Jagdishkumar Gor
1. Pre-deposit Made Mandatory in Appeal Procedures for Central excise, Customs & Service Tax.
Significant amendment to Section 35F of the Central Excise Act, 1944 and Section 129E & 129B of the Customs Act, 1962 and proposed Mandatory (1) 7.5% pre-deposit of duty demanded or penalty imposed or both for filing appeal before Commissioner (Appeals) or Tribunal (1st Stage) and 10% duty demanded or penalty imposed or both for filing Tribunal (2nd stage), subject to ceiling of Rs. 10 crore.
As per the Section, “Duty Demanded” shall include:-
(i) Amount determined under Section 11D;
(ii) Amount of erroneous CENVAT credit taken and;
(iii) Amount payable under Rule 6 of the CENVAT credit Rules, 2001 or the CEVNAT Credit Rules, 2002 or the CENVAT credit Rules, 2004.
As per the above provision, we would have a new set of litigation with the word “OR”
Suppose the Demand of duty is 50 lac and 100% penalty, Now before filing of the appeal at 1st Stage Assessee should make the Pre-deposit @7.5% = Rs. 750000.00 and at 2nd Stage Assessee should make the Pre-deposit @10% = Rs. 1000000.00. So total amount blocked is Rs. 1750000.00 against demand of Rs. 50 lacs.
This will effective from the date when the Finance Act 2014 becomes effective.
2. Increase in interest Rate for delayed service tax payment.
As per the Notification No. 12/2014 ST dated 11-7-2014, Rate of Interest on delayed payment of service tax is increased up to 30% as per below :- (Effective from 01-10-2014).
| Sl.No. | Period of delay | Rate of simple interest |
| 1 | Up to six months | 18 per cent. |
| 2 | More than six months and up to one year | 18 per cent. for the first six months of delay and 24 per cent. for the delay beyond six months. |
| 3 | More than one year | 18 per cent. for the first six months of delay; 24 per cent. for the period beyond six months up to one year and 30 per cent. for any delay beyond one year. |
Suppose the Demand of Service Tax amount is Rs. 50 lac and paid the said amount after 5 years, the calculation of interest as per below :-
| Calculation of interest for 5 years | |||
| Period of Delay | Amount | Interest Rate | Amount of Interest |
| Up to Six Month | 5000000 | 18% | 450000 |
| More than Six Months and up to 1 year | 5000000 | 24% | 600000 |
| 2nd year | 5000000 | 30% | 1500000 |
| 3rd year | 5000000 | 30% | 1500000 |
| 4th year | 5000000 | 30% | 1500000 |
| 5th year | 5000000 | 30% | 1500000 |
| Total Amount of Interest | 7050000 | ||
As per the above calculation for Demand of 50 lacs, need to pay the Interest amount of Rs. 70.5 lacs for 5 years i.e. more than Demand.
While for payment of Interest by Government to Assessee is only 6%.
This is really a not justifiable and Industry should represent the same before Ministry of Finance.
( Author is AGM Indirect Taxation at Intas Pharmaceuticals Limited, Ahmedabad)
The provision appears to be most Arbitrary and confiscatory. May be challenged in High Court under art 226 of Constitution of India because it violative of Article 14
Poddar
Sr Advocate
High Court
Ranchi