Recovery of arrears in installments and amendment of Garnishee Notice-Excise Duty

Cir­cu­lar No. 996/3/2015-CX dat­ed the 28th Feb., 2015

F. No. 207/02/2015-CX.6

Your atten­tion is invit­ed to pro­vi­sions of sub-sec­tion (2) of sec­tion 11 of the Cen­tral Excise Act, 1944. Cen­tral Excise Offi­cers are empow­ered under this pro­vi­sion 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. Sim­i­lar pro­vi­sions are con­tained in sec­tion 142(1)(d) of the Cus­toms Act, 1962 and sec­tion 87(b) of the Finance Act, 1994 . It has been brought to the notice of the Board that clar­i­fi­ca­tion is required regard­ing pow­ers of recov­ery offi­cer to amend or with­draw the Gar­nishee Notice.

2. The issue has been exam­ined. There are occa­sions when the assessee comes for­ward for pay­ment of arrears, once Gar­nishee Notice are issued to the per­sons from whom mon­ey is due to the assessee. There would be a prac­ti­cal need to amend or with­draw the Gar­nishee Notice issued in such sit­u­a­tions. Fur­ther, sec­tion 21 of the Gen­er­al Claus­es Act, 1897 clear­ly pro­vides that pow­er to issue an order includes pow­er to add, amend, vary or rescind the order. Fur­ther­more, an inter­pre­ta­tion that Gar­nishee Notice can­not be amend­ed or rescind­ed would make the pro­vi­sions unwork­able. Such inter­pre­ta­tions should be avoid­ed in law.

3. In view of the above, it is here­by clar­i­fied that recov­ery offi­cers do have pow­ers to add, amend, vary or rescind any Gar­nishee Notice issued. How­ev­er, the inter­est of rev­enue has to be suit­ably safeguarded.

4. Atten­tion is also invit­ed to the issue of recov­ery of arrears in install­ments. On Cen­tral Excise side, three circulars/instructions have been issued in the past viz. instruc­tions from F. No. 289/10/91-CX.9 dt 18–3‑1991, Cir­cu­lar no. 32/32/94/CX dt. 11–4‑94 and Cir­cu­lar no. 208/42/96-CX dt. 2–5‑1996. There is a need to pro­vide uni­form instruc­tions regard­ing facil­i­ty to pay arrears in install­ments in Cen­tral Excise, Ser­vice Tax and Cus­toms. It has there­fore been decid­ed that in super­s­es­sion of all ear­li­er cir­cu­lars and instruc­tions, fol­low­ing instruc­tions shall be fol­lowed here­after to allow pay­ment of arrears in install­ments under the Cen­tral Excise Act, 1944, Chap­ter V of the Finance Act, 1994 (for Ser­vice tax) and the Cus­toms Act, 1962.

5. 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 24monthly install­ments and by the Chief Com­mis­sion­ers for grant­i­ng sanc­tion to pay arrears in month­ly install­ments greater than 24 and upto a max­i­mum of 36monthly installments.

6. 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 install­ments. 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.

7. 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 install­ment 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.

8. 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.

9. Any dif­fi­cul­ty in imple­ment­ing the cir­cu­lar may be brought to the notice of the Board. Hin­di ver­sion would follow.