A major anomaly has been removed in the Federal Excise Act 2005 to empower the excise officials for imposing default surcharge retrospectively on persons, who had claimed wrong adjustment of excise duty, inadmissible refund and drawback on exports of goods manufactured from duty paid inputs, etc.
Experts told Business Recorder on Tuesday that the Finance Act 2008 has removed a lacuna in the Federal Excise Act 2005, which enabled the excise officials to recover default surcharge along with the principal amount of excise duty wrongly claimed by the registered person.
This provision for recovery of the amount along with surcharge/penalty is available in the Sales Tax Act and now the Federal Excise Act has also been brought in line with the sales tax law. Field formations of the Federal Board of Revenue (FBR) have started enforcing the provision, wherever required.
In case of inadmissible adjustment, refund/drawback the period of default shall be calculated from the date of such adjustment, refund/drawback has been obtained by the registered person, they said. Prior to budget (2008-2009), if a person claims an illegal refund or drawback of excise duty, the department can recover the principal amount for past period. However, the excise officials were not allowed the recover the default surcharge during the past period.
For example, the person, who has claimed inadmissible refund, has utilised government money for one or two years. In case of recovery proceedings after two years of claiming refund, the default surcharge would also be recovered from the wrong claimant.
Experts further explained that the default surcharge was recoverable from a person if he fails to pay the duty within the prescribed time as per provisions of section 8. However, if a person claims a refund or drawback or make an adjustment which is not admissible to him the section lacks provisions to levy default surcharge on such person. To remove this anomalous condition section 8 was amended in budget 2008-2009 as is the case under section 34 of Sales Tax Act, 1990.
Under the revised section 8, Default surcharge, if a person does not pay the duty due or any part thereof within the prescribed time or receives a refund of duty or drawback or makes an adjustment which is not admissible to him, he shall, in addition to the duty due, pay default surcharge at the rate of one and a half per cent per month of the duty due, refund of duty or drawback.
Explanation: For the purpose of this section,- (a) the period of default shall be reckoned from the date following the due date on which the duty was payable to the preceding day on which the duty is actually paid; and (b) in case of inadmissible adjustment or refund of duty or drawback, the period of default shall be reckoned from the date of such adjustment or as the case may be, refund of duty or drawback is received".