Budget Highlights - Central Excise, Customs & Service Tax

Central Excise, Customs & Service Tax

GENERAL

1. FM's Budget speech dwelt on agriculture, public investments in infrastructure, manufacturing and social sector spending.

2. States to be equal partners in economic growth; move to making India cashless society; social sector programmes to continue. Some of the challenges mentioned by the Finance Minister are: poor agricultural income, decline in manufacturing; and the need for fiscal discipline.

3. Govt. proposes to set up 5 ultra mega power projects, each of 4000MW.  AIIMS in Jammu and Kashmir, Punjab, Tamil Nadu, Himachal Pradesh, Bihar and Assam. IIT in Karnataka; Indian Institute of Mines in Dhanbad to be upgraded to IIT. IIM for Jammu and Kashmir and Andhra Pradesh.

4.Visa on Arrival for 150 countries.

5. GOODS AND SERVICE TAX (GST): Finance Minister reiterated his resolve for introduction of GST by April 2016.

6. DIRECT TAX CODE (DTC): Finance Minister said that most of the provisions of contemplated DTC have been incorporated in present Income Tax Act 1961. So DTC chapter is closed for now.

7. LEGISLATIVE CHANGES: A number of positive legislative changes have been made for ease of business, most importantly reduction of upper limit of penalties to be imposed. See in the relevant section.

DIRECT TAXES HIGHLIGHTS

1.Wealth Tax being abolished.

2. Additional 2% surcharge for the super rich with income of over Rs. 1 crore.

3. Rate of corporate income tax to be reduced to 25% over next four years.

4.  An individual with total income up to Rs. 4,44,200 may not pay any tax by investing in various investment and insurance schemes.

5. 100% exemption for contribution to Swachch Bharat, apart from CSR.

CENTRAL EXCISE

Part I: CENTRAL EXCISE ACT, 1944: STATUTORY CHANGES (w.e.f. enactment of Finance Act’ 2015.  Normally it is enacted in First week of April)

1. Amendment in Section 11A

a. When a return is filed the time limit of one year or five year for demanding differential duty shall start from the date on which such return is filed.

b. When a return is filed based on self assessment and duty payable is shown in the return, even though such duty is not paid, NO SCN shall be issued proposing recovery and penalty. The amount admitted in return can be straight way recovered under Section 11 as an arrears of revenue.

c. Time limit for recovery of interest is also introduced, which will start from the date on which duty was paid on which interest is being demanded.

d. All SCNs issued after enactment of Finance Act 2015, shall be governed by amended Section even if they pertain to older period.

[Clause 91 of the Finance Bill, 2015]

2. Amendment in Section 11AC/Rule 25

a.  In non fraud cases maximum penalty is 10% of the duty evaded. Earlier it was up to 100% of the duty evaded.

b.  In non fraud cases if duty and interest is paid either before SCN or within 30 days of communication of SCN, no penalty shall be imposed.

c.  In non fraud cases if duty and interest is paid within 30 days of receipt of adjudication order, the penal liability is 25% of the penalty imposed, meaning thereby that maximum penalty shall be 2.5% of the duty involved.

d.  In fraud cases penal liability is equal to duty evaded.

e.  In fraud cases if duty and interest is paid either before SCN or within 30 days of communication of SCN, penal liability shall be 15% of the duty evaded.  

f.   In fraud cases if duty and interest is paid within 30 days of communication of OIO, penal liability shall be 25% of the duty evaded. 

g.  All cases where no SCN is issued, and SCN is issued after the date, on which Finance Act 2015 is enacted, shall be governed by new provisions.

h.  All cases where SCN is issued, before the date, on which Finance Act 2015 is enacted, but remains un-adjudicated on the date on which FA 2015 is enacted, can claim benefit of no penalty in non fraud case and 15% penalty in fraud case provided duty along with interest is paid within 30 days of enactment of FA 2015. 

i.    All cases where adjudication order is passed after the date on which FA 2015 is enacted, can claim benefit of 2.5% penalty in non fraud case and 25% penalty in fraud case provided duty along with interest is paid within 30 days of communication of order, irrespective of the date on which SCN is issued. 

[Clause 92 of the Finance Bill, 2015]

Part II: CENTRAL EXCISE TARIFF ACT, 1985: STATUTORY CHANGES (w.e.f. 1.3.2015)

1.  The standard ad valorem effective rate of duty of excise (i.e. CENVAT) is being increased from 12.36 % to 12.5%. No separate education cess shall be levied.

[Clause 104 of the Finance Bill, 2015. The above change will come into effect immediately owing to a declaration under the Provisional Collection of Taxes Act, 1931.]

Part III: STATUTORY CHANGES IN RULES (w.e.f. 1.3.2015)

1.  Now formally a dealer or importer can dispatch the goods procured by him to his customer without first bringing it to his registered premises (Rule 11 of CER and Rule 4 of CCR refers). Now by specific provision, transit sales are being recognized for allowing seamless transfer of credit.

2.  Now formally a principal manufacturer or a service provider can send inputs and capital goods to job worker without first bringing them to his registered premises (Rule 11 of CER and Rule 4 of CCR refers).

3.  Export out of India alone shall be eligible for (i) refund of CENVAT credit under Rule 5 of CCR 2004 and (ii) rebate of duty under Rule 18 of CER 2002. However under Rule 19 of CER 2002,   Export out of India as well as supplies to SEZ can be made without payment of duty. This has been done by insertion of definition of export in Rule 5/Rule 18 referred. No such insertion is done in Rule 19 of CER 2002.

4.  Now formally issue of digitally signed invoices and preservation of records in electronic form by a manufacturer is being recognized under Rule 10 and 11 of CER 2002.

5.  CENVAT Credit Rules, 2004 are being amended to –

a.  Increase the time limit for taking CENVAT credit on inputs and input services from the present six months to one year (Rule 4 of CCR).

b.  Principal manufacturer can take credit on the date on which goods are received by job worker directly from supplier of inputs.

c.  Increase the time limit for return of Capital Goods from a job worker from the present six months to two years (Rule 4 of CCR refers).

d.  Now rule 6 of CENVAT Credit Rules teats non-excisable goods at par with exempt goods and services.

6.  Registration process in Central excise is being simplified to ensure that registration is granted within two working days of the receipt of a duly completed application form. Verification of documents and premises, as the case may be, shall be carried out after the grant of the registration. [Notification No.7/2015-Central Excise (N.T.) dated 1st March, 2015]

7.  Circular No.998/5/2015-Central Excise dated 28th February, 2015 allows withdrawal of prosecution where the civil proceedings of duty evasion on identical set of facts have been decided in favor of assessee and same has attained finality.

By: Shuchi Agrawal

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