TaxTMI 
TaxTMI 
Master Circular on Recovery and Write-Off of Arrears of Revenue
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....ff of arrears of Indirect taxes and Customs. 2. THE CONCEPT OF ARREAR: (i) Arrears are the overdue payment of the amount of tax, interest, fine or penalty that is confirmed against a person who is liable to pay the same to the exchequer. It arises as a result of Order-in-Original, Order of Appellate forum, like the Commissioner Appeals / ADC/JC Appeals or the CESTAT and the Courts of law. (ii) The amount in the case under investigation, unconfirmed demands (i.e. Show Cause Notice, including those in Call Book), the Order-in-Original that has been set aside or remanded for de-novo adjudication by Appellate authority do not fall under the category of 'arrears'. 3. THE STATUTORY PROVISIONS FOR RECOVERY: Recovery of Arrears is the positive act of getting the money that is legally overdue from a person/entity. The act of recovery of arrears has to be persuasive and legal. The taxing statutes incorporate the legal provisions for such recovery. Various statutory provisions for recovery of arrears are indicated as below:- (a) Customs Act, 1962: Section 28 BA, Section 142 read with Section 142 A (b) Customs (Attachment of Property of Defaulters for recovery ....
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....ragraphs. (iv) W.r.t. recovery of arrears arising out of common adjudication orders, it is directed that copy of SCN and Adjudication Order should be endorsed to the concerned Jurisdictional Pr. Commissioners/Commissioners for recovery of arrears. Such arrears should be reported by the said Jurisdictional Pr. Commissioners / Commissioners and action of recovery of arrear should be taken by him. 5.1 CASES UNDER LITIGATION/APPEAL- Though, arrears pending before the appellate fora may not be recoverable immediately yet the status of these cases need to be clarified and monitored regularly. For this category the following guidelines should be followed for effective monitoring: (a) Cases of arrears pending before SC / HC/ CESTAT- (i) The Jurisdictional Commissioners /Commissioners will identify all cases of appeal where the department has a strong case or a reasonable chance of success and the amount involved in the arrears is more than Rs. 1 Crore. (ii) The particulars of all such cases will be kept with the Review Cell/Legal Cell and the TRC of the Commissionerate for regular monitoring. (iii) Miscellaneous Application for early....
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....se, Service tax and GST enactments have provisions for the liability to be the first charge on property but this charge is subject to the provisions of Section 529 A of the Companies Act, 1956 (Section 326 of Companies Act, 2013), the Recovery of Debts due to Banks and the Financial Institutions Act, 1993 (RDB Act), the Securitisation and Reconstruction of Financial Assets and the Enforcement of Security Interest Act, 2002 (SARFAESI Act) and the Insolvency and Bankruptcy Code, 2016. In cases pending with BIFR /OUDRT/Units taken over by Banks, the department should file affidavits for first charge under Section 11 E of the Central Excise Act/Section 142 A of the Customs Act/Section 88 of the Finance Act, 1994 and Section 82 of the CGST Act, 2017. Besides taking aforesaid action, the cases pending in such authorities should be monitored and approached constantly for their early disposal. (a) Cases with Board for Industrial and Financial Reconstruction (BIFR) /National Company Law Tribunal (NCLT)- BIFR was set up in January 1987 under The Sick Industrial Companies (Special Provisions) Act, 1985 (SICA) to determine the sickness of industrial companies and to assist in reviving....
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....se is listed on the website then it is imperative for the Jurisdictional Commissionerate to file its claim (if any) with Interim Resolution Professionals (IRPs) in prescribed format accompanied with all requisite documents. The IRP forms the 'Committee of creditors' and calls its meeting to decide whether the business of corporate defaulter can be revived. Since taxes have been declared as 'Operation debts' under IBC, the jurisdictional Central Tax or Customs officer should attend the meeting of committee of creditors although they do not possess the voting rights. By attending the meetings called by Interim Resolution Professionals/Resolution Professionals, jurisdictional officer may raise their points regarding protection of Government revenue. (ii) When the insolvency professional acts as the liquidator, he collects the claims of the creditors within a period of 30 days from the date of commencement of the liquidation proceedings and creates a liquidation estate comprising of all the assets of the corporate debtor and holds these assets in a fiduciary capacity for the benefit of all the creditors. The jurisdictional Central Tax/ Customs officers shall have to s....
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....ts of the company to sale via public auction, recovery of debts due to the company, invitation of claims against the company, settlement of claims so received, distribution of funds to the creditors and contributories, prosecution of directors of the company in the event of misfeasance and eventual dissolution of the company. (iii) A company is ordered to be compulsorily wound up by the High Court in response to a petition filed by one or more creditors seeking such relief when the company is unable to pay off its debts to its creditors. In the same order the Official Liquidator is appointed with a direction to take charge of the assets and affairs of the company. (iv) During such processes, a claim can be filed by the defaulter as per proforma annexed herewith as annexure B. The claimant (department) is required to submit all documents necessary to prove the claim. The said proforma is an Affidavit sworn by the claimant and is to be filed through the departmental counsel. (v) The Official Liquidator invites claims from the creditors of the company through an advertisement in leading dailies giving at least 14 days' time (normally 30 days) for the claiman....
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....cluding Ports, ICDs, CFSs, Bonded Warehouses), such Officers would be required to recover the said amount by detaining and selling such goods belonging to the defaulter. If the amount cannot be recovered from such person in the manner provided in aforesaid clauses - (d) Send a certificate specifying the amount the collector of District for recovery of the amount where the defaulter owns an roperty or records or business and the said Collector shall proceed to recover the id arrear as land revenue. (e) Detention/attachment and sale of property of defaulter by the department as per provisions of Section 142 1(c)(ii) of Customs Act, 1962. (f) Recovery by way of attachment and sale of goods/ material etc. from the successor of the defaulter (i.e. transferee, purchaser etc.) in business or trade in whole or part thereof. (g) Invoking the Garnishee Provisions i.e. recovery from any other person from whom money is due to such defaulter or may become due to such defaulter or who holds or may subsequently hold money for on account of defaulter. II. Apart from aforesaid legal provisions there may be occasions where there is a possibility to rec....
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....s and Aadhar No. of the defaulter. (b) Comprehensive enquiries should be conducted with banks and the known premises [ residence, warehouse, depots etc.] of the defaulter. (c) Discrete enquiries/investigation should be made with neighbors, trade rivals, local market and other departments where there is possibility of registration of defaulter viz. electricity, SGST, pollution control department, stamp authorities etc. (d) On the basis of PAN Number, the Income Tax Department's data base should be accessed to ascertain the Aadhaar No., Mobile No., phone no., e-mail address, location address, any house property, life/ medical/ general insurance, Bank details, movable & immovable property etc. of the defaulters. (e) DGFT website can provide the registered residential, business address/details of the defaulters on the basis of IEC and further access to MCA Company data to verify Directors details [DIN] and other companies where the person is a director, its address etc. (f) Details of shares in capital market held by defaulters should be found out through the two depositaries viz. National Securities Depository Limited (NSDL) and Central Depository Services (India) Limit....
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....sioner (where the arrear pertained/arisen), the certificate under Section 142 (1) (c) of the Customs Act, 1962 should be sent only to those Jurisdictional Pr. Commissioners/Commissioners under whose jurisdiction the identified property of the defaulters is located for the following action. (a) Any moveable or immovable property belonging to or under the control of the defaulter will be detained under Section 142(1)(c) read with Customs (Attachment of Property of Defaulters for Recovery of Government Dues) Rules, 1995. (b) For recovery of the dues under these provisions, simultaneous action through district authorities and through Jurisdictional Pr. Commissioners /Commissioners should be taken. Accordingly, the Circular No. 54/95-Cus. Dt. 30.05.95 stands superseded. (c) If any dues are not paid within 30 days of the detention as above, the said property would be sold in the prescribed manner. (d) For recovery through attachment and sale, the procedure prescribed vide following Circulars may be followed: (i) Circular No. 56/96-Cus., Dated 14/11/96 F. No. 450/72/96-Cus-VI Sub: Recovery of arrears of Revenue under amended Section 142(1) of the Customs Act 1962 read with ....
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.... (b) Circular No. 1080/01/2022-CX dated 19.01.2022 is issued providing constitution of two-member Committees to examine the proposals for write-off of irrecoverable arrears of duty/taxes and fine & penalties. (c) The Committee so constituted shall examine the proposals and on the basis of the recommendation/decision of the Committee, the competent authority shall write-off arrears in deserving cases in accordance with the powers delegated for the purpose. (d) The Committee of Jurisdictional Pr. Commissioners/Commissioners so constituted shall also examine the proposals/cases to write-off the arrears where only penalty is levied on the defaulters (viz. penalty imposed in cases of non-filing of returns, penalty on crew in smuggling cases/penalty on transporters etc.). On the basis of recommendations of the Committee the Competent Authority shall write-off arrears in deserving cases. (e) As regards write-off of interest amount, it is clorified that once duty/tax involved is written off, the interest due thereon would autOiatically get written-off. (f) It is also directed that the act of writing off of arrear does not absolve the defaulter from the liability to pay for an....
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....o. 296/10/2009-CS-9(Pt.) dated 29.05.2013. Sub: Writing off of arrears of Central Excise, Service Tax and Customs duty- Constitution of Committees to advise the authority for writing off of arrears. (viii) F. No. 296/202/2017-CX-9 dated Sep 2017 Sub: Writing off of arrears of Central Excise, Service Tax and Customs duty- Constitution of Committees to advise the authority for writing off of arrears read with corrigendum w.r.t 20/10/2017. ANNEXURE-B FORM FOR FILING CLAIM WITH OL/DRT Affidavit of proof of arrear (may be filed in the form of application as the case may be) (PETITION No............ of.............. (20...... ) I, ........................... of ......... (full name, address and occupation of deponent to be given) do solemnly affirm and state as follows:- 1. The Company/firm ....................................... (full name, address etc. of the company/firm/entity to be given) was, at the date of the order of winding-up the same* viz., the ............ day of............. 20... and still is, justly and truly indebted to the Department of indirect Taxes & Customs as arrears mentioned as follows are pending for recovery by the office ....