WELCOME
An overview on
RECOVERY OF ARREARS OF
REVENUE
“Doubt is not a pleasant
condition, but certainty is
absurd”
-Voltaire
RECOVERY OF ARREARS OF REVENUE
Arrears arise as a result of OIO, OIA, Tribunal
orders, Courts’ Orders or Default under Rule 8
Thousands of crores due
Not only huge amount is locked up, recovery of
arrears helps in achieving the targets and
nation building.
Board has set it as a top priority area
Therefore, is an important task
FOLLOWING ARE NOT ARREARS:
 Unconfirmed demands
 Orders set aside
 Orders sent for denovo adjudication
 SCNs transferred to call book
 Cases under investigation
RECOVERABLE OR NOT
 All stayed arrears are not recoverable.
 All unstayed arrears are recoverable.
( Chief Commissioner (TAR) letter in C.No.CC(TAR)79/2011
dated November 29,2011)
Recoverable(unstayed) arrears are three types Restrained
 Fit for write-off
 Unrestrained
 Unstayed but Restrained Arrears
Cases where department is prevented from recovery for
some reason-

BIFR /DRT/OL cases
 Cases where Stay Applications by Commissioner(A)/CESTAT
not decided
 Cases where 180 days has elapsed after grant of stay by CESTAT
but party has applied for extension of stay before CESTAT
 Cases pending with Settlement Commission and R.A
 Cases pending under Section 11C (Circular 684/75/2002 CX)
Fit for Write –Off Cases:
 Units closed
 Defaulters not traceable
 Directors of Public/Private Limited Companies
available but assets of the Company not available
 All types of action to recover exhausted
Unrestrained Arrears:
All other arrears are “unrestrained recoverable” arrears.
For example cases where
 Sec 11 action initiated/intended
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Certificates to District Collector are sent
Sec 142 action initiated/intended
letters are sent to DGCEI/DRI/FIU for identifying assets
certificates to other Customs /C.E formations awaiting reply
awaiting sale of movable/immovable property
cases where Sec 87 action initiated/intended
other recoverable arrears
cases where factories are running/operational and assets are available
ACTIONS :
 Persusasive action
 Coercive action
 Write off
COERCIVE ACTION:
 Deducting from any money owed to the defaulter
(Sec 11)
 Attachment and sale of excisable goods belonging to the
defaulter (Sec 11 )
 Attachment and sale of goods in possession/custody of
transferee/successor (Sec 11)
 Certificate Action to the District Collector (Sec 11)
 Deducting any money owed to the defaulter/detention and sale
of goods under any other officers of Customs , Central Excise
(Sec 142 (1 ) (a)&(b))
 Attachment and sale of movable and immovable properties
(Sec 142 (1)(c) (ii))
COERCIVE ACTION
Primary responsibility is on Range Officers and
Divisional AC/DC
Headquarters level AC/DC (ARC) is authorised
by the Commissioner for attachment and sale
of movable and immovable properties after the
proposal is received from the divisional AC/DC
Commissioner (ARC) at metros monitors the
recovery
COERCIVE ACTION-STATUTORY PROVISIONS
 Section
11 of CEA, 1944 – Recovery of sums due to the
Government
- Any duty and any other sums payable under the
Act or Rules
- Officer may deduct the amounts from any money
owing to such person which is in the officers hand
or disposal or control
- or, the officer to recover the amount by attachment
or sale of excisable goods belonging to the defaulter
STATUTORY PROVISIONS ….CONTD.
if not so recovered, the officer should prepare a
certificate and send it to the District Collector to
recover it as arrears of land revenue (for amounts less
1
than Rs.
lakh only and if not recovered within 3
months attachment movable/immovable properties
process to be adopted. As per Board circular No. 54/95
dated 30-5-95 and 552/48/2000Cx dt. 4-10-2000.)
STATUTORY PROVISIONS ….CONTD.
- If the defaulter transfers or disposes whole or
part of the business/trade or effects change in
the ownership, all excisable goods, materials,
preparations, plants, machineries, vessels,
utensils, implements and articles in the
custody or possession of the successor to be
obtained and sold after obtaining written
approval from the Commissioner of Central
Excise. (Since 2004)
STATUTORY PROVISIONS ….CONTD
 After exhausting the options mentioned already, if
dues still remain unrecovered, action to be
initiated under Sec. 142 (1)(b) of Customs Act
made applicable to Central Excise matters as per
Notification No. 68/63 CE dated 4-5-1963 by which
AC/DC can require any other AC/DC of
customs/excise anywhere in India to deduct from
any refund/rebate or detain and sell any goods
belonging to the defaulter .
STATUTORY PROVISIONS ….CONTD.
After exhausting the options mentioned
already, if dues still remain unrecovered, action
to be initiated under Sec. 142 (1) (c)(ii) of
Customs Act, 1962 made applicable to Central
Excise matters as per Notification No. 68/63 CE
dated 4-5-1963
-
CUSTOMS (ATTACHMENT OF PROPERTY OF DEFAULTERS
FOR RECOVERY OF GOVERNMENT DUES) RULES, 1995
 Rule 3 - Issue of Certificate - (Appendix I)
 Rule 4 - Issue of Notice (Appendix II)
 Rule 5 - Attachment of property (Appendix
IIIA for Movable Property and
Appendix III B for Immovable
property)
 Rule 6 - Attachment not to be excessive
 Rule 7 - Attachment between sunrise and
sunset
CUSTOMS (ATTACHMENT OF PROPERTY OF DEFAULTERS
FOR RECOVERY OF GOVERNMENT DUES) RULES, 1995
….Contd.
 Rule 8 -
Inventory
 Rule 9 - Defaulter or his representative not
competent to mortgage, lease or
otherwise deal with property or any
transfer or delivery of the property to
be void.
 Rule 10 - Share in property- attachment to be
made by notice to the defaulter
prohibiting from transferring the share
or interest or changing it in any way
CUSTOMS (ATTACHMENT OF PROPERTY OF DEFAULTERS
FOR RECOVERY OF GOVERNMENT DUES) RULES, 1995
….Contd.
 Rule 11 - Attachment of property in custody of
court or public officer- Authorised
officer to give a notice in Appendix V
or VI to such court or the officer
requesting that such property and any
interest or dividend becoming payable
thereon may be held subject to the
further order of the authorised officer.
 Rule 12 - Service of notice of attachment
 Rule 13
Proclamation of attachment
CUSTOMS (ATTACHMENT OF PROPERTY OF DEFAULTERS
FOR RECOVERY OF GOVERNMENT DUES) RULES, 1995
….Contd.
 Rule 14
Property exempt from attachment
- Any property exempted from attachment
and sale for execution of a decree of a civil
court as per Code of Civil Procedure 1908
to be exempt from attachment
 Rule 15 - Sale of property
- to be initiated after 30 days of the
attachment of the property.
Commissioner to fix the reserve price
CUSTOMS (ATTACHMENT OF PROPERTY OF DEFAULTERS
FOR RECOVERY OF GOVERNMENT DUES) RULES, 1995
.
….Contd
 Rule 16 - Negotiable instrument and
shares in a corporation
– to be sold through a broker – order of
attachment on negotiable instrument
in the form of Appendix VII A. In the
case of shares, order in Appendix
VIIB to be issued to the defaulter and
principal officer of the company
prohibiting them from transfer of any
shares
CUSTOMS (ATTACHMENT OF PROPERTY OF DEFAULTERS
FOR RECOVERY OF GOVERNMENT DUES) RULES, 1995
….Contd.
 Rule 17 - Proclamation of sale - to be made in the
language of the district
 Rule 18 - Contents of the proclamation – shall
state the time and place of sale and
specify
 (a) Property to be sold
 (b) the revenue if any, assessed on the
property
 (c) the amount for the recovery
 (d) the reserve price, etc.
CUSTOMS (ATTACHMENT OF PROPERTY OF DEFAULTERS
FOR RECOVERY OF GOVERNMENT DUES) RULES, 1995
.
….Contd
 Rule 19 - Mode of making proclamation – Beat of
drum or other customary mode and
copy of the proclamation shall be affixed
on the property as well as in the office of
the proper officer
 Rule 20 - Setting aside of the sale where defaulter
has no saleable interest – within 30 days
of the sale
CUSTOMS (ATTACHMENT OF PROPERTY OF DEFAULTERS
FOR RECOVERY OF GOVERNMENT DUES) RULES, 1995
.
….Contd
 Rule 21 - Confirmation of the sale – in the form of
Appendix X – If confirmation is not
made, notice to the interested parties to
be issued in the form of Appendix IX
 Rule 22 - Sale certificate in the form of Appendix
XI
CUSTOMS (ATTACHMENT OF PROPERTY OF DEFAULTERS
FOR RECOVERY OF GOVERNMENT DUES) RULES, 1995
.
….Contd
 Rule 23 - Purchaser’s title – from the time the
property sold and not from the
time the sale become absolute.
 Rule 24 - Irregularity not to vitiate sale, but
injured person may sue
 Rule 25- Prohibition against bidding or purchase
by officers
 Rule 26 - Prohibition against sale on holidays
CUSTOMS (ATTACHMENT OF PROPERTY OF DEFAULTERS
FOR RECOVERY OF GOVERNMENT DUES) RULES, 1995
.
….Contd
 Rule 27
- Disposal of the sale proceeds
 (a) first towards meeting of the cost of the
sale
 (b) towards the recovery of the arrears
mentioned in the certificate and cost of
detention of the property
 (C) the balance if any towards recovery of any
other government dues payable by the
defaulter
 (d) balance if any, to be paid to the defaulter
CUSTOMS (ATTACHMENT OF PROPERTY OF DEFAULTERS
FOR RECOVERY OF GOVERNMENT DUES) RULES, 1995
….Contd.
 Rule 28 - Procedure on death of defaulter – if
defaulter dies after the certificate under
Rule 3 is issued, proceedings to be
against the legal representatives of the
defaulter
 Procedure and formats of the Appendices given in
Board’s Circular No. 365/81/97-CX dated 15-12-1997
Procedure where defaulter is not traceable:
 Write to Sub Registrar to get details of immovable properties
 Write to Municipal authorities to ascertain the title/ownership

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of the land/building where the unit is located
Write to Income Tax Department and obtain Income Tax
Returns
Write to Bank and obtain details likd cash balance / FD’s
/lockers etc.,
Obtain details from RTA on the vehicles/cars
Write to Registrar of Companies (ROC) to ascertain the assets
and liabilities , any new companies started, details of Directors
and their assets etc.,
 Write to Post Office for ascertaining changed address
and whereabouts
 Write to Police for changed address and whereabouts
 Write to respective trade associations for whereabouts,
present address and activities
 Make discreet enquiries to trade rivals
- Standing order No. 09/2010 CE Dt. 30.9.2010 issued
by Hyderabad III Commissionerate
WRITE OFF
Sl. No.
Competent Authority
Constitution of the
Committee
Powers delegated
1.
Chief Commissioner of Customs
& Central Excise/ Central Excise/
Customs
Committee of two Chief
Commissioners of Customs &
Central Excise/ Central Excise/
Customs and the Chief
Commissioner (TAR)
(a) Full powers for abandonment
of irrecoverable amounts of fines
and penalties imposed under
Customs Act, 1962, and Central
Excise Act, 1944.
Committee of two Commissioners
of Customs & Central Excise/
Central Excise/ Customs and one
Commissioner (TAR) nominated
by CC(TAR))
(b) To write off irrecoverable
amounts
of
Customs/Central
Excise duties upto Rs. 15 lakh
subject to a report to the Board
(a) Full powers for abandonment
of irrecoverable amounts of fines
and penalties imposed under
Customs Act, 1962, and Central
Excise Act, 1944.
2.
Commissioner of Customs &
Central Excise / Commissioner of
Customs / Commissioner of
Central Excise
(b) To write off irrecoverable
amounts
of
Customs/Central
Excise duties upto Rs. 10 lakh
subject to a report to the Chief
Commissioner
WRITE OFF ….
 Interest amount would get automatically written off
once the duty involved is written off.
 Proforma for sending proposals for written off is very
stringent and exhaustive and is required to be signed
by the DC/AC Incharge.
 Suppose duty , fine, penalty are paid and only interest
is required to be paid, can it be written off under this
Circular?
 (Authority -Circular 946/07/2011 dt 01-06-2011)
CBEC Circular 788/21/2004CX dated 25-5-2004
 If stay application is filed before Commissioner
(Appeals), no coercive action till the disposal of
the stay application.
 Normally, 3 months from the date of
communication of the order/OIA to be provided
before taking coercive action.
 In respect of Tribunal/High Court/GOI orders, one
month to be given before taking coercive action.
CBEC Circular 778/21/2004CX dated 25-5-2004… contd.
 In case of Supreme Court Order only 15 days to be
given.
 Same procedure to be applicable for recovering of
defaulted amounts under Rule 8 also.
 If only is appeal is filed before Commissioner (A)
and no stay application is filed, recovery
proceedings to be started after 60 days.
CBEC Circular 778/21/2004CX dated 25-5-2004… contd.
 If only appeal is filed to Tribunal but no stay
application is filed, against Commissioners orders,
90 days time to be given before taking coercive
action
 in respect of stay application filed before Tribunal
against Commissioner’s orders, 6 months time or
time till the disposal of the stay petition ,
whichever is earlier to be given- (Sec. 35C(2A) of
CEA,1944). This is for first stage appeals only.
Action on expiry of stay orders by CESTAT
(Circular No. 925/15/2010 Cx dated
25.5.2010):
 Department to issue a simple letter asking the party to
pay and party will be at liberty to go back to the
tribunal for seeking extension of stay
 Tribunal order granting indefinite stay could be
challenged before the jurisdictional High Court
Provisional Attachment of Property during
Pendency of Proceedings
11
 Sec.
DDA of CEA, 1944 w.e.f. 13-11-2006 (Sec 73C
in case of S.T)provides for provisional attachment
of property to protect the interest of revenue
during the pendency of any proceedings u/s 11A or
11D
 Proceedings to be initiated only after SCN is issued
 Proposal to be put up to Commissioner within one
month of issue of notice
Provisional Attachment of Property during Pendency
of Proceedings ….Contd.
 Grounds to entertain the belief that the noticee
would dispose off or remove the property and the
source of information should be clearly stated.
 The remedy of attachment being extraordinary in
nature, to be resorted to with utmost
circumspection, maximum care and caution.
 Disciplinary action, if powers are exercised
frivolously without sound reasons
Provisional Attachment of Property during Pendency of
Proceedings … contd.
 Commissioner to issue notice to the person and
after following principle of natural justice grant
approval
 Offences covered are: clandestine removal, undervaluation, fraudulant cenvat credit availment,
issue of invoice without delivery of goods, claiming
of fraudulent refund/rebate.
Provisional Attachment of Property during Pendency of
Proceedings …. contd.
 Attachment only if duty or credit is above Rs.25
lakhs
 Period of attachment to be operational only for 6
months, Chief Commissioner can extend for
another 2 years
 Personal property in use of the person of a sole
proprietorship or partners of a firm should not be
attached.
Immovable property used in
commercial purpose can be attached.
Provisional Attachment of Property during Pendency of
Proceedings … contd.
 Movable property to be attached only if
immovable property is not available
 Normal manufacturing activities should not be
hampered, i.e., raw materials/inputs should not be
attached.
 Inventory to be drawn and copy to be handed over
to the person
Provisional Attachment of Property during Pendency of
Proceedings … contd.
 Property exempted for sale by a decree of a civil
court not to be attached
 Authority Board Circular No. 874/12/2008 CX dated
30-6-2008
RECOVERY OF S.T ARREARS
 SECTION 87
 Recovery of any amount due to Central Government
 (a) the Central Excise Officer may deduct or may
require any other Central Excise Officer or any officer
of customs to deduct the amount so payable from any
money owing to such person which may be under the
control of the said Central Excise Officer or any officer
of customs
RECOVERY OF S.T ARREARS….
 (b) (i) the Central Excise Officer may, by notice in
writing, require any other person from whom money is
due or may become due to such person, or who holds
or may subsequently hold money for or on account of
such person, to pay to the credit of the Central
Government either forthwith upon the money
becoming due or being held or at or within the time
specified in the notice, not being before the money
becomes due or is held, so much of the money as is
sufficient to pay the amount due from such person or
the whole of the money when it is equal to or less than
that amount
RECOVERY OF S.T ARREARS….
 (iv) every person to whom a notice is issued under this
section shall be bound to comply with such notice,
and, in particular, where any such notice is issued to a
post office, banking company or an insurer, it shall not
be necessary to produce any pass book, deposit receipt,
policy or any other document for the purpose of any
entry, endorsement or the like being made before
payment is made, notwithstanding any rule, practice
or requirement to the contrary;
RECOVERY OF S.T ARREARS….
 (iii) in a case where the person to whom a notice under
this section is sent, fails to make the payment in
pursuance thereof to the Central Government, he shall
be deemed to be an assessee in default in respect of the
amount specified in the notice and all
the consequences of this Chapter shall follow;
RECOVERY OF S.T ARREARS….
 (c) the Central Excise Officer may, on an authorisation by
the Commissioner of Central Excise, in accordance with
the rules made in this behalf, distrain any movable or
immovable property belonging to or under the control of
such person, and detain the same until the amount payable
is paid; and in case, any part of the said amount payable or
of the cost of the distress or keeping of the property,
remains unpaid for a period of thirty days next after any
such distress, may cause the said property to be sold and
with the proceeds of such sale, may satisfy the amount
payable and the costs including cost of sale remaining
unpaid and shall render the surplus amount, if any, to such
person;
RECOVERY OF S.T ARREARS….
 (d) the Central Excise Officer may prepare a certificate
signed by him specifying the amount due from such
person and send it to the Collector of the district in
which such person owns any property or resides or
carries on his business and the said Collector, on
receipt of such certificate, shall proceed to recover
from such person the amount specified there under as
if it were an arrear of land revenue.
S.T. ARREARS VIS-À-VIS CENTRAL EXCISE ARREARS
 No provision for write off of ST arrears
 No provision for recovery of ST arrears from the
successor/transferee
 Special provision for recovery of ST arrears from any
funds owing to the defaulter which may be lying with a
third party /Bank/Post Office/Insurance Company etc.,
GENERAL
 One more effective provision is powers u/s 37E to
publish name of persons, companies, etc. Even
names of partners, directors, managing agents,
secretaries, members of associations can be
published. In case of penalty no publication till
the appeal period is over.
 Penalty to be paid in cash only and not by debiting
the CENVAT credit.
GENERAL … contd.
 Powers of recovery can be used against surety or
guarantor also.
 Award scheme extended to informants of property
of defaulters – MF (DR) letter No. 13011/3/2004
CUS (AS) dated 12-8-2005
 Adjustment from refund/ rebate claims only after
notice issued and principles of natural justice
followed
GENERAL … contd.
 Department itself cannot debit in PLA or
Cenvat credit account to recover arrears.
 Goods not belonging to the person but under
his control can be attached and sold
 Committee of Disputes (COD) procedure
regarding appeals against PSUs dispensed
with. (Director (Judicical Cell), instructions
vide F.No. 390/R/262/09-JC dated 24.3.2011)
GREY AREAS
 Power to grant installments?
 Adjustment from the amounts due to the another
unit of the same company with different
registration?
 Often machineries mortgaged to financial
institutions and raw materials hypothecated to
banks. Can they be attached?
 Meaning of the successor of the business- change
of ownership/integrity of business remains the
same/ substantially changed
Crown Debts
 Krishna Lifestyle Technologies Ltd. Vs. UOI
-
Recovery of arrears- state has no priority
State priority not applicable to secured creditors
Attachment by CEX has no consequences over the
bank’s right
 Bombay High Court judgment delivered in Feb., 2008
has been upheld by Supreme Court in 2009.
 Supreme Court held that excise authorities would have
priority of claim only if there is a specific provision
giving such priority to the state dues.
Crown Debts….
 Section 11E of CEA/Sec 88 of FA : (w.e.f 8-4-2011)
creates 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 Banks
and Financial Institutions 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.
Disclaimer:
This presentation is only meant to refresh your
knowledge on the subject and all are requested
to go through the relevant
sections/rules/regulations/circulars/directions/
orders etc. before taking action in specific cases.
THANK YOU
D.V.REDDY
Additional Commissioner