1. Mens Rea is not essential for imposing Penalty:-
In case of No Fraud, Collusion, Misstatement etc.:-
S.Tax/C.Excise
-Maximum Penalty 10% of duty amount
-No penalty if duty paid before issuance of SCN or within 30 days of SCN.
-25% penalty if duty paid within 30 days of Order in Original.
In case of Fraud, collusion, Misstatement etc:
| S.Tax/C.Excise- | Maximum penalty 100% of duty amount |
| 15% Penalty if duty paid within 30 days of SCN | |
| 25% Penalty if duty paid within 30 days of Order in Original |
2. Method for utilization of Cenvat Credit prescribed:-
Cenvat Credit will deemed to be utilized in following manner:-
1. First, Opening balance of the month
2. Second, admissible credit taken during the month
3. Third, inadmissible credit taken during the month
In the above prescribed method, if we don’t have enough opening balance then chances of payment of interest is high because credit utilized will be decided in the above prescribed method. For Example:-
| PARTICULARS | MARCH, 15 | APRIL, 15 |
| Opening Balance | 90 | 30 |
| Credit availed during the month | 50 | 80 |
| Inadmissible credit availed during the month | 10 | 0 |
| Total Credit | 150 | 110 |
| Credit utilized | 120 | 60 |
| Closing Balance | 30 | 50 |
In above case, we have enough balance at the end of April,15 to cover Rs. 10 but as per above formula since we have opening balance of Rs. 30 and pay Rs. 60 during the month, hence it will be treated as Rs. 10 (inadmissible credit) is in Rs. 30 and Rs. 30 has been utilized first so you are liable to pay interest with effect from 01.04.15.
3. Non Excisable goods at par with exempted goods:-
Following explanation added in Rule 6:-
“Explanation 1 – For the purpose of this rule, exempted goods or final products as defined in clauses (d) and (h) of rule 2 shall include non – excisable goods cleared for a consideration from the factory”
It means if some non excisable goods are also cleared from the factory Rule 6 will come into play.
This is basically to reverse proportionate Cenvat credit on Electricity, because some companies were not reversing Cenvat Credit on electricity used in their colonies.
4. Refund not allowed in case of supply to EOU, SEZ:-
Definition of “Export Goods” inserted in Rule 5 of CCR, 2004, which is as follows:-
“Export Goods” means any goods which are to be taken out of India to a place outside India.
It means Refund will not be allowed in case of supply to EOU and SEZ.
Rebate is given under Rule 18 of Central Excise Rules, 2002, whether it will hit rebate or not?
5. Loss of accumulated Education Cess and Secondary Cess:-
Rule 3(7) of Cenvat Credit Rules, 2004 bars utilization of Education Cess and Secondary Cess for other payments.
It means accumulated Education Cess and Secondary cess cannot be utilized further and need to be booked as expenses.
6. Reimbursement are taxable now, confusion cleared:-
Clause (a)of Section 67 of Finance Act, 1994 substituted and now includes reimbursements also.
Delhi High Court in the case of Intercontinental held that reimbursements are not taxable. This amendment is overruling that judgement.
7. All Services by Government to Business Entity is taxable:-
Earlier only support services provided by Government to Business entity were taxable. But now all services provided by Government to Business entity is taxable.
Most important is we will have to pay service tax under reverse charge method. Hence, after enactment of bill every payment made to government is required to be checked whether Service Tax is payable or not.
8. Clean Energy Cess increased from Rs. 100 PMT to 200 PMT:-
Clean Energy cess on Coal increased from Rs. 100 PMT to 200 PMT. It will increase the cost of coal and so cost of paper.
9. Discretion to waive penalty taken away:-
Earlier AC/DC was empowered to waive penalty under section 80 of the Finance Act, 1994 in case of justifiable reason for not paying Service Tax.
Now this power has been taken away and AC/DC cannot waive penalty in case of bonafide mistake also.
10. Remanded matter cannot go to Settlement Commission:-
Now if any matter is remanded by the Appellate Authority or High Court then Assessee cannot approach settlement commission.
Settlement Commission can be approached only at the time of issuance of Show Cause Notice.
11. Swachh Bharat Cess:-
Government has inserted enabling provision to impose SBS in future. But following issue will decide its impact on cost:-
1. It is on VALUE or on SERVICE TAX (means Service Tax will be 14%/14.28%/16%)
2. Whether All services or Taxable Services
3. Gross Amount/Abated Amount
4. Availability of Cenvat Credit
5. Cross Utilization
6. How the manufacturer will be able to utilize this or it will a cost for manufacture.
POINTS IN FAVOUR OF INDUSTRY:-
1. Time limit to take Cenvat Credit increased from 6 months to 1 year.
2. Time limit to receive Capital Goods back from job worker increased from 180 days to 2 Years.
3. Now resident firm can go for Advance Ruling.
4. Place of removal in case of direct export from manufacturer defined as “PORT”. Now Cenvat Credit can be taken upto the place of removal. Earlier only judgment supported this view, now it has been accepted in law also.
5. Cenvat Credit allowed in all those cases where goods are directly supplied to job worker. Earlier Cenvat Credit was allowed only after receipt of goods in the factory premises. Now 180 days and 2 years will be counted from the date of receipt of goods in job workers premises.
6. Very important amendment is this now dealer and registered importer can adopt Bill to /Ship to model.
Now they can directly send material to their buyer without receiving it in their premises. It will save huge transportation cost.
Companies with plant on multiple locations importing same goods for all plants must get their office registered as “REGISTERED IMPORTER” and import all the goods in the name of registered importer and after importing can transfer material to their plants under their own invoice.
