The government has decided to enhance the time period of recovery of federal excise duty (FED) from three years to past five years through a major amendment in section 14 of the Federal Excise Act 2005 in the coming budget for 2011-12.
Sources told Business Recorder here on Sunday that the powers of the officials of Inland Revenue would be enhanced for recovery of the past dues of FED from 3 years to five years period. Finance Act 2011 is expected to amend the Federal Excise Act 2005 to bring uniformity in the period of recovery of federal excise duty and sales tax to avoid any possible revenue loss in 2011-12.
Sources stated that the Federal Board of Revenue (FBR) has proposed to amend the Federal Excise Act 2005 to ensure applicability of similar period for recovery of sales tax and excise duty. Details show that section 14 of Federal Excise Act, 2005 provides the period of recovery for 3 years, while under section 17 of the Federal Excise Act, 2005 the prescribed period for retaining record is 6 years. The period for recovery of sales tax is 5 years and for income tax purposes, record keeping period is 6 years.
In the absence of recovery period of five years, there is strong possibility of duty loss by virtue of limitation of three years. It is, therefore, proposed that the period of show-cause notice under section 14 of the Federal Excise Act, 2005 be enhanced from three years to five years for making the provision at par with corresponding provisions of the Sales Tax Act, 1990 so as it will also be comparable to the income tax law.
The section 14 of the Federal Excise Act relates to the recovery of unpaid duty or of erroneously refunded duty or arrears of duty, etc. Where any person has not levied or paid any duty or has short levied or short paid such duty or where any amount of duty has been refunded erroneously, such person shall be serviced with notice requiring him to show cause for payment of such duty provided that such notice shall be issued within three years from the relevant date. The Federal Excise Officer would determine the amount of duty payable by a person and he shall pay the amount so determined along with default surcharge and penalty as specified by such officer under the provisions of this Act, section 14 of the Act stated.
Through the Finance Act 2011, the said period of three years would be enhanced to five years for making the provision at par with corresponding provisions of the Sales Tax Act, 1990 and the income tax law.