New Penalty Provisions Under Cenvat Credit Rules

Published On - May 28, 2015

admin CENVAT, Finance Act

Vide Notification No. 6/2015-ST dated 1.3.2015, following amendments have been made in Rule 15 containing penal provisions to rationalize penalties w.e.f. date of enactment of Finance Act, 2015(14.05.2015)

Under Penalties Imposable
Rule 15(1) As per Section 11AC(1) (a) or (b) of Central Excise Act, 1944
or
As per section 76(1) of Finance Act, 1994
Rule 15(2) As per section 11AC (1) (c) and (d) or (e) of Central Excise Act, 1944
Rule 15(3) As per section 78(1) of Finance Act, 1994

The aforementioned penalties shall be over and above interest recoverable under Rule 14 of Cenvat Credit Rules, 2004. Readers may refer to Topic No. 25 for penalties under section 76 and 78 of the Finance Act, 1994

Penalties for short / non-payment of duty under Section 11AC of Central Excise Act, 1944

Penal provisions have been rationalised and the amount of penalties is sought to be reduced significantly. The amended penalties under section 11AC under different situations will be as under:

(a) For show cause notices issued after enactment of the Finance Act, 2015 (i.e, 14.05.2015)-

  1. For cases not involving fraud, collusion, wilful-misstatement etc. with the intent to evade duty
  1. Amount of maximum penalty shall be limited to the extent of 10% of the duty demanded or Rs 5,000/-, whichever is higher.
  2. No penalty to be levied if duty and interest is paid with in 30 days from the service of show cause notice
  3. Penalty shall be reduced to 25% of the penalty demanded if duty, interest and reduced penalty is paid within 30 days from the communication of the adjudication order or the appellate order, as the case may be.
  1. For cases involving fraud, collusion, willful-misstatement etc. with the intent to evade duty-
  1. Penalty shall be leviable equivalent to 100% of the duty amount.
  2. Penalty shall be reduced to 15 % if the duty and interest is paid with in 30 days from the service of show cause notice.
  3. Penalty shall be reduced to 25% of the penalty demanded, if duty, interest and reduced penalty paid within 30 days from the communication of the adjudication order or the appellate order, as the case may be.

(b) For the pending SCN’s before adjudication at the time of enactment of the Finance Act, 2015, i.e. on 14.05.2015 (where the assessee does not wish to wait for adjudication) –

  1. Cases can be closed upon the payment of duty, interest and penalty @ 15% of the duty in the matters involving fraud, collusion, willful-misstatement etc. within 30 days from the enactment of the Finance Act, 2015.
  2. Cases can be closed upon the payment of duty and interest in the matters not involving fraud, collusion, willful-misstatement etc. within 30 days from the enactment of the Finance Act, 2015.(i.e. from 14.05.2015)

(c) For show cause notices issued before and adjudicated after the enactment of the Finance Act, 2015 (i.e. after 14.05.2015) –

  1. Reduced penalty of 25% of duty payable shall be applicable in the matters involving fraud, collusion, willful-misstatement etc. if the duty, penalty and interest is paid within 30 days from the communication of the order.
  2. Reduced penalty shall be payable @ 25% of the penalty imposed in the order for cases not involving fraud, collusion, willful-misstatement etc. if the duty, penalty and interest is paid within 30 days from the communication of the order.
  1. Further, for penalty under section 11A, availability of specified records shall no more be a criteria for issuing show cause notice to demand reduced penalty.
  2. Where only interest is to be demanded and a show cause notice is to be issued for recovery of interest, relevant date shall be the date of payment of duty to which such interest relates.