201502.28
0
0

Proposed Section 11AC in Central Excise In Budget 2015-2016

Penal Provisions under proposed 11AC of CEA,1944 , in Finance Bill 20015 via Budget  2015-2016, is a welcome step from the Finance Minister of India.Finally , the crux of legal ratios as laid down by various courts of law has been summarised to give shape to the proposed Section 11AC of CEA,1944 .

1. evasion of duty or non payment of duty but without  suppression

a) a penalty not exceeding 10% of the duty determined or Rs.5000 whichever is higher shall be payable;

b) no penalty shall be payable if duty and interest payable thereon under section 11AA is paid  before issue of show cause notice

or

no penalty shall be payable if duty and interest payable thereon under section 11AA is paid  within 30 days of issue of show cause notice

c) the penalty will be reduced to 25% provided  the  25% of the penalty out of total penalty  imposed alongwith duty and interst is paid within 30 days of the date of communication of such order.

2. evasion or non payment of duty with  suppression

a) a penalty equal to the duty so determined shall be payable.

b) for the period beginning with 8th April, 2011 and upto the date of assent to the Finance Bill, 2015, the penalty payable shall be 50% of the duty so determined provided details of transactions of evasion are recorded

c) 15% penalty shall be payable, of the duty determined, if duty and interest payable thereon under section 11AA is paid  within 30 days of issue of show cause notice

d) the penalty will be reduced to 25% provided  the  25% of the penalty out of total penalty  imposed alongwith duty and interest is paid within 30 days of the date of communication of such order.

Appellate Order To Effect Penalty 

a. If duty is reduced by way of an order of Tribunal or Appellate authority then , percentage of penalty shall reduce accordingly depending upon the class of evasion as enumerated above i.e evasion with suppression or evasion without suppression .

b.  If duty is increased by way of an order of Tribunal or Appellate authority then , percentage of penalty shall increase accordingly depending upon the class of evasion as enumerated above i.e evasion with suppression or evasion without suppression .

Further , very important explanations has been added to the proposed Section 11AC

Applicability of   New Section 11AC

Explanation I covers the following 3 situations :

Situation 1 - where no show cause notice has been issued before the the date of assent of president to   the Finance Bill,2015  , the provisions of to be enacted new Section 11AC of the Finance Act,2015 shall be applicable .

Situation 2 - where  show cause notice has been issued before the the date of assent of president to   the Finance Bill,2015

                                                                  but

order is not issued before  the assent of the president to the Finance Bill 2015 , then provisions of to be enacted new Section 11AC of the Finance Act,2015 shall be applicable .

                                                         Provided 

such person pays the interest, duty and penalty in terms clause d) of proposed Section 11AC within 30 days from the date on which  the Finance Bill ,2015 receives the assent of the President .

Situation 3 - where  order is passed after  the assent of the president to the Finance Bill 2015 , then provisions of to be enacted new Section 11AC of the Finance Act,2015 shall be applicable .

                                                         Provided 

such person pays the interest, duty and penalty in terms of clause b) or e) of proposed Section 11AC  within 30 days from the date of communication of the order.

Explanation II to the proposed Section 11AC is equally important as it explain the word "specified records"

It is pertinent to note that similar explanation already  existed, since 2011, in Section 73 of Finance Act,1994 for service tax as below 

Explanation under Section 73 of Finance Act,1994

 For the purposes of this sub-section and section 78, “specified records” means records including computerized data as are required to be maintained by an assessee in accordance with any law for the time being in force or where there is no such requirement, the invoices recorded by the assessee in the books of account shall be considered as the specified records.;”

With the proposed new Section 11AC,  i foresee reduction in disputes atleast in those appeals which used to be filed for getting relief in penalty .

Anand Mishra, Founder Advocate, AMLEGALS

(  The author is a leading indirect tax advocate handling cases in CESTAT & High Courts of India. He can be contacted on anand@amlegals.com and for more please refer www.amlegals.com . )

Leave a Reply

Your email address will not be published. Required fields are marked *

Current day month ye@r *