Amended penal provisions in Central Excise and Service Tax - CBEC clarifies
CBEC has issued an instruction with the lofty goal of reducing:
1. litigation,
2. paperwork, and
3. compliance formalities.
The Board deserves all praise for this and let us hope the Commissioners show some respect to and share the Board's concern and ensure that litigation, paperwork and compliance formalities are really reduced.
The penal provisions in Central Excise and Service Tax have been amended by Finance Act, 2015. To put it more precisely, the penal provisions have been liberalised to a large extent.
If an assessee is in agreement with the department and is willing to pay the duty/tax with interest either before the Show Cause Notice or within 30 days from the date of issue of notice, there will be no penalty in non-suppression cases and the penalty is 15% in suppression cases. However, many of the departmental officers are not ready to accept such liberal approach with penalty and are still raising some doubts. An officer asked DDT - What happens if an assessee pays the amount before Show Cause Notice, basing on an audit objection and later changes his mind and seeks a refund after the para is dropped? How to close the issue properly so that no such complications arise in future? Also, many officers are still not coming out of 2011 amendment effect (of collecting penalty of 1% per month during the audit).
Perhaps to clear the confusion in the field, CBEC has issued instructions to the field.
The Board clarifies:
Doubt: Does a SCN have to be issued in a case involving the extended period of limitation, where the assessee pays the tax/duty, interest and 15% penalty as prescribed?
In a case involving the extended period of limitation, if an assessee pays the service tax/central excise duty, interest and penalty equal to 15% of the tax/duty and makes a request in writing that a written SCN may not be issued to them, then in such cases the SCN can be oral and the representation (if he desires) against it also oral. In other words, an assessee can request for an informed waiver of a written SCN. [Board has relied on the Supreme Court in the case of Commissioner of Customs, Mumbai versus Virgo Steels reported in
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.
Further, clause (i) of the second proviso to section 78 of the Finance Act, 1994 and clause (d) of sub-section (1) of section 11AC of the Central Excise Act. 1944 refer to a thirty day period, from the date of service of the notice, within which the assessee may make the payment of tax/duty, interest and reduced penalty of 15%. In case the assessee makes a written request for waiver of a written SCN, the thirty day period can be computed from the date of receipt of such a letter by the department. (What happens if the assessee fails to pay the 15% penalty within 30 days from such date? An adjudication order has to be passed without a written notice?)
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. Such an assessee cannot be placed on a worse footing than one who pays tax/duty, interest and reduced penalty of 15% within 30 days of the receipt of the SCN/receipt of letter by the department.
Doubt: Who is competent to order conclusion of proceedings if the conditions meriting conclusion of proceedings are fulfilled?
Conclusion of proceedings may be approved by an officer equal in rank to the officer who is competent to adjudicate such cases. The cases can be closed by officers of DGCEI/Executive Commissionerate/Audit Commissionerate, as the case may be. If multiple issues involving different monetary values arise from the same proceedings, then the sum total involved in all the issues arising from the same proceedings should be considered for conclusion of proceedings. The conclusion of proceedings should invariably be intimated to the assessee in writing. There is no need to issue an adjudication order. Further, there is no need to undertake review of such conclusion of proceedings.
It is further clarified that a harmonious reading of Section 73(3) and the proviso to clause (1) of Section 76, in cases not involving fraud, suppression of facts, etc, if the assessee pays the tax along with interest, either within 30 days of issuance of SCN or before the issuance of SCN, then in such cases proceedings shall be deemed to be concluded. Legal provisions for similar closure in central excise are present in clause (a) of sub-section (1) of section 11 AC of the Central Excise Act, 1944.
Though the Board has not asked the Chief Commissioners and Commissioners to issue trade facilitation letters/standing orders or to follow these instructions, as they do in all instructions, it is obvious that the instructions are meant for compliance by the Commissioners. Let us hope they do conclude the proceedings.
To sum up, Board instructs that in these cases:
1. There is no requirement of a written Show Cause Notice if the assessee waives it.
2. Even when the assessee has the option to pay 15% penalty within thirty days of receipt of notice, the notice can be waived and the date of receipt of the waiver request by the department will be the relevant date for computing the thirty day period.
3. 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.
4. Conclusion of proceedings may be approved by an officer equal in rank to the officer who is competent to adjudicate such cases.
5. The conclusion of proceedings should invariably be intimated to the assessee in writing.
6. There is no review of the proceedings - they are really final.
Board should ask the Commissioners and Chief Commissioners to give wide publicity to these instructions and the departmental auditors, investigators and adjudicators must be instructed to compulsorily bring these instructions to the notice of the assessees whenever a non-payment of duty/tax is detected.
The Board has referred to the Supreme Court judgement in Commissioner of Customs, Mumbai versus Virgo Steels reported in 2002-TIOL-1572-SC-CUS-LB. The judgement held that the assessee who had waived the right to notice, cannot be permitted to claim that the proceedings are void as no notice was given. What was the need to refer to this judgement? Is it to warn the assessee that once he waives the notice, he is bound by it? But in that case, the Supreme Court specifically noted that the assessee alleged that the waiver was obtained by coercion and the assessee challenged it after one and a half year. The reference to this judgement is a discordant note in an otherwise pleasant instruction from the Board.
Seven years ago, the Hyderabad-III Commissioner had issued a Standing Order for a similar procedure. He had also prescribed a form for the assessee to file his letter, which also contained a declaration that he would not be claiming refund.
Please see 30.10.2008.
CBEC F.No.137/46/2015-Service Tax., Dated: August 18, 2015