Advocate Anandaday Misshra

Onset of Mandatory Era

Indirect taxes have finally fallen and infact seems to be more obsessed with the word mandatory.

In first and interim budget of Modi Government, first bomb of mandatory aspect fall on all who wanted to exhaust the remedy of appeal. All aspiring appellants who had liability of evasion by way of mala fide act or bona fide had to made stand on same platform for making a mandatory pre-deposit , under Section 35 of CEA,1944 , 129 of the Customs Act ,1944 and service tax was also no exception . Their crime was that they wanted their appeal entertained before Appellate Authority and/or Tribunals.

This mandatory bomb of pre-deposit is under challenge before Honourable High Court of Andhra Pradesh under WP No. 3393 of 2015 and an interim relief has been granted on 19th February 2015 only. But , it is yet to be seen as whether lis prevails over the government power to levy a condition before entertaining an appear or otherwise. Similar challenge is pending in VAT rules before the Apex Court and final verdict is still awaited.

Second mandatory bomb of availment of cenvat credit within 6 months from the date of invoice or prescribed document was infused in September 2014. Thankfully, it has been diluted on a better note to 1 year in place of 6 months .But , mandatory provisions are here to sustain in indirect taxes for sure.

Mandatory Era of Penalty

Forgetting the old pain which infact got subsumed in all erstwhile , aspiring and existing appellants like cess subsumed, in Finance Bill 2015 via budget 2015-2016, by way of enhancement of 12.5% excise duty to 12.5%, lets check how another hoax of mandatory penalty will treat the assessee in future .

This budget carried the legacy and path of word mandatory, under proposed provisions of Bills 2015, as below :

a. Excise – Mandatory Penalty under Proposed Section 11AC

b. Service Tax – Mandatory Penalty under Proposed Section 76, Section 78 & Section 78B of Finance Act

No Recognition

It took almost last 3-4 decades for the courts to evolve gradually to an era where the following words , doctrine, propositions, thought process , ratio to consider when it came to imposition of penalty before them :

a.       Lack of mens  rea

b.      Bona fide belief

c.       No intention to evade the payment of duty or service tax

d.      No wilful suppression of facts or misstatement of facts

e.      Facts were known to the department

f.        Ingredients missing

g.       Matter of interpretation

h.      Etc. as list is quite long

Henceforth , all intentional duty /service tax evader or bona fide evaders will stand on the same platform and have got to face the axe of penalty .However , a escape door has been provided .I wish such escape door have been provided under mandatory pre-deposit provisions as well .

Escape Door to Penalty

However, you have been provided with an escape door cum an oxygen kit to contain and get out of this penalty provided

Way out 1:

Pay the duty determined or service tax specified alongwith interest before the issuance of show cause notice

Way out 2

Pay the duty determined or service tax specified alongwith interest within 30 days of service of show cause notice.

Way out 2

Pay the duty determined or service tax specified alongwith interest within 30 days from the date of communication/receipt of the order.

If you fail to choose any way shown above, you will have got to end up paying something to exchequer in the name of penalty for sure.

Hope , more mandatory provisions do not come in future budget otherwise , I can foresee many more areas where such bombs will keep falling till the time Government will keep falling for the word mandatory .

I have tried to attempt the serious issues on a lighter note for the professionals and readers so that such things can be understood in a better manner.

(Advocate Anand Mishra, 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)

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