F.NO 96/1/2017-CX.

1
GOVERNMENT OF INDIA
MINISTRY OF FINANCE
DEPARTMENT OF REVENUE
CENTRAL BOARD OF EXCISE AND CUSTOMS
**********

Dated: 19th January, 2017

To,
Principal Chief/Chief Commissioner of Central Excise (All) and
Principal Chief/Chief Commissioner of Central Excise and Service Tax (All)

Sub: Master Circular on Show Cause Notice, Adjudication and Recovery-reg.

Madam/Sir,

Board is considering issuance of a Master Circular on Show Cause Notice, Adjudication

and Recovery by consolidating 85 circulars of Central Excise. The said master circular
intends to compile relevant legal and statutory provisions on the subject by including all
relevant Circulars issued in the past and by rescinding Circulars which are no longer relevant.
2. There are two Annexures to the draft Master Circular enclosed with this letter. Annexure-
I provides a list of eighty two circulars which are proposed to be rescinded by this Master
Circular. Annexure- II lists three Circulars which would remain operative as they contain
comprehensive instructions on the subject they address.
3. The draft Master Circular is enclosed. It is requested that feedback on the said Circular
may be called for from the Trade and also Officers of the department; the consolidated
comments/suggestions may please be sent by 15th Feb, 2017 to the following e-mail:
shankar.sarma@nic.in.

Yours faithfully,

(Shankar Prasad Sarma)

Under Secretary, CX-6
011-23095537

Encl: Draft Circular

 Circular No…………..CX
F.No. 96/1/2017-CX.I
Government of India
Ministry of Finance
Department of Revenue
Central Board of Excise and Customs

Dated the…….January, 2017

To,
The Principal Chief Commissioner/Chief Commissioners of Central Excise (All)
The Principal Chief Commissioner/Chief Commissioners of Central Excise and Service
Tax (All)
The Principal Chief Commissioner/Chief Commissioners of Service Tax (All)
The Principal Commissioner / Chief Commissioners of Customs (All)

Madam/Sir,

Subject: Master Circular on Show Cause Notice, Adjudication and Recovery –reg.

Kind attention is invited to Eighty five Circulars and Instructions on Show Cause
Notices and Adjudication issued by the Board from time to time, placed at the Annexures to
this Master Circular. These circulars address references from trade and field formations and
provide clarity and uniformity on the issues raised. Board undertakes an exercise of
consolidating these circulars from time to time for ease of reference. This master circular on
the subject of show cause notices, adjudication proceedings and recovery is an effort to
compile relevant legal and statutory provisions, circulars of the past and to rescind circulars
which have lost relevance. Annexure-I to the circular provides list of the eighty two circulars
which stand rescinded. Three circulars listed in Annexure-II have not been rescinded as they
contain comprehensive instructions on the subject they address.
2. The master circular is divided into four parts. Part I deals with Show Cause Notice
related issues, Part II deals with issues related to Adjudication proceedings, Part III deals with
closure of proceedings and recovery of duty and Part IV deals with miscellaneous issues.
3. Difficulty, if any, in the implementation of this Circular may be brought to the notice
of the Board. Hindi version will follow.

Under Secretary to the Government of India

 MASTER CIRCULAR
S.No. Subject Para No.

Part-I

1 Demand 1.1 -1.2

2 Show Cause notice (SCN) 2.1

3 Structure of SCN 2.2-2.10

4 Authority to adjudicate 2.11

5 Limitation to demand duty 3.1

6 Extended period 3.2 to 3.7

7 Applicability of limitation in demanding interest 3.8

8 Demand due to Departmental Audit or CERA 4.1 to 4.5

9 Pre Show Cause Notice consultation 5.0

10 Authority to issue SCN 6.0

11 Unjust enrichment in SCN 7.0

12 Changing practice of assessment 8.0

13 Waiver of SCN 9.1 to 9.2

Part-II

14 Adjudication 10

15 Monetary limits and other issues 11.1 to 12

16 Jurisdiction of Executive Commissionerate 12.1

17 Adjudication by officers of Audit Commissionerate 12.2

18 Cases investigated by DGCEI 12.3 to 12.5

19 Service of Show Cause Notice and Relied Upon Documents 13.0

20 Stages of adjudication 14.1 to 14.10

 21 Corrigendum to an adjudication order 15.0

22 Transfer of adjudicating authority 16.0

23 Signing of the order 16.1

24 Adjudication of SOFs/LAR raised by CERA 17.1 to 17.4

Part III

25 Confirmed demands 18

26 Recovery 19 to 22.4

Part-IV

27 Service of decisions, orders, summons, etc. 23

28 De novo adjudication 24

29 No SCN on voluntary payment 25

30 Refund of pre-deposit 26

Part I : Show Cause Notice

1.1 Demand: Under the provisions of the Central Excise Act, 1944, demand can be issued
when any duty of Central Excise has not been levied or paid or has been short-levied or short-
paid or where any duty has been erroneously refunded, for any reason. The demand of duty
may also arise on account of duty collected without the authority of levy or in excess of the
levy but not deposited with the department in terms of Section 11D of the Central Excise Act,
1944.
1.2 Demand of duty from the assessee is made by way of issue of a Show Cause Notice
(SCN in short) indicating therein charges of violations of provision of law requiring the
assessee to explain as to why the duty not levied/not paid or short levied/ short paid should
not be recovered from the noticee with interest and penalty, if applicable. Similarly, a show
cause notice can also be issued for recovery of refund erroneously paid by the Government to
the taxpayer.

2.1 Show Cause notice (SCN): Show Cause Notice (SCN) is the starting point of any legal
proceedings against the party. It lays down the entire framework for the proceedings that are
intended to be undertaken and therefore it should be drafted with utmost care. Issuance of
SCN is a statutory requirement and it is the basic document for settlement of any dispute
relating to tax liability or any punitive action to be undertaken for contravention of provisions
of Central Excise Act and the rules made thereunder. A SCN offers the noticee an
opportunity to submit his oral or written submission before the Adjudicating Authoritiy on
the charges alleged in the SCN. The issuance of show cause notice is a mandatory
requirement according to the principles of natural justice which are commonly known as audi
alteram partem which means that no one should be condemned unheard.

2.2 Structure of SCN: A SCN should ideally comprise of the following parts, though it may
vary from case to case:

a) Introduction of the case

b). Legal frame work
c). Factual statement and appreciation of evidences
d). Discussion, facts and legal frame work,
e). Discussion on Limitation
f). Calculation of duty and other amounts due
g). Statement of charges
h). Authority to adjudicate.

2.3 Introduction of the case: This part of the SCN must contain the details of the person to
whom the notice is to be issued. It must contain the name, registration number/IEC and
address of the person and the manner in which the said person, has been identified in the later
text of the notice. In case of issuance of SCN to many noticees, details of all such noticees
should be stated separately irrespective of the fact that, the persons are closely related to each
other. A very brief background as to how the present proceeding started should be discussed
in the SCN. For example, a SCN may be based on audit of accounts by the internal audit or
detailed scrutiny of return by the Range office or intelligence by anti-evasion etc. In this part,
the gist of audit objections/observations/ intelligence and a brief modus operandi of duty
evasion adopted by the alleged offender may be discussed. Further, the details of
verification/investigation conducted/ carried out and the summary of the verification may
also be discussed in this part.
2.4 Legal framework: The authority issuing the SCN should clearly lay down the legal
provisions in respect of which the person shall be put to notice. While specifying the
provisions, care should be taken to be very accurate in listing all the provisions and the law in
respect of which the contraventions are to be alleged in the SCN.

2.5 Factual statement and appreciation of evidence: In this part of SCN, the facts relating
to act of omission and commission pertinent to the initiation of the proceedings against the
noticee need to be stated in a most objective and precise manner. All evidences in form of
documents, statements and material evidence resumed during the course of enquiry
/investigation should be organised serially in a manner so as to establish the charges against
the noticee. While discussing the facts and evidences, care should be taken to be precise and
succinct in expression so that unnecessary details are avoided.

2.6 Discussion, facts and legal frame work: In this part the facts and evidence need to be
discussed against the legal framework set out in the show cause notice so as to arrive at the
charges of omission and commission against each of the noticees separately. On the basis of
discussion, the charges need to be clearly and succinctly spelt out against each noticee.

2.7 Discussion on Limitation: As per the provisions of Central Excise Act, 1944, the duty
which has not been levied or paid or has been short levied or short paid or erroneously
refunded can be demanded only within normal period i.e. within two years from the relevant
date. However, in specific case, where any duty of excise has been not paid or short paid or
erroneously refunded, by the reason of fraud or collusion or any wilful mis-statement or
suppression of facts or contravention of any of the provisions of the Act or rules made
thereunder with intent to evade payment of duty, then the duty can be demanded within a
period of five years from the relevant date. The SCN should clearly spell out the ingredients
for invoking the extended period of five years with evidence on record. A more detailed
discussion on the subject is contained in paragraph 3.1 to 3.6.

2.8 Quantification of duty demanded: It is desirable that the demand is quantified in the
SCN, however if due to some genuine grounds it is not possible to quantify the short levy at
the time of issue of SCN, the SCN would not be considered as invalid. It would still be
desirable that the principles and manner of computing the amounts due from the noticee are
clearly laid down in this part of the SCN. In the case of Gwalior Rayon Mfg. (Wvg.) Co. Vs.
UOI, 1982 (010) ELT 0844 (MP), the Madhya Pradesh High Court at Jabalpur affirms the
same position that merely because necessary particulars have not been stated in the show
cause notice, it could not be a valid ground for quashing the notice, because it is open to the
petitioner to seek further particulars, if any, that may be necessary for it to show cause if the
same is deficient.

2.9 Interest: Interest is chargeable on the delayed payment of duty under the provisions of
Section 11AA of CEA, 1944 or Rule 8 of the Central Excise Rules, 2002 or mutatis mutandis
for CENVAT Credit taken or/and utilized wrongly or for recovery of refund or on amount
collected in excess of the duty payable on any excisable goods from the buyer of the goods
under Section 11DD. There may not be need for any explicit mention of the interest liability
in the show cause notice since the legal provisions in this regard are explicit and contained in
Section 11A(14). However, to make the SCN a self-contained notice of charges, it may still
be desirable to mention the liability of interest in the SCN.

2.10 Statement of charges: In this part, the SCN list of all charges against the noticees need
to be summarized and the notice should be charged as to why action as provided in law,
should not be taken against them.

2.11 Authority to adjudicate: A SCN must state the authority to whom the reply to the show
cause notice is required to be answered. In case of seizure of goods, the issue of show cause
notice is mandatory before any order for confiscation of goods is passed. Where there is a
change in the adjudicating authority, a corrigendum to the SCN may be issued and served on
the noticees to ensure that the noticees have a fair opportunity to present their case to the
appropriate adjudicating authority. Corrigendum to SCN is issued due to change in
jurisdiction, monetary limit, re assignment, etc. The authority who issued the SCN has to
issue the corrigendum and then transfer the file to the new adjudicating authority.

3.1 Limitation to demand duty: A show cause notice demanding duty not paid or short paid
or erroneous refund can be issued by the Central Excise Officer normally within two year
from the relevant date of non-payment or short payment of duty, whereafter the demand
becomes time-barred. Where duty has not been paid or short paid by any person chargeable
with the duty by reason of fraud or collusion or any wilful mis-statement or suppression of
facts or contravention of any of the provisions of the Central Excise Act, 1944 or of the Rules
made thereunder with intent to evade payment of duty, a longer period of limitation applies
and show cause notice demanding duty can be issued within five years from the relevant date.
3.2 Ingredients for extended period: Extended period can be invoked only when there are
ingredients necessary to justify the demand for the extended period in a case leading to short
payment or non-payment of tax. The onus of establishing that these ingredients are present in
a given case is on revenue and these ingredients need to be clearly brought out in the Show
Cause Notice alongwith evidence thereof. The active element of intent to evade duty by
action or inaction needs to be present for invoking extended period.

3.3 The Apex Court’s in the case of M/s Cosmic Dye chemical Vs Collector of Cen. Excise,
Bombay [1995 (75) E.L.T. 721 (S.C.), has laid the law on the subject very clearly. The same
is reproduced below for ease of reference.

Now so far as fraud and collusion are concerned, it is evident that the requisite intent, i.e.,
intent to evade duty is built into these very words. So far as mis-statement or suppression of
facts are concerned, they are clearly qualified by the word “wilful” preceding the words
“mis-statement or suppression of facts” which means with intent to evade duty. The next set
of words “contravention of any of the provisions of this Act or Rules” are again qualified by
the immediately following words “with intent to evade payment of duty”. It is, therefore, not
correct to say that there can be a suppression or mis-statement of fact, which is not wilful and
yet constitutes a permissible ground for the purpose of the proviso to Section 11A. Mis-
statement or suppression of fact must be wilful.

3.4 Extended period in disputed areas of interpretation: There are cases where either no
duty was being levied or there was a short levy on any excisable goods on the belief that they
were not excisable or were chargeable to lower rate of duty, as the case may be. Both trade
and field formations of revenue may have operated under such understanding. Thus, the
general practice of assessment can be said to be non-payment of duty or payment at lower
rate, as the case may be. In such situations, Board may issue circular clarifying that the
general practice of assessment was erroneous and instructing field formations to correct the
practice of assessment. Consequent upon such circular, issue of demand notice for extended
period of time would be incorrect as it cannot be said that the assessee was intentionally not
paying the duty.

3.5 On the other hand, there can be Board is circulars which only reiterate the correct practice
of assessment which is being followed by the compliant segment of the assessees. In such
situations, decision to invoke extended period would depend on examination of facts of a
case and where the ingredient to invoke extended period is present, show cause notice for
extended period can be issued. In such situations it would be unfair to the compliant segment
of the assessees to not invoke the extended period of time, if active ingredients are present to
invoke extended period.

3.6 Power to invoke extended period is conditional: Power to issue notice for extended
period is restricted by presence of active ingredients which indicate an intent to evade duty as
explained above. Indiscriminate use of such restricted powers leads to fruitless adjudications,
appeals and reviews, inflates the figures of outstanding demands and above all causes
unnecessary harassment of the assessees. Therefore, before invoking extended period, it must
be ensured that the necessary and sufficient conditions to invoke extended period exists.
3.7 Second SCN invoking extended period: Issuance of a second SCN invoking extended
period after the first SCN invoking extended period of time has been issued is legally not
tenable. However, the second SCN, if issued would also need to establish the ingredients
required to invoke extended period independently. For example, in cases where clearances
are not reported by the assessee in the periodic return, second SCN invoking extended period
is quite logical whereas in cases of wilful mis-statement regarding the clearances made under
appropriate invoice and recorded in the periodic returns, second SCN invoking extended
period would be difficult to sustain as the department comes in possession of all the facts
after the time of first SCN. Therefore, as a matter of abundant precaution, it is desirable that
after the first SCN invoking extended period, subsequent SCNs should be issued within the
normal period of limitation.

3.8 Applicability of limitation in demanding interest: In cases where duty and interest is
demanded, it is quite clear that limitation prescribed in Section 11A applies. However, it may
be noted that in cases where the duty has been paid belatedly and interest has not been paid,
interest needs to be demanded and recovered following the due process of demand and
adjudication. In such cases, the period of limitation as prescribed in Section 11A applies for
demand of interest. Section 11A(15) may be referred in this regard.

4.1 Demand due to Departmental or CERA (CAG Audit): Show Cause Notice may be
required to be issued due to audit objection arising out of either internal audit or CERA
conducted by the office of CAG. The decision to issue Show Cause Notice due to internal
audit rests with the Audit Commissioner. As far as CERA audit is concerned, a detailed
circular has been issued vide Circular No. 1023/11/2016-CX dated 8.4.16. Important
directions in the circular in this regard are as follows:
4.2 Where the department has agreed with the audit objection on merits and which constitute
a large proportion of the audit objections, in such situations, Show Cause Notices should be
issued immediately. Such cases should not be transferred to the Call-Book and should be
adjudicated forthwith and revenue realized in cases of confirmed demand at the earliest.
4.3 Where the department has not agreed with the audit objection on merits no show cause
notice should be issued in cases and should be replied giving detailed reasoning and case-
laws on the subject. For further details of the procedure to reply to CERA, the said circular
may be referred.
4.4 Where a contested audit objection has become DAP and on examination it is found by the
Commissioner (PAC) or Joint Secretary (Customs) in CBEC that the objection should have
been admitted, they may give necessary directions to the field formations to issue show cause
notice and adjudicate the case on merits.
4.5 It may be noted that the procedure of transferring the show cause notice arising out of
CAG objection to call-book has been discontinued vide the said circular. It may be noted that
Para 4.2 to para 4.4 above only give the gist of the instructions regarding issue of Show
Cause Notice and for further details, the said circular dated 8.4.2016 may be referred. The
procedure for adjudication of Show Cause Notices issued due to CERA objections are
contained in the circular dated 8.4.2016(ibid) and have been reproduced from para 18.1 to
18.4 of this circular for ease of reference.
5.0 Consultation with the noticee before issue of Show Cause Notice: Board has made pre
show cause notice consultation by the Principal Commissioner/ Commissioner prior to issue
of show cause notice in cases involving demands of duty above Rs. 50 lakhs (except for
preventive/ offence related SCN's) mandatory vide instruction issued from F No.
1080/09/DLA/MISC/15 dated 21st December 2015. Such consultation shall be done by the
adjudicating authority with the assessee concerned. This is an important step towards trade
facilitation and promoting voluntary compliance and to reduce the necessity of issuing show
cause notice.
6.0: Authority to issue SCN: A SCN should ideally be issued by the authority empowered to
adjudicate the case as this ensures accountability as well as rigour of examination as demands
of higher amounts are adjudicated by the officers of higher rank. Details of authority
empowered to adjudicate the cases as per demand of duty are discussed in paragraph no. 11.
Though, issue of SCN by an officer of the rank empowered to adjudicate the case is the
accepted norm, a SCN issued by a Central Excise officer of rank other than the one
prescribed in the circular would not ipso facto be an invalid SCN.
7.0 Issue of unjust enrichment to be raised in SCN itself : In case of consequential refund
of excess duty paid, the applicant should be granted a refund only after the claim is found
admissible on merits as well as within time and the question of unjust enrichment is decided
in favour of the applicant. Where a refund application is prima-facie found to be liable to
rejection, a notice should be served on the applicant stating the ground on which the refund
application is liable to be rejected. In cases where refund is admissible on merits but is liable
to be paid to the Consumer Welfare Fund on grounds of unjust enrichment, the assessee will
be adversely affected by the decision and therefore, a notice should be served on the applicant
before such adjudication rejecting refund is undertaken.
8. Changing a long standing practice of assessment: A long standing practice of
assessment which is widely prevalent across the country should not be suddenly changed by
issuing show cause notice demanding duty. Such issues should be referred to the Board in a
comprehensive manner with inputs obtained from the other zones regarding the proposed
change in the practice of assessment. Demand of duty if any should be limited to normal
period in such cases as the practice of assessment in such cases is known to both trade as well
as the department.
9.1 Waiver of SCN: The issue of waiver of SCN has been dealt with in circular issued vide
by F.No. 137/46/2015-Service tax dated 18.08.2015. The crux of the clarification given is
that on receipt of written request of the assessee the requirement of written SCN may be
waived and the charges alongwith duty payable may be explained orally. This clarification
was given in the context of closure of cases on payment of duty, interest and penalty.
However, where the issue is likely to be litigated at a later date by the assessee, it would be
appropriate that a written SCN be issued. This would hold true in particular for offences of
serious nature or where the duty involved in high. Conclusion of proceedings may be
approved by an officer equal in rank to the officer who is competent to adjudicate such cases.
The cases can be closed by the competent authority in DGCEI/Executive
Commissionerate/Audit Commissionerate, as the case may be. If multiple issues involving
different monetary values arise from the same proceedings, then the sum total involved in all
the issues arising from the same proceedings should be considered for conclusion of
proceedings.

9.2 The conclusion of proceedings should invariably be intimated to the assessee in writing.
There is no need to issue an adjudication order. Further, there is no need to undertake review
of such conclusion of proceedings.
 Part II : Adjudication of Show Cause Notice

10. Adjudication: Officers of Central Excise have been vested with powers under Section
33A of Central Excise Act, 1944 to adjudicate the Show cause notice issued to the noticees
and answerable to the officers. They, in their capacity as adjudicating officers act as quasi-
judicial officers. Further as per Section 2(a) “Adjudicating authority” means any authority
competent to pass any order or decision under this Act, but does not include the Central
Board of Excise and Customs constituted under the Central Boards of Revenue Act, 1963 (54
of 1963), Commissioner of Central Excise (Appeals) or Appellate Tribunal.

11.1 Monetary limits: Board vide Circular no 1049/37/2016-CX dated 29-9-2016 has
prescribed monetary limits for adjudication of cases by the Central Excise officers. The
revised monetary limits and some of the salient features of the circulars are as follows:

Central Excise Monetary Limits of duty/ tax/ credit demand for

Sl. No.
Officer Central Excise and Service Tax

1. Superintendent Not exceeding Rupees Ten lakhs

Deputy/ Assistant Above Ten Lakhs but not exceeding Rupees Fifty
2.
Commissioner Lakhs

Additional/ Joint Above Fifty Lakhs but not exceeding Rupees Two
3.
Commissioner Crore

4. Commissioner Without limit i.e. cases exceeding rupees two crores

11.2 Other important points:

Cases involving taxability, classification, valuation and extended period of limitation shall be
kept out of the purview of adjudication by Superintendents. Such cases, upto rupees 10
Lakhs, shall also be adjudicated by the Deputy Commissioner/ Assistant Commissioner in
addition to the cases exceeding rupees 10 Lakhs but not exceeding rupees 50 lakh.

i. Refund matters (including rebate), shall be adjudicated by the Deputy Commissioner/

Assistant Commissioner without any monetary limit
 ii. In case different show cause notices have been issued on the same issue answerable to
different adjudicating authorities, Show Cause Notices involving the same issue shall
be adjudicated by the adjudicating authority competent to decide the case involving
the highest amount of duty.

11.3 Where differential duty/demand of duty is paid without interest, in such cases, Show
Cause Notices demanding interest and levy of penalty should be issued. In the Show Cause
Notice, the reference of duty already paid should also be mentioned.

11.4 As regards adjudication of the notices issued for recovery of interest alone, it is clarified
that these cases should be decided by the proper officer based on the monetary limit fixed for
the duty amount involved and not on the basis of the amount of interest. Therefore, the
amount of duty on which interest has not been paid, should be the monetary criterion for
deciding the authority to decide such cases.

12.1 Jurisdiction of Executive Commissionerate: Officers of Central Excise within the

jurisdiction of a Commissionerate normally issue a SCN for demands of duty pertaining to
assessees or units falling within the jurisdiction of the Commissionerate and such cases are
adjudicated by the Officers of the Executive Commissionerate. Officers of Executive
Commissionerate also adjudicate SCNs issued by the Audit Commissionerates under normal
circumstances.

12.2 Adjudication by officers of Audit Commissionerate: Circular no: 1049/37/2016-CX

dated 29-9-2016 has clarified that the Central Excise Officers in the Audit Commissionerate
shall also have powers to adjudicate Show Cause Notice in Zones where the pendency
position warrants adjudication by Audit Commissionerates Officers. Power has been
accorded to the Chief Commissioners to distribute the cases for adjudication within the Zone,
including to the officers of the Audit Commissionerate. The function of review, appeal etc
even for cases adjudicated by the officers of the Audit Commissionerate shall continue with
the Executive Commissionerate as adjudication by officers of Audit Commissionerate shall
continue be an exception rather than as a rule.

12.3 Cases investigated by DGCEI: DGCEI after investigation issues show cause notice
which may be answerable to either ADG (Adjudication) or to Executive Commissioner as
the case may be. Board has issued detailed circulars regarding adjudication of cases booked
by DGCEI vide Circular no 994/01/2015-CX dated 10.02.2015 and Circular No.
1000/7/2015-CX dated the 3rd March, 2015. The salient points of the instruction given are as
follows.

12.4 To assign cases for adjudication amongst the Additional Director General
(Adjudication) and the field Commissioners, following general guidelines may be followed :-

(i) Cases including cases pertaining to the jurisdiction of multiple Commissionerates,

where the duty involved is more than Rs. 5 crore shall be adjudicated by the ADG
(Adjudication). However in case of large pendency of cases or there being a vacancy in the
rank of ADG (Adjudication), Director General, CEI may assign cases involving duty of more
than Rs. 5 crore to the field Commissioners following clauses (iv) and (v) of the guidelines.

(ii) Director General, CEI may issue general orders assigning the show cause notices
involving duty of more than Rs. 5 crore issued by the specified Zonal Units and/or the
DGCEI Headquarters to a particular ADG (Adjudication).

(iii) Where ADG (Adjudication) is the adjudicating authority in one of the cases involving
identical issue or common evidences, the Director General, CEI may assign all such cases to
that ADG (Adjudication).

(iv) Cases to be adjudicated by the executive Commissioner, when pertaining to

jurisdiction of one executive Commissioner of Central Excise, shall be adjudicated by the
said executive Commissioner of the Central Excise.

(v) Cases to be adjudicated by the executive Commissioners, when pertaining to

jurisdiction of multiple Commissionerates, shall be adjudicated by the Commissioner in
whose jurisdiction, the noticee from whom the highest demand of duty has been made, falls.
In these cases, an order shall be issued by the Director General, CEI exercising the powers of
the Board, assigning appropriate jurisdiction to the executive Commissioner for the purposes
of adjudication of the identified case.

(vi) Show Cause Notices issued prior to 1st March, 2015 shall continue to be adjudicated
by the Commissioner before whom the adjudication proceedings are continuing unless the
Director General, CEI issues orders appointing a new adjudicating authority in terms of the
guidelines above or where Board appoints a new adjudicating authority on the basis of
proposal of DGCEI.
(vii) Where DGCEI proposes appointment of an adjudicating authority not in conformity
with the above guidelines, DGCEI shall forward such proposal to the Board.

(viii) Cases to be adjudicated by the officers below the rank of Commissioner may be
adjudicated only by the field officers in the executive Commissionerates and the above
guidelines shall apply mutatis mutandis.”

12.5 Above guidelines shall also apply mutatis mutandis to the Service Tax cases booked
by DGCEI. Notification No. 2/15-Service Tax, dated 10-2-2015 has been issued to provide
necessary jurisdiction to the DG, CEI over the Principal Commissioners and Commissioners
of Service Tax in this regard.

13.0 Service of Show Cause Notice and Relied Upon Documents: A show cause notice and
the documents relied upon in the Show Cause Notice needs to be served on the assessee for
initiation of the adjudication proceedings. The documents/records which are not relied upon
in the Show Cause Notice are required to be returned under proper receipt to the persons from
whom they are seized. Show Cause Notice itself may incorporate a clause that unrelied upon
records may be collected by the concerned persons within 30 days of receipt of the Show
Cause Notice. The designation and address of the officer responsible for returning the relied
upon records should also be mentioned in the Show Cause Notice. This would ensure that the
adjudication proceedings are not delayed due to non-return of the non-relied upon documents.

14.1 Settlement of Cases: As per Board instruction every show cause notice should be
forwarded, along with a letter stating that party can approach settlement of case through
Settlement Commission. Where the noticee approaches the Settlement Commission, the
matter needs to be transferred to call book till the matter is decided by Settlement
Commission. In case matter is not finally accepted for settlement by the settlement
commission, the show cause notice should be adjudicated in normal manner, in case the
Settlement Commission, settles the matter, the show cause notice should be taken out of call
book and shown as disposed off.

14.2 Filing of Written submissions: Show Cause Notice generally provides a time limit of
thirty days for submission of written reply, however the time limit may be extended by the
adjudicating authority on written request of the assessee. Where the assessee fails to submit a
written reply, the adjudicating authority may issue a letter requesting the noticee to submit
reply to the SCN.
14.3 Personal hearing: After having given a fair opportunity to the noticee for replying to
the show cause notice, the adjudicating authority may proceed to fix a date and time for
personal hearing in the case and request the assessee to appear before him for a personal
hearing by himself or by through authorised representative. At least three opportunities of
personal hearing should be given with sufficient interval of time so that the noticee may avail
opportunity of being heard. All three opportunities of personal hearing should not be fixed in
one go. In fact separate letter for each hearing/extension should be issued at sufficient
interval. The Adjudicating authority may, if sufficient cause is shown, at any stage of
proceeding adjourn the hearing for reasons to be recorded in writing. However, no such
adjournment shall be granted more than three times to a noticee.

14.4 Record of personal hearing: The adjudicating authority must maintain a record of
personal hearing and written submission made during the personal hearing. Evidence of
personal hearing and written submission on record is very important while adjudicating the
case.

14.5 Adjudication order: The adjudication order must be a speaking order. A speaking
order is an order that speaks for itself. A good adjudication order is expected to stand the test
of legality, fairness and reason at higher appellate forums. Such order should contain all the
details of the issue, clear findings and a reasoned order.
14.6 Analysis of issues: The Adjudicating authority is expected to examine all evidences,
issues and material on record, analyse those in the context of alleged charges in the show
cause notice. He is also expected to examine each of the points raised in the reply to the SCN
and accept or reject them with cogent reasoning. After due analysis of facts and law,
adjudicating authority is expected to record his observations and findings in the adjudication
order.
14.7 Body of the order: The adjudication order should generally contain brief facts of the
case, written and oral submissions by the party, observation of the adjudicating authority on
the evidences on record and facts of omission and commission during personal hearing and
finally the operating order. At any cost, the findings and discussions should not go beyond
the scope and ground of the show cause notice.
14.8 Quantification of demand: The duty demanded and confirmed should be clearly
quantified and the order portion must contain the provisions of law under which duty is
confirmed and penalty is imposed. The duty demanded in an adjudication order cannot
exceed the amount proposed in the Show Cause notice.
14.9 Corroborative evidence and Cross-examination: Where a Statement is relied upon in
the adjudication proceedings, it would be required to be established though the process of
cross-examination, if the noticee makes a request for cross-examination of the person whose
statement is relied upon in the SCN. During investigation, a statement can be fortified by
collection of corroborative evidence so that the corroborative evidence support the case of the
department, in cases where cross-examination is not feasible or the statement is retracted
during adjudication proceedings. It may be noted retracted statement may also be relied upon
under given circumstances.
14.10 Issue and Communication of order: A signed Adjudication Order, generally called
as Order-in-original, is expected to be issued within a reasonable time as laid down in law of
the submission of written reply and conclusion of personal hearing in the case. The order is
required to be communicated to the assessee in terms of provisions of Section 37C of the
CEA, 1944.

15. Corrigendum to an adjudication order: A corrigendum to an adjudication order can

only be issued to correct minor clerical mistakes which do not alter the adjudication order per
se. Therefore, adjudicating order should normally be issued after careful examination of
details obviating the need to issue any corrigendum. It may be noted that after issuing an
adjudication order, the adjudicating authority becomes functus officio, which means that his
mandate comes to an end as he has accomplished the task of adjudicating the case. As a
concept, functus officio is bound with the doctrine of res judicata, which prevents the re-
opening of a matter before the same court or authority. It may also be noted that under the
Central Excise Act, adjudicating authority does not have powers to review his own order and
carry out corrections to the adjudication order.

16. Transfer of adjudicating authority: Adjudicating officers are expected to issue order-
in-original before being relieved in cases where personal hearing has been completed. The
successor in office can not issue any order on the basis of personal hearing conducted by the
predecessor. The successor in office should offer a fresh hearing to the noticee before
deciding the case and issuing adjudication order/formal order.

16.1 Signing of the order: The adjudicating order should be signed by the adjudicating
authority only and it should not be further delegated to any other officer and the adjudicating
order furnished to the noticee(s) has to be an originally signed copy and not an attested copy.
17.1 Adjudication of SoFs/LARs raised by CERA which are not converted into DAP :
SoFs/LARs are replied by the Commissionerate and therefore these cases may be adjudicated
after ensuring that the reply given by the Commissionerate is available on record.

17.2 Adjudication of admitted DAPs/APs: DAPs are replied by the Ministry (CBEC) and
therefore adjudication of DAPs should be undertaken after ensuring that the reply given by
the Ministry (CBEC) is available on record.

17.3 Adjudicating authority is a quasi-judicial authority and is legally bound to adjudicate the
case independently and judiciously taking into consideration the audit objection by
CERA/CRA, reply of the department as referred above, reply of the party, relevant legal
provisions, case laws on the subject and relevant circulars of the Board, if any. It is expected
that the factum of SCN being a consequence of CERA/CRA objection, would be incorporated
in the brief facts of the case in the adjudication order.

17.4 Where an issue was under audit objection and has been subsequently either judicially
settled, by say judgment of Hon’ble Supreme Court or where a circular of the Board has been
issued on the subject, further correspondence with the Board on the audit objections, even if
they have become DAPs, is not necessary and such cases may be adjudicated on merits taking
into consideration the latest judgments and circulars.

Part III: Confirmed demands/Recovery

18. Confirmed demands: Section 11 of the Central Excise Act, 1944 provides powers which
may be exercised for recovery of duty and any other sums of any kind payable to the Central
Government. It may be noted that duty and other sums are considered payable to the
Government in the following situations:

(i) Where there is no appeal filed against the confirmed order in adjudication or appeal and
statutory period of appeal is over;

(ii) Where the CESTAT or High Court has confirmed the demand and no stay is in operation
as explained in para 23.2.

(iii) Where there is an admitted liability reflected in the periodic return as explained in para
24.

19. Powers of recovery: Recovery of confirmed demand can be made by exercising any of
the powers under Section 11 of the CEA, 1944 such as adjustment from refunds payable,
attachment and sale of excisable goods of such person or through certificate action treating
the recoverable amounts as arrears of land revenue. After exhausting the option of taking
action as above, if dues remain unrecovered, action is to be taken under the provisions of
Section 142 of the Customs Act, 1962 which have been made applicable to like matters in
Central Excise. Further, where the entire business is disposed off with assets and liabilites,
duty or any other sums are recoverable from the successor in business also. It may be noted
that under sub-Section (2) of Section 11 of the Central Excise Act, 1944, now Central Excise
Officers are empowered to issue an order to any other person from whom money is due to
such person from whom recovery of arrears is required to be made. Such notice for recovery
to the other person is generally referred as Garnishee Notice.

20. Recovery from the assets under liquidation: Section 53 of the Insolvency and
Bankruptcy Code, 2016 provides for order of priority for distribution of proceeds from the
sale of the liquidation assets. Pari-materia changes have been made in Section 11E of the
Central Excise Act, 1944. In effect, the Central Excise dues shall have first charge, after the
dues, if any, under the provisions of 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 and the Insolvency and Bankruptcy Code, 2016,
have been recovered.

20.1 Recovery during pendency before BIFR/IFCL/OL/DRT/Insolvency and

Bankruptcy Code, 2016: When the cases are pending before BIFR/IFCL/OL/ appropriate
authority under Insolvency and Bankruptcy Code, 2016 then in such cases recovery measures
should not be resorted. In such cases public counsel should be advised to file affidavits for
first charge under Section 11E of Central Excise Act, 1944 informing the quantum of
confirmed demand to BIFR/IFCL/OL/DRT/Insolvency and Bankruptcy Code Authorities.

20.2 Recovery during pendency of litigation: Board has issued two circulars on the subject
vide Circular no 984/08/2014- CX dated 16.9.2014 and Circular no 1035/23/2016-CX dated
4.7.2016.

(i) Sub-Section (iii) of Section 35F of the Central Excise Act, 1944 and Section 129E of the
Customs Act, 1962 stipulate payment of 10% of the duty or penalty payable in pursuance of
the decision or order being appealed against i.e. the order of Commissioner (Appeals). In the
event of appeal against the order of Commissioner (Appeals) before the Tribunal, 10% is to
be paid on the amount of duty demanded or penalty imposed by the Commissioner (Appeals).
This need not be the same as the amount of duty demanded or penalty imposed in the Order-
in-Original in the said case.

(ii) In a case, where penalty alone is in dispute and penalties have been imposed under
different provisions of the Act, the pre-deposit would be calculated based on the aggregate of
all penalties imposed in the order against which appeal is proposed to be filed.

(iii) In case of any short-payment or non-payment of the amount stipulated under Section
35F of the Central Excise Act, 1944 or Section 129E of the Customs Act, 1962, the appeal
filed is liable for rejection.

(iv) Section 35F of the Central Excise Act, 1944 has been amended with effect from 6.8.14 to
provide for mandatory payment of 7.5% or 10% of the of the duty demanded where duty
demanded is in dispute or where duty demanded and penalty levied are in dispute for
admission of appeal before Commissioner (Appeals) or CESTAT. Once the amount is paid,
no coercive action shall be taken for recovery of the balance amount during the pendency of
the appeal proceedings before these authorities.

22.3 In cases where stay application is pending before Commissioner (Appeals) or CESTAT
for periods prior to 6-8-2014, no recovery shall be made during the pendency of the stay
application.

20.4 Recovery of demand confirmed by CESTAT or High Court: Where a demand has
been confirmed by the CESTAT or High Court, recovery proceedings may be initiated after
sixty days of issue of order provided no stay has been granted by the High Court or Supreme
Court as the case may be.

21. Recovery of admitted liability in periodic returns: Rule 8(4) of the Central Excise
Rules, 2002 provide that provisions of Section 11 of the Central Excise Act, 1944 would
apply for recovery of sums declared payable in periodic returns but not paid. Section 11
provides wide ranging power for recovery of dues as explained in paragraph 21 above.
Section 11A(16) on the other hand provides that provisions of Section 11A shall not apply for
duty short paid or not paid which is self-assessed and declared in the periodic returns. The
conjoined reading of these two provisions provide that where the liability of duty is admitted
but not paid by the assessee, adjudication proceedings envisaged under Section 11A are not
required to be undertaken. Such self-admitted liability would be covered under the expression
duty and any other sums of any kind payable to the Central Government used in Section 11A
notice for recovery of admitted liability may be served on the assessee under Section 11 and
when such dues are not paid within a reasonable time, recovery proceedings may be initiated.

22.0 Recovery in instalments: Board has issued Circular No. 996/3/2015-CX dated the 28th
Feb., 2015 to provide the facility of payment of confirmed demand in installments.

22.1 It has been decided by the Board to allow recovery of arrears of taxes, interest and
penalty in installments. The power to allow such payment in monthly installments shall be
discretionary and shall be exercised by the Commissioners for granting sanction to pay
arrears in installments upto a maximum of 24 monthly installments and by the Chief
Commissioners for granting sanction to pay arrears in monthly installments greater than 24
and upto a maximum of 36 monthly installments.

22.2 The facility to pay arrears in installments shall generally be granted to companies
which show a reasonable cause for payment of arrears in installments such as the company
being under temporary financial distress. Approval to pay in installments and the number of
installments should be fixed such that an appropriate balance between recovery of arrears and
survival of business is maintained taking into consideration the overall financial situation of
the company, its assets, liabilities, income and expenses. Frequent defaulters may not be
allowed payment of arrears in instalments. The decision shall be taken on a case to case basis
taking into consideration the facts of the case, interest of the revenue, track record of the
company, its financial situation, etc.

22.3 The application for allowing payment of arrears shall be made to the jurisdictional
Commissioner giving full justification for the same. The approval of the application should
be in writing with due acknowledgment taken on record. The permission should clearly
identify the number of installments and the month from which the payments of installments
should begin and should also clearly stipulate that in case of default in payment of
installments, the permission shall be withdrawn and action shall be taken for recovery of
arrears.

22.4 For this purpose, Commissioner shall also exercise the power to cancel the permission
to pay arrears in installments. Cancellation should be resorted to in cases of default in the
payment of installments or when the company is becoming financial unviable and there is
likelihood of winding up of business. After cancelling the permission to pay in installments,
action should be taken forthwith for recovery of arrears.

Part IV: Miscellaneous

23: Service of decisions, orders, summons, etc: The statutory provisions for Service of
decisions, orders, summons, etc. have been provided under Section 37C of the CEA, 1944.
The Section provides that the service of interalia of any order or notice, which would include
a SCN or an adjudication order needs to be carried out in prescribed manner for the service to
be considered complete. The Section provides for various methods of service such as by
tendering or sending it by registered post with acknowledgment due or as a fallback, by
affixing a copy thereof to some conspicuous part of the factory or warehouse or other place of
business or usual place of residence of the person or as a further fallback, by affixing on the
notice board of the officer. For further details, the Section may be referred.

24. De novo or Adjudication remanded by appellate authority: In cases of de novo

adjudication in pursuance of the order of Appellate Authority, such cases should be decided
by the adjudicating authority of the same rank who had passed the order which was in appeal
before the Appellate authority, notwithstanding the enhancement of the power of adjudication
of the officers. On receipt of the order for de novo adjudication from the Appellate authority,
such case should be shown as pending in the list of cases pending adjudication of such
adjudicating authority till it is decided by him. Close monitoring of such pending de-novo
cases should be done to ensure that these cases are adjudicated well within the time limit, if
any, laid down by the Appellate authority.

25. No SCN on voluntary payment: In any case of short payment or non-payment of tax/
duty in a case not involving extended period of time, a person who has paid the duty payable
along with interest, if any, by ascertaining the duty himself, or as ascertained by the Central
Excise Officer shall not be served any notice in respect of the duty so paid or for any penalty.
The provisions of Section 11A(1)(b) read with Section 11A(2) may be referred to in this
regard.

26. Refund of pre-deposits:-

(i) Where the appeal is decided in favour of the party/assessee, he shall be entitled to refund
of the amount deposited along with the interest at the prescribed rate from the date of making
the deposit to the date of refund in terms of Section 35FF of the Central Excise Act, 1944
(ii) Pre-deposit for filing appeal is not payment of duty. Hence, refund of pre-deposit need
not be subjected to the process of refund of duty under Section 11B of the Central Excise Act,
1944. Therefore, in all cases where the appellate authority has decided the matter in favour of
the appellant, refund with interest should be paid to the appellant within 15 days of the
receipt of the letter of the appellant seeking refund, irrespective of whether order of the
appellate authority is proposed to be challenged by the Department or not.

(iii) If the Department contemplates appeal against the order of the Commissioner (A) or the
order of CESTAT, which is in favour of the appellant, refund along with interest would still
be payable unless such order is stayed by a competent Appellate Authority. It is important to
note that in such cases of consequential refund, besides filing of appeal against the order, it is
also necessary that a protective demand of the refunded amount be issued under Section 11A
by not lower than Assistant/Deputy Commissioner of Central Excise as per new monetary
limits for adjudication of cases by the Central Excise officers and transferred to the call-book.

(iv) In the event of a remand, refund of the pre-deposit shall be payable along with interest.

ANNEXURE-I

S.No. Circulars/Instructions

1 207/47/85-CX.6, dated 12.8.1986

2 17/87, dated 18.3.1987

3 267/104/87, dated 15.12.1987

4 27/88-CX.6, dated 7.4.1988

5 42/88-CX.6, dated 24.5.1988

6 48/88-CX.6, dated 10.6.1988

7 50/88-CX.6, dated 17.6.1988,

8 67/17/88-CX.2,dated 18.8.1988
9 76/88-CX.6, dated 2.11.1988

10 79/88-CX.6, dated 15.11.1988

11 66/88,dated 20.12.1988

12 2/89, dated 9.1.1989

13 29/89,dated 2.5.1989

14 50/89, dated 29.8.1989

15 18/90-CX.8, dated 28.3.1990

16 53/90, dated 26.9.1990

17 21/90, dated 6.12.1990

18 167/39/92-CX.4, dated 13.10.1992

19 5/92, dated 13.10.1992

20 20/92-CX.6, dated 21.12.1992

21 9/93-CX.6, dated 8.7.1993

22 19/93-CX.6, dated 29.12.1993

23 20/20/94-CX, dated 10.2.1994

24 67/67/94-CX, dated 19.10.1994

25 163/74/95-CX, dated 14.12.1995

26 171/5/96-CX, dated 2.2.1996)

27 228/62/96-CX, dated 8.7.1996

28 268/102/96-CX, dated 14.11.1996

29 354/118/96-TRU, dated 6.1.1997

30 290/6/97-CX. dated 20.1.1997

31 295/11/97-CX., dated 10.2.1997

32 298/14/97-CX, dated 25.2.1997

33 299/15/97, dated 27.2.1997

34 312/28 /97-CX., dated 22.4.1997

35 317/33/97-CX, dated 18.6.1997

36 328/44/97-CX, dated 13.8.1997

37 350/66/97-CX. dated 4.11.1997

38 362/78/97-CX, dated 9.12.1997

39 373/06/98-CX, dated 20.1.98

40 444/10/99-CX, dated 12.3.1999

41 502/68/99-CX, dated 16.12.1999

42 518/14/2000-CX, dated 3.3.2000

43 523/19/2000-CX. Dated 6.4.2000

44 534/30/2000-CX, dated 30.5.2000

45 540/36/2000-CX., dated 8.8.2000

46 552/48/2000-CX, dated 4.10.2000

47 555/51/2000-CX, dated 19.10.2000

48 588/25/2001-CX,dated 19.9.2001

49 592/29/2001-CX, dated 19.10.2001

50 606/43/2001-CX, dated 4.12.2001

51 712/28/2003-CX., dated 5-5-2003

52 718/34/2003-CX, dated 23.5.2003

53 723/39/2003-CX, dated 10.6.2003

54 744/60/2003-CX, dated 11.9.2003

55 752/68/2003-CX, dated 1.10.2003

56 762/78/2003-CX. dated 11.11.2003

57 765/81/2003-CX, dated 10.12.2003

58 794/27/2004-CX, dated 23.6.2004

59 806/3/2005-CX, dated 12.1.2005

60 207/09/2006-CX.6, dated 8.9.2006

61 208/27/2003-CX.6, dated 18.12.2006

62 865/3/2008-CX. dated 19.2.2008

63 922/12/2010-CX., dated 18.5.2010

64 957/18/2011-CX.3, dated 25.10.011

65 967/1/2013-CX, dated 1.1.2013

66 201/01/2014-CX.6, dated 26-6-2014

67 994/01/2015-CX, dated 10.2.2015

68 996/3/2015-CX, dated 28.2.2015

69 1000/7/2015-CX, dated 3.3.2015

70 390/CESTAT/69/2014-JC, dated 22.12.2015

71 1035/23/2016-CX, dated 4.7.2016

72 1049/37/2016-CX, dated 29.9.2016

73 5/83-CX.6 dated10.3.1983

74 3/92-CX.6

75 13/93-CX.6 dated15.10.93

76 674/65/2002-CX dated1.11.2002

77 32/80-CX.6 dated26.7.80

78 732/48/2003-CX dated5.8.03

79 1/90-AU dated19.3.90

80 275/37/2K-CX.8A dated2.1.2002

81 655/46/2002-CX dated26.6.2002

82 766/82/2003-CX dated15.12.2003

ANNEXURE-II

S.No. Circulars/Instructions
1 984/08/2014-CX, dated 16.9.2014
2 137/46/2015-S.T., dated 18.8.2015

3 1023/11/2016-CX, dated 8.04.2016