6.1 The provisions of sections 11A relating to the recovery of duty not levied, short levied, not paid, short paid or erroneously refunded have been redrafted with a view to improve the sequence in which provisions occur and simplify their language. Each sub-section consists of one sentence and conveys a single point. As far as possible, active voice has been used and provisos have been eliminated. In terms of content, the following important amendments have been proposed in this section:  

(i) A separate category has been carved out from cases involving extended period of limitation (fraud, collusion, willful mis-statement etc.) wherein a lower mandatory penalty of 50% of the duty (rather than 100% of the duty) would apply. These would cover cases where it is noticed during an audit, investigation or verification that duty has not been levied, short levied, not paid or short paid or erroneously refunded but the transactions to which such duty relates are entered in the specified records.  

(ii) While a provision has been made for issuance of show cause notice invoking the extended period for recovery of duty with interest under section 11AC and penalty equivalent to 50% of the duty, it has also been specifically provided that even in cases where show cause notice has been issued involving extended period of limitation (fraud, collusion, willful mis-statement etc.) with penalty equal to the duty, the penalty can be remitted to 50% if the Central Excise officer is of the opinion that the details of the transactions in respect of which the demand notice has been issued have been duly recorded by the person charged with duty in the specified records.  

(iii) The provisions of the existing sub-section (1A) of section 11 have been omitted. The facility of compounding the penalty amount has been confined only to the new category and if the person chargeable with duty (for an extended period) pays the duty in full or part along with interest before the issuance of a show cause notice, the penalty shall stand reduced to 1% per month but not exceeding 25% of the duty. However if the duty alongwith interest is paid within thirty days of the issuance of adjudication order, the penalty would be 25% of the duty.  

6.2 The provisions of sections 11AA and 11AB have been merged into a revised section 11AA. Under the proposed provision, interest would be payable on any duty not levied, short- levied, not paid, short paid or erroneously refunded from the first date of the month succeeding the month in which the duty ought to have been paid under the Act or from the date of erroneous refund. The provisions of the existing section 11AA are proposed to be omitted.  

6.3 Pending enactment of the Finance Bill, 2011, the rates of interest are being revised with effect from the 1st of April, 2011 to a uniform rate of 18 per cent per annum under the existing provisions of sections 11AA and 11AB.  

6.4 Section 11E is being inserted in the Central Excise Act to create a first charge on the property of a defaulter for recovery of Central Excise dues subject to the provisions of the Companies Act, Recovery of Debt due to Bank and Financial Institution Act, 1993 and Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002. This implies that after the dues, if any, owing under these provisions, dues under the Central Excise Act shall have a first charge.  

6.5 The provisions of section 12 of the Central Excise Act enable the Central Govt. to borrow the machinery provisions of the Customs Act with suitable modifications and alterations in respect of duties imposed by section 3. These are being amended to include a reference to duties imposed under section 3A as well so that the same provisions can be applied in respect of duties collected on the basis of compounded levy. The amended provision shall acquire legal force upon the enactment of the Finance Bill, 2011 with retrospective effect from 10.05.2008.  

6.6 It has been decided to empower the Joint Commissioner/Additional Commissioner of Central Excise (instead of Assistant Commissioner) to carry out the search of any premises or to authorize a central excise officer to do so. For this purpose, section 12F is being inserted in the Central Excise Act.  

6.7 As you are aware, the Board has already issued instructions prescribing monetary limits below which appeals, revision application or references need not be filed. However, such instances are not meant to be cited as precedents in cases involving similar issues or questions. A new section 35R is being inserted to empower the Board to issue such instructions. This section shall also acquire legal force when the Finance Bill, 2011 is enacted although with effect from 20.10.2010.  

6.8 The Standards of Weights and Measures Act, 1976 is being repealed with effect from 01.03.2011 and replaced by „The Legal Metrology Act, 2009.. Section 4A of the Central Excise Act is being amended to incorporate a reference to the new Act.  

6.9 The First Schedule to the Central Excise Tariff Act (contained in the Tenth Schedule to the Finance Bill, 2011 read with clause 70(a)(i)) is being amended with immediate effect to, inter-alia, carry out the following changes .  

Recovery of excise duty: revised penalty and interest regimes streamline extended limitation and first charge provisions. Redrafted recovery provisions distinguish extended limitation cases, allowing a mandatory 50% of duty penalty where transactions are recorded in specified books and permitting remission to that level; compounding relief is limited to this category with reduced penalties for pre-notice or early payment. Interest provisions are consolidated to run from the month after duty fell due or from the date of erroneous refund. A first charge on a defaulter's property is created for excise dues, subject to creditor-priority statutes, while search powers, customs machinery borrowing for compounded levies, Board instructions on appeal thresholds, and legal metrology cross-references are amended.