The penal provisions under the Service Tax and the Central Excise has been liberalised vide the Finance Act, 2015, effective from May 14, 2015, whereby, in terms of the amended provisions, if an assessee is willing to pay the duty/tax along with interest either before the issuance of Show Cause Notice (“SCN”) or within 30 days from the date of issue of SCN, there shall be:
- No Penalty in case of Non-fraud cases;
- Reduced Penalty equal to 15% of Duty/ taxes in fraud cases
However, consequent to the amendments made to Section 73, 76 and 78 of the Finance Act, 1994 (“the Finance Act”) and Section 11AC of the Central Excise Act, 1944 (“the Excise Act”) vide the Finance Act, 2015, field formations have sought certain clarifications with regard to detections made during audit, investigation or scrutiny.
Keeping in mind the need to reduce litigation as well as paperwork and compliance formalities, the Central Board of Excise and Customs (“CBEC”or “the Board”) vide Instruction F. No. 137/46/2015-ST dated August 18, 2015 has issued following clarification as under:
A. Waiver of issuance of SCN
- On assesses’ request for an informed waiver of a written SCN
In a case involving the extended period of limitation, if an assessee pays the tax/duty amount, interest and penalty equal to 15% of the tax/duty and makes a request in writing for non-issuance of written SCN,then in such cases the SCN can be oral and the representation (if he desires) against it also be oral.
The principles laid down by the Hon’ble Supreme Court in the case of Commissioner of Customs, Mumbai Vs. Virgo Steels [2002(141) E.L.T 598 (S. C.)]while dealing with Section 28 of the Customs Act, 1962(“the Customs Act”) by holding that “From the ratio laid down by the Privy Council and followed by this Court in the above cited judgments, it is clear that even though a provision of law is mandatory in its operation if such provision is one which deals with the individual rights of person concerned and is for his benefit, the said person can always waive such a right.”, are equally applicable to SCNs issued under other statutes.
Section 124 of the Customs Act dealing with confiscation of goods/ imposing penalty, also provides that the Notice and the representation may, at the request of the person concerned, be oral. This provision has been made applicable to the Excise Act vide Notification No. 68/63-CE dated May 4, 1963 issued under Section 12 of the Excise Act. The said Section of the Excise Act is also applicable to Service tax vide Section 83 of the Finance Act.
- On assesses’ written intimation of being informed about the grounds, quantification and his acceptance thereof
If the grounds on which the Department feels that there has been short/non-payment of tax/duty are intimated to the assessee orally with its quantification and the assessee indicates in writing that he has been informed about such grounds and he accepts the grounds and the quantification and is waiving the requirement of a written SCN, then a written SCN need not be issued.
- 30 day period to be computed from the date of receipt of such letter by the Department
In terms of Section 78 of the Finance Act and Section 11AC of the Excise Act, 30 days period within which the assessee may make the payment of tax/duty, interest and reduced penalty of 15%, is computed from the date of service of SCN.
In case the assessee makes a written request for waiver of a written SCN, the 30 days period can be computed from the date of receipt of such a letter by the Department.
- No bar on payment even before the receipt of such letter by the Department
There is no bar on an assessee making the payment of tax/duty, interest and reduced penalty of 15% even before the date of receipt of such a letter by the Department.
B. Conclusion of Proceedings
- An officer equal in rank to the officer who is competent to adjudicate such cases shall approve the conclusion of the proceeding.
- The officers of DGCEI/Executive Commissionerate/Audit Commissionerate can close the case.
- The sum total involved in all the issues arising from the same proceedings should be considered for conclusion of proceedings, in case of multiple issues with different monetary values arising from the same proceeding.
- The intimation for such conclusion shall be given in writing to the assessee.
- No need to issue of an adjudication order or to undertake review of such conclusion of proceedings.
- Provisions under Section 73(3) of the Finance Act and Section 76(i) thereof have to be read harmoniously to conclude that in non-fraud cases, if the assessee pays the tax along with interest, either within 30 days of issuance of SCN or before issuance of SCN, then in such cases proceedings shall be deemed to be concluded.
- Legal provisions for similar closure under the Central Excise are present in clause (a) of sub-section (1) of Section 11AC of the Excise Act.
Even though the Board has attempted to reduce the litigation by issuing clarification as to waiver of issuance of SCN and/ or conclusion of proceedings, however the moot question still remains as to when a case should be categorised by the Department as a Non-fraud case. The Department follows stereotype practice in most cases of always alleging fraud, suppression etc., while alleging demand on assessees. Then, under what circumstances, can an assessee avail the benefit of no penalty on payment of tax along with interest, either within 30 days of issuance of SCN under Section 76 of the Finance Actor before issuance of SCN in terms of Section 73(3) thereof.
If the Board is really inclined towards reducing the quantum of litigation in the Country, some sort of clarification must also be issued in this regard as well.
To view the compete Instruction, please click on the link below:
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