In this article an attempt has been made to analyse the key provisions amended/proposed to be amended related to Central Excise Act and rules made thereunder:
1. Effective Rate of Duty
Standard ad valorem rate of duty of excise is being increased from 12% to 12.5% for most of the items. Similarly, duty of excise is increased from 12% to 12.5% for goods covered by the Medicinal and Toilet Preparations Act, 1955. However, the Education cesses of 3% applicable on the duty amount are being exempted. Therefore, the effective rate of duty for most of the items would be 12.5% in stead of 12.36%.
There is no increase in the concessional rates of duties of 2% or 6%.
(This amendment is effective from 1-3-2015)
a. Presently, if duty has not been paid due to reasons like fraud/collusion/wilful misstatement/suppression of facts or contravention of any provisions with an intention to avoid duty, then penalty equal to the amount of duty involved is leviable. However, if details regarding such transactions are available then penalty would reduce by fifty per cent vide Section Also, if duty liability along with applicable interest has been paid, before issuance of show cause notice (SCN), the penalty shall get reduced to maximum up to 25% of the duty.
b. However, as per the proposed amendment, the availability of transaction in records will have no bearing on reduction of penalty. Moreover, in cases, where there is no involvement of factors like fraud, etc.; the penalty not exceeding 10% will be leviable. In such bona fide cases, if the duty along with interest, before issuance of SCN or within 30 days of SCN, no penalty would be leviable. In such cases, if the duty along with interest has been paid within 30 days of commnunication of the order, the penalty will get reduced to 2.5% of the duty amount.
c. Moreover, as per the proposed amendments, if the duty is wilfully evaded, the penalties shall be payable as under:
i. If the duty along with interest and reduced penalty is paid within 30 days of SCN, the penalty shall be 15% of the duty
ii. If the duty, interest and reduced penalty is paid within 30 days of the order, the penalty shall be 25% of the duty
iii. In other cases, 100% of the duty amount
The below table summarises the proposed changes pertaining to the penalty in cases involving mens rea and other cases:
Proposed Penalty under Section 11AC (Bona fide cases)
Proposed Penalty under Section 11AC (Mala fide cases)
Cases other than
• Wilful mis-statement
• Suppression of facts
• Contravention of provisions of the Act with intent to evade Excise Duty
• Wilful mis-statement
• Suppression of facts
• Contravention of provisions of the Act with intent to evade Excise Duty
Non-levy/Non-payment/Short-levy/Short-payment/Erroneous refund of Excise Duty
Penalty not exceeding 10% of amount of duty or
Penalty equal to 100% of Excise Duty
50% reduction in penalty where details relating to transactions are available in specified records only for the period from 8th April, 2011 to the date of enactment of Finance Bill.
3. Excise Duty with interest paid within 30 days from the date of service of SCN
Reduced penalty of 15% of Excise Duty provided such reduced penalty is also paid within 30 days from the date of service of SCN
Excise Duty with interest and reduced penalty as per these Sections is paid within 30 days from the date of receipt of Adjudication Order
25% of the penalty imposed
25% of Excise Duty
If Commissioner (Appeals), Appellate Tribunal or Court modifies Excise duty liability, penalty to be modified accordingly. Benefit of reduced penalties is proposed to be made available provided Excise duty, interest and reduced penalty is paid within 30 days from the date of receipt of the Order modifying Excise Duty liability.
The penalty under sections 37(4) and 37(5) have been increased from
Rs. 2,000 to Rs. 5,000.
The above changes shall be effective from the date of enactment of the Finance Bill, 2015 (The Bill).
Moreover, general penalty prescribed under rule 25 of Central Excise Rules, 2004 (CER) has been increased from
Rs. 2,000 to Rs. 5,000 w.e.f. 1-3-2015
3. Recovery of duties:
a. Presently, relevant date for the purposes of calculating time limit for recovery of duties is the date of filing return. However, the cases where return is filed belatedly are not covered. Now, it has been proposed that date of filing of return would be the relevant date irrespective whether the return was filed on time or belatedly. Moreover, in respect of interest not paid on duties, the relevant date is proposed to be the date of payment of duty.
b. Self-assessed duty liability as per return which has not been discharged by the assessee can be recovered without issuance of show cause notice as per the proposed introduction of a new sub-section (16).
The above amendments to come into effect from the date of enactment of the Bill.
a. Compulsory online registration: Application for registration or de-registration is made compulsory through online procedure at website www.aces.gov.in
b. Compulsory PAN based Registration
i. Applicants other than Government Departments intending for registering themselves under Central Excise shall compulsorily have their Permanent Account Number (PAN) failing which No Registration Certificate shall be issued.
ii. Existing temporary registrants other than Government Department shall apply for PAN based registration within 3 months failing which their temporary registration shall stand cancelled. Extension for time limit of 3 months can be provided by the jurisdictional authority for one month on the basis of reasons specified by the applicant. If the assessee makes application beyond 1 month then an opportunity of being heard shall be provided thereafter the jurisdictional authority shall pass an appropriate order.
c. Compulsory Details Required
i. Applicant shall mandatorily provide its mobile number and e-mail id in the application form for communication with the department. Also, existing registrants who have not provided its communication details shall submit amended application within 3 months
ii. Requirement of Business Transaction Numbers: Business Transaction Numbers obtained from other Governments or agencies are to be filled in the application form if they are already issued or the certificate should be amended after procuring such numbers. Certain examples of Business Transaction Numbers are provided such as Customs Registration No (BIN No.), Import Export Code (IEC) Number, State Sales Tax /(VAT) Number, Central Sales Tax Number, Company Index Number (CIN), Service Tax Registration Number. Existing registrants are required to amend its application accordingly within 3 months
d. Registration Certificate within 2 days: It has been provided that post verification of documents and premise the Registration Certificate shall be issued by the DC/AC within 2 days instead of 7 days of receipt of duly completed online application form.
e. Online Registration Certificate: Registration Certificate which is issued online shall be an adequate proof of registration. Applicants are now not required to take signature of issuing authority on the said Registration Certificate.
f. Submission of Documents: The applicant shall tender self attested copies of the following documents at the time of verification of the premises:
i. Plan of the factory premises;
ii. Copy of the PAN Card of the proprietor or the legal entity registered;
iii. Photograph and Proof of the identity of the applicant;
iv. Documents to establish possession of the premises to be registered;
v. Bank account details;
vi. Memorandum or Articles of Association and List of Directors; and
vii. Authorisation by the Board of Directors or Partners or Proprietor for filing the application by a third party.
g. Physical Verification
The authorised officer has been made responsible to verify the premises physically within 7 days from the date of receipt of application through online. If any error is found by the concerned authority or certain clarifications are required, the applicant shall rectify the same within 15 days from the date of intimation failing which registration shall stand cancelled. Also, the assessee would be given an opportunity to present his case against the cancellation and if the reasons provided are reasonable, the officer shall not cancel the registration.
If during physical verification it is found that the premise is non-existent, the registration shall stand cancelled. The applicant would also be provided an opportunity of being heard.
h. Change in Constitution
Change in the Constitution shall be intimated to the Jurisdictional Officer within 30 days by way of amendment in the registration details. Any change in the Constitution leading to change in PAN shall require a fresh Registration Certificate
i. Deregistration within 30 days
Earlier, if a registered person ceases to carry on the business he/she may de-register himself by physically submitting a declaration along with the Registration Certificate. However, now only filing of such application will suffice. If there are no dues pending against the person, the application for deregistration shall be approved within 30 days from the date of filing online declaration which shall be accordingly communicated to the assessee.
j. Cancellation of Registration
Earlier revocation/suspension of Registration could be done only if the holder of such certificate or any person in his employment, is found to have committed breach of any of the provisions of the Act or the rules made thereunder or has been convicted of an offence under section 161, read with section 109 or with section 116 of the Indian Penal Code (45 of 1860). However, now the Registration of an assessee may get cancelled due to the following reasons:
i. Where on verification, the premises proposed to be registered is found to be non-existent;
ii. Where the assessee does not respond to request for rectification of error noticed during the verification of the premises within fifteen days of intimation;
iii. Where there is substantial misdeclaration in the application form; and
iv. Where the factory has closed and there are no dues pending against the assessee.
The assessee shall also be provided a reasonable opportunity of being heard against the proposed cancellation by the AC/DC.
The above amendments shall come into effect from 1st March, 2015.
(Notification 7/2015-CE (NT) dated 1st March, 2015 w.e.f. 1st March, 2015)
5. Records can be maintained in electronic form
Rule 10 of the Central Excise Rules, 2002 provides for maintenance of daily stock account by every assessee having description of goods manufactured, opening balance, quantity produced or manufactured, inventory of goods, quantity removed, assessable value, the amount of duty payable and particulars regarding amount of duty actually paid. Also, first page and the last page of each such account book shall be duly authenticated by the producer or the manufacturer or his authorised agent. Now, assessees can maintain records in the electronic form provided that every page of the record shall be authenticated by a means of digital signature.
CBEC shall also specify conditions, safeguards and procedures to be followed by the assessee who wishes to preserve digitally signed records through notification.
The above changes will come into effect from 1-3-2015
6. Invoice can be signed digitally
With effect from 1-3-2015, Sub-rule (8) has been inserted under Rule 11 which lays down that invoice issued by a manufacturer under Rule 11 can be authenticated by means of a digital signature. However, if the duplicate invoice meant for transporter is digitally signed, then the hard copy of the duplicate invoice should be self-attested by the manufacturer. Also, the Board may, by notification, specify the conditions, safeguards and procedure to be followed by an assessee using digitally signed invoice.
7. Late filing Fees
If an assessee fails to submit any return or Annual Financial Information Statement or Annual Installed Capacity Statement referred to in Rule 12 within the prescribed time then penalty of
Rs. 100 per day subject to a maximum of Rs. 20,000 for the period of delay in submission of each such return or statement shall be levied.
Similar late fees has also been prescribed for the delay in filing returns required to be filed by 100% EOUs under Rule 17(3).
The above changes are in effect from 1-3-2015.
8. Power to impose restriction extended to registered importers
Rule 12CCC of Central Excise Rules, 2002 empowers the Central Government to specify the restrictions if there is evasion of duty or to prevent evasion of duty. However, the rule provided that such measures could be imposed for manufacturer, first stage and second stage dealer or an exporter. Now, such restrictions can also be provided by the Central Government for registered importer, with effect from 1-3-2015.
9. Applicability of Rules to the Importer
a. Rule 22 specifying the details to be furnished and audit of assessee are now been made applicable to importer who issues an invoice on which CENVAT credit can be taken also.
b. Rule 25 of Cenvat Credit Rules, 2002 which prescribes the reasons whereby goods can be confiscated and penalty can be levied. It has been amended to include importers in its gamut.
c. Importers who are issuing invoices need to prepare invoices as per Rule 11 of Central Excise Rules, 2002.
(Notification 8/2015-CE (NT) dated 1st March, 2015 w.e.f. 1st March, 2015)
10. Submission of Undetaking in lieu of Bond
Central Excise (Removal of Goods at Concessional Rates of Duty for Manufacture of Excisable Goods) Rules, 2001 allows Manufacturer to receive goods for specified use at concessional rate of duty. Earlier, to avail the exemption a general bond with surety or security was to be submitted. Now, submission of letter of undertaking is also allowed in case of specified Manufacturers.
(Notification 9/2015-CE(NT) dated 1st March, 2015 w.e.f. 1st March, 2015)
11. Settlement Commission
The case which is remanded back to the adjudicating authority for fresh adjudication, by a Court/Appellate authority/any authority, the same shall not be eligible for Settlement.
The above amendment will be effective post enactment of the Bill.
12. Advance Ruling
Section 23A of Central Excise Act, 1944 provides for the meaning of an applicant for the purpose of filing advance ruling application. The term “applicant” means a non-resident or resident, Indian or foreign company setting up joint venture in India.
Now resident firms shall also be eligible to apply for the advance ruling, as the term ‘applicant’ has been amended to include ‘resident firms’. Firms would include LLPs and sole proprietorship firms also.
Whether a firm is ‘resident’ or otherwise shall get determined in accordance with Income tax provisions.
(Notification 11/2015-CE (NT) dated 1st March, 2015 w.e.f 1st March, 2015)
13. CENVAT Credit
Following amendments would be effective from 1st March, 2015:
a. Time limit for availment CENVAT Credit on inputs and input services has been increased from 6 months to 1 year1 from the date of issuance of Cenvatable document.
b. Now, CENVAT Credit on inputs and capital goods is available to a job worker if goods are directly sent to job worker on the direction of manufacturer or service provider2.
c. The benefit of availment of CENVAT Credit on inputs as such or after being partially processed by a job worker is extended to include all subsequent job workers in a chain.
d. The benefit of availment of CENVAT Credit on capital goods is available provided capital goods are sent “as such” to the job worker. The time lag allowed for to and fro of capital goods is increased to 2 years as against 180 days for non-reversal of CENVAT Credit.
e. Henceforth, inputs and capital goods may be received at any place by manufacturer.
f. In case of export of goods or services, refund of CENVAT Credit is available subject to conditions vide Rule 5 of CENVAT Credit Rules, 2004. Now, the said Rule is amended to include the meaning of Export Goods as under:
“’export goods’ means any goods which are to be taken out of India to a place outside India.”3
g. Till now, definition of exempted goods4 and final products5 included only “excisable goods”. Therefore, CENVAT Credit was not allowed on inputs or input services used in or in relation to manufacture of exempted excisable goods6. However, now for the limited purpose of Rule 6 of CENVAT Credit Rules, exempted goods would include even non-excisable goods i.e. to say CENVAT Credit shall not be taken on input or input services used for manufacture of non-excisable goods7.
h. Rule 12AAA of CENVAT Credit Rules, 2004 relating to restrictions to prevent misuse of provisions of Cenvat Credit is made applicable to importers as well.
i. Till now, CENVAT Credit was recovered provided CENVAT Credit is availed as well as utilised wrongly8. However, now SCN may be issued for recovery of CENVAT Credit availed wrongly though not utilised.
j. All credits taken during a month shall be deemed to have been taken on the last day of the month and the utilisation thereof shall be deemed to be in the following order:
i. Opening balance first
ii. Admissible credits second
iii. Inadmissible credits last
Following amendment to be effective from 1st April, 2015:
In case of Partial RCM, CENVAT Credit is available on input services only when value of input services as well as Service tax is paid. Now, CENVAT Credit, in respect of Service tax payable by service recipient, is available on payment of Service tax and the same is delinked with payment for services made to service provider9.
(Notification 6/2015-CE (NT) dated 1st March, 2015)
CA Jayesh P. Gogri