Significant Changes in Excise & Service Tax-Budget 2015-16

Advocate Anandaday Misshra

Change in Excise & Service Tax Rate

Central Excise duty to be rounded off to 12.5 % (from 12.36 %)

Service tax to be increased from 12.36 % to 14 %. Date of levy of new rate shall be notified after enactment of Finance Bill 2015. Till the time it is notified the rate shall be 12.36% only .

Procedure Changes

Online Excise and Service Tax registrations in 2 days

Digital invoices to be accepted

A provision for issuing digitally signed invoices is being added along with the option of maintaining of records in electronic form and their authentication by means of digital signatures.

Cenvat Credit

Rule 4(7) is being amended to allow Cenvat Credit of Service Tax paid under partial reverse charge by the service receiver without linking it to the payment to the service provider. This change will come into effect from 1.4.2015.

The period for availing Cenvat Credit can be availed within one year from the date of invoice. Previously it was restricted to six months only.

Penal Provisions

Section 11AC of CEA,1944 is proposed to be changed with new provision to impose penalty to tackle two situations as below :

1. evasion of duty or non payment of duty but without suppression

a) a penalty not exceeding 10% of the duty determined or Rs.5000 whichever is higher shall be payable;

b) no penalty shall be payable if duty and interest payable thereon under section 11AA is paid before issue of show cause notice

                                         or

no penalty shall be payable if duty and interest payable thereon under section 11AA is paid within 30 days of issue of show cause notice

c) the penalty will be reduced to 25% provided the 25% of the penalty out of total penalty imposed alongwith duty and interest is paid within 30 days of the date of communication of such order.

2. evasion or non payment with suppression

a) a penalty equal to the duty so determined shall be payable.

b) for the period beginning with 8th April, 2011 and upto the date of assent to the Finance Bill, 2015, the penalty payable shall be 50% of the duty so determined provided details of transactions of evasion are recorded

c) 15% penalty shall be payable, of the duty determined, if duty and interest payable thereon under section 11AA is paid within 30 days of issue of show cause notice

d) the penalty will be reduced to 25% provided the 25% of the penalty out of total penalty imposed alongwith duty and interest is paid within 30 days of the date of communication of such order.

Appellate Order To Effect Penalty 

a. If duty is reduced by way of an order of Tribunal or Appellate authority then , percentage of penalty shall reduce accordingly depending upon the class of evasion as enumerated above i.e evasion with suppression or evasion without suppression .

b. If duty is increased by way of an order of Tribunal or Appellate authority then , percentage of penalty shall increase accordingly depending upon the class of evasion as enumerated above i.e evasion with suppression or evasion without suppression .

Further , very important explanations has been added to the proposed Section 11AC

Applicability of   New Section 11AC

Explanation I covers the following 3 situations :

Situation 1 – where no show cause notice has been issued before the the date of assent of president to   the Finance Bill,2015  , the provisions of to be enacted new Section 11AC of the Finance Act,2015 shall be applicable .

Situation 2 – where  show cause notice has been issued before the the date of assent of president to   the Finance Bill,2015

                                                                  but 

order is not issued before  the assent of the president to the Finance Bill 2015 , then provisions of to be enacted new Section 11AC of the Finance Act,2015 shall be applicable .

                                                         Provided 

such person pays the interest, duty and penalty in terms clause d) of proposed Section 11AC within 30 days from the date on which  the Finance Bill ,2015 receives the assent of the President .

Situation 3 – where  order is passed after  the assent of the president to the Finance Bill 2015 , then provisions of to be enacted new Section 11AC of the Finance Act,2015 shall be applicable .

                                                         Provided 

such person pays the interest, duty and penalty in terms of clause b) or e) of proposed Section 11AC  within 30 days from the date of communication of the order.

Explanation II to the proposed Section 11AC is equally important as it explain the word “specified records”

It is pertinent to note that similar explanation already  existed, since 2011, in Section 73 of Finance Act,1994 for service tax as below 

Explanation under Section 73 of Finance Act,1994

For the purposes of this sub-section and section 78, “specified records” means records including computerized data as are required to be maintained by an assessee in accordance with any law for the time being in force or where there is no such requirement, the invoices recorded by the assessee in the books of account shall be considered as the specified records.;”

With the proposed new Section 11AC,  I foresee reduction in disputes atleast in those appeals which used to be filed for getting relief in penalty .

Invoices & Records In Excise & Service Tax With Digital Signature

Khudos to our digital savy Prime Minister Shri Narendra Modi that finally the Budget 2015-2016 has incorporated the digital signature era in invoicing and records under central excise and service tax .

Service Tax

Notification No. 5/2015-Service Tax dated 01.03.2015 prescribes the authentication of invoices by digital signature by way of introduction of Rule 4C and sub-rule (4) of Rule 5 in service Tax Rules ,1994

“Rule 4C. Authentication by digital signature– (1) Any invoice, bill or challan issued under rule 4A or consignment note issued under rule 4B may be authenticated by means of a digital signature.

(2) The Board may, by notification, specify the conditions, safeguards and procedure to be followed by any person issuing digitally signed invoices.”;

“In Rule 5, sub-rule (4)

Records under this rule may be preserved in electronic form and every page of the record so preserved shall be authenticated by means of a digital signature.

(5) The Board may, by notification, specify the conditions, safeguards and procedure to be followed by an assessee preserving digitally signed records.

Explanation – For the purposes of rule 4C and sub-rule (4) and (5) of this rule,- (i) The expression “authenticate” shall have the same meaning as assigned in the Information Technology Act, 2000 (21 of 2000). (ii) The expression “digital signature” shall have the meaning as defined in the Information Technology Act, 2000 (21 of 2000) and the expression “digitally signed” shall be construed accordingly.”

Note –

a. manual signature will not be required rather a digital signature can be used for all authentications on the invoices.

b. the records which are maintained electronically shall be preserved with digital signature on each and every page of such record.

c. The aforesaid provisions shall be effective from 1^st March 2015.

Excise

Notification No. 8/2015- Central Excise (N.T.) Dated- 1st March, 2015 prescribes the authentication of invoices by digital signature by way of introduction of sub-rule (8) & (9) of Rule 11 in Central Excise Rules,2002

In Rule 11, Sub-rule(8) &(9)

(8) An invoice issued under this rule by a manufacturer may be authenticated by means of a digital signature: Provided that where the duplicate copy of the invoice meant for transporter is digitally signed, a hard copy of the duplicate copy of the invoice meant for transporter and self attested by the manufacturer shall be used for transport of goods.

(9) The Board may, by notification, specify the conditions, safeguards and procedure to be followed by an assessee using digitally signed invoice.

Explanation. – For the purposes of rule 11 and this rule, the expressions, “authenticate”, “digital signature” and “electronic form” shall have the respective meanings as assigned to them in the Information Technology Act, 2000 (21 of 2000).

Note-

a. a manufacturer can authenticate invoices digitally but for transportation of excisable goods a self attested invoice shall also accompany with the goods as per sub-rule 8) of rule 11 of CER,2002.

b. The aforesaid provisions shall be effective from 1^st March 2015.

(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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