt and State Govts. Needless to say different department of Central Govt. and State Govts. co-operate each other to obtain information pertaining to any party.

AI Summary

Best judgement assessment: Department may issue SCN based on available records when assessee fails to produce documents.
Where an assessee fails to provide records, the department may quantify duty and issue an SCN using available records, reasonable means or collateral evidence under valuation and excise procedural rules; the burden to prove correct duty for re-determination lies with the assessee, and failure to comply with summons may invite prosecution under general penal law.