Budget 2015 - Excise & Custom

BUDGET’ 2015 HIGHLIGHTS - CENTRAL EXCISE

Education cess and the SHEC to be subsumed in Central Excise Duty

Rate of Excise Duty has been increased to 12.5% w.e.f. 1st March’ 2015

Online central excise and service tax registration to be done in two working days.

Central excise/Service tax assesses to be allowed to use digitally signed invoices and maintain record electronically

Time limit for taking CENVAT credit on inputs and input services increased from 6 months to 1 year.

Excise duty on chassis for ambulance reduced from 24% to 12.5%.

Penalty provision are being rationalised to encourage compliance and early dispute resolution.

BUDGET’ 2015 HIGHLIGHTS - CUSTOMBasic Custom duty on certain inputs, raw materials, inter mediates and components in 22 items, reduced to minimise the impact of duty inversion.

SAD reduced on import of certain inputs and raw materials.

No change in Education cess and the Secondary and Higher education cess.

Basic custom duty on digital still image video camera with certain specification reduced to nil.

Penalty provision are being rationalised to encourage compliance and early dispute resolution

Increase in basic custom duty:

♦ Metallergical coke from 2.5 % to 5%.

♦ Tariff rate on iron and steel and articles of iron and steel increased from 10% to 15%.

♦ Tariff rate on commercial vehicle increased from 10 % to 40%.

BUDGET’ 2015 HIGHLIGHTS – SERVICE TAXEfforts being made on various fronts to implement GST from next year.

Rate of service tax has been increased to consolidated 14% w.e.f. such date as notified by central government. This hasbeen done to facilitate transition to GST.

Education cess and the SHEC to be subsumed in Service Tax of 14%

Enabling provision to levy Swachh Bharat cess at a rate of 2% or less on all or certain services, if need arises. Thus,effective rate would be 16%.

Penalty provision are being rationalised to encourage compliance and early dispute resolution.

Service Tax on reimbursements has been given the legal backing.

Negative List and exemption notification revamped

Service-tax to be levied on service provided by way of access to amusement facility,entertainment events orconcerts, pageants, non recoganised sporting events etc.

Enabling provision made all services provided by the Government or local authority to a business entity taxable.

BUDGET’ 2015 HIGHLIGHTS – SERVICE TAXHowever, Admission to museum, zoo, national park, wild life sanctuary and tiger reserve are exempted.

Service-tax exemption to construction, erection, commissioning or installation of original works pertaining to an airport or port withdrawn.

New exemptions under Service-tax:

♦ Services of pre-conditioning, pre-cooling, ripening etc. of fruits and vegetables.

♦ Life insurance service provided by way of Varishtha Pension Bima Yojana.

♦ All ambulance services provided to patients.

A uniform abatement is being prescribed for transport by rail, road and vessel to bring parity in these sectors.

Manpower supply and security services when provided by individual, HUF, partnership firm to a body corporate are being brought to full reverse charge as a simplification measure.

Cenvat Credit Rules are being amended to allow credit of service tax paid under partial reverse charge by theservice receiver without linking it to the payments of value of service to service provider as a trade facilitationmeasure.

DETAILED AMENDMENTS THROUGH FINANCE BILL, 2015(All provisions of Finance Bill to be applicable from the date of its enactment)

Section 3APOWER OF CENTRAL GOVERNMENT TO CHARGE EXCISE DUTY ON THE BASIS OF CAPACITY OF

PRODUCTION IN RESPECT OF NOTIFIED GOODS

An explanation has been inserted to provide that Factor relevant to production includes factors relevant to production,

This has been done so as to enable the CG to specify more than one factor relevant to the production of such goods.

This amendment will come into effect immediately owing to a declaration under the Provisional Collection of Taxes Act, 1931.

DETAILED AMENDMENTS THROUGH FINANCE BILL, 2015Section 11A

RECOVERY OF DUTIES NOT LEVIED OR NOT PAID OR SHORT-LEVIED OR SHORT-PAID OR ERRONEOUSLY REFUNDED

1. Sub section (5), (6) and (7) of section 11A speaks for voluntary payment facility before issuance of SCN wherepenalty will be equal to 1% per month subject to the maximum of 25%. This has been deleted so as to bringuniformity in treatment of all such cases irrespective of whether the transaction is so recorded or not.

2. The provision relating to relevant date for issuance of SCN has been amended so as to provide• Definition of relevant date in respect of cases where a return is not filed on the due date and• Cases where only interest is required to be recovered.

3. New sub section (16) has been inserted to provide that the direct recovery action shall be initiated where the dutyis reflected in the periodic returns filed and in such cases recovery of duty shall be made in such manner as may beprescribed in the rules.

4. Transitional provisions have been inserted by way of an explanation so as to apply the amended Section 11A to theSCNs to be issued after the enactment of Finance Bill’ 2015.

DETAILED AMENDMENTS THROUGH FINANCE BILL, 2015Section 11AC

PENALTY FOR SHORT-LEVY OR NON-LEVY OF DUTY IN CERTAIN CASES

Section 11AC is being substituted so as to rationalize the penalty as follows:

(1) In cases not involving fraud or collusion or wilful mis-statement or suppression of facts or contravention of any provision of the Act or rules with the intent to evade payment of excise duty, in the following manner,-

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

b) No penalty is to be paid if duty and interest payable is paid either before issue of show cause notice or within 30 days of issue of show cause notice, and all proceedings in respect of said duty and interest shall be deemed to be concluded;

c) A reduced penalty equal to 25% of the penalty imposed by the CEO if duty, interest and reduced penalty is paid within 30 days of the date of communication of order of the Central Excise Officer.



(2) In cases involving fraud or collusion or wilful mis-statement of suppression of facts or contravention of any provision of the Act or rules with the intent to evade payment of excise duty, in the following manner,-a) Penalty shall be 100% of duty involved in such cases. (For cases prior to the enactment of the Finance Bill, 2015, the penalty payable shall be 50% of the duty so determined.)b) A reduced penalty equal to 15% of the duty, if duty, interest and reduced penalty is paid within 30 days of communication of show cause notice. c) A reduced penalty equal to 25% of the duty, if duty, interest and reduced penalty is paid within 30 days of the date of communication of order of the Central Excise Officer.

(3) (a) If the duty amount gets modified in any appellate proceeding, then the penalty shall also stand modified accordingly. Where the duty amount is increased in the appellate proceedings, the benefit of reduced penalty as specified shall be admissible if duty, interest and reduced penalty in relation to such increased amount is paid within 30 days of such appellate order.



(4) Cases where no show cause notice has been issued prior to the date on which the Finance Bill, 2015 receives the assent of the President, shall be governed by provisions of section 11AC as amended.

(5) Proceedings in the pending show cause notices can be closed – (i) on payment of duty, interest and penalty @ 15% of the duty in cases involving fraud, collusion, willful mis-statement, etc. and (ii) on payment of duty and interest in cases not involving fraud, collusion, willful mis-statement, etc., within 30 days of the Finance Bill, 2015 receiving the assent of the President.

DETAILED AMENDMENTS THROUGH FINANCE BILL, 2015Section 31 to 32-O

CHAPTER OF SETTLEMENT COMMISSION

Chapter of Settlement Commission has been amended to amend various sections which are now redundant.

Major amendment is that when any proceeding is referred back, whether in appeal or revision or otherwise, by any court, Appellate Tribunal Authority or any other authority to the adjudicating authority for a fresh adjudication or decision, then such case shall not be entitled for settlement.

Section 37

Sub-sections (4) and (5) of section 37 are being amended so as to increase the penalty from Rs.2000 to Rs.5000.

DETAILED AMENDMENTS THROUGH FINANCE BILL, 2015CENTRAL EXCISE TARIFF ACT

(Changes Applicable immediately)FIRST SCHEDULE

Highlights

1. The standard ad valorem rate of duty of excise (i.e. CENVAT) is being increased from 12% to 12.5%. 2. Duty of excise on “waters, including mineral waters and aerated waters, containing added sugar or other sweetening

matter or flavoured” falling under Chapter sub-heading 2202 10 is being increased from 12% to 18%. 3. Duty of excise on cigarettes is being increased by 25% for cigarettes of length not exceeding 65 mm and by 15% for

cigarettes of other lengths. Increase in are also proposed on cigars, cheroots and cigarillos. 4. Excise duty on cut tobacco is being increased from Rs.60 per kg to Rs.70 per kg. 5. Tariff rate of excise duty on goods falling under Chapter sub-heading 2523 29 is being increased from Rs.900 per

tonne to Rs.1000 per tonne.

DETAILED AMENDMENTS THROUGH FINANCE BILL, 2015CENTRAL EXCISE TARIFF ACT

(Changes Applicable immediately)FIRST SCHEDULE

6. Tariff rate of excise duty on high speed diesel (HSD) falling under tariff item 2710 19 30 is being increased from 14% + Rs.5 per litre to 14% + Rs.15 per litre. However, there is no change in the aggregate of various duties of excise on high speed diesel (HSD).

7. Tariff rate of excise duty on all goods falling under tariff item 3923 21 00 and Chapter sub-heading 3923 29 is being increased from 12% to 18%.

The above changes will come into effect immediately owing to a declaration under the Provisional Collection of Taxes Act, 1931

AMENDMENTS IN CENTRAL EXCISE BY NOTIFICATIONSNotification No. 03/2015- CE Dt. 1st March, 2015 (Applicable w.e.f. 1st March, 2015)

Goods assessable under section 4A of Central Excise Act’ 1944

1. All goods falling under Chapter sub-heading 2101 20, including iced tea, are being notified under section 4A of the Central Excise Act for the purpose of assessment of Central Excise duty with reference to the Retail Sale Price with an abatement of 30%.

2. Goods, such as lemonade and other beverages, are being notified under section 4A of the Central Excise Act for the purpose of assessment of Central Excise duty with reference to the Retail Sale Price with an abatement of 35%.

3. Excise duty of 2% without CENVAT credit or 6% with CENVAT credit is being levied on condensed milk put up in unit containers. Condensed milk is also being notified under section 4A of the Central Excise Act for the purpose of valuation with reference to the Retail Sale Price with an abatement of 30%.

4. Suitable amendment is being carried out to expressly provide that LED lights or fixtures including LED lamps are liable to assessment of excise duty with reference to retail sale price. Similar changes are being made in the Third Schedule to the Central Excise Act, 1944.

AMENDMENTS IN CENTRAL EXCISE BY NOTIFICATIONS

Notification No 04/2015 and 05/2015- CE Dt. 1st March, 2015 (Applicable w.e.f. 1st March, 2015)

Chewing Tobacco and Unmanufactured Tobacco Packing Machines (Capacity Determination and Collection of Duty) Rules, 2010 Amended.

AndPan Masala Packing Machines (Capacity Determination and Collection of Duty) (Amendment) Rules, 2015 Amended

Maximum speed of packing machine for packing of notified goods of various retail sale prices is being specified as a factor relevant to production for determining excise duty payable under the Compounded Levy Scheme presently applicable to pan masala, gutkha and chewing tobacco.

Accordingly, deemed production and duty payable per machine per month are being notified with reference to the speed range in which the maximum speed of a packing machine falls.

AMENDMENTS IN CENTRAL EXCISE BY NOTIFICATIONSNotification No 06/2015- CE Dt. 1st March, 2015 (Applicable from different dates)

Service Tax Rules’ 1994 Amended

Cenvat Credit Rules’ 2004 amended

1. Rule 4(1) specifying the conditions of taking Cenvat credit on Inputs amended. (Applicable w.e.f. 01st March’ 2015)•Time limit for taking cenvat credit within 6 months of the date of invoice has been increased to 1 year.•Cenvat credit can now be taken on receipt of input directly in the premises of the job-worker.

2. Rule 4(2) specifying the conditions of taking Cenvat credit on Capital Goods amended. (Applicable w.e.f. 01st

March’ 2015)•Cenvat credit can now be taken on receipt of capital goods directly in the premises of the job-worker.

3. Rule 4(5) specifying the procedure to be followed for transferring Input and Capital Goods to the premises of Job Worker has been amended. (Applicable w.e.f. 01st March’ 2015)•Pre amendment, the Input or Capital goods transferred to the premises of the job worker should be received back within 180 days.•Post amendment, the Input must be received within 180 days and the capital goods must be received in 2 years.


4. Rule 4(7) specifying the conditions of taking Cenvat credit on Input Services amended.•Time limit for taking cenvat credit within 6 months of the date of invoice has been increased to 1 year. (Applicable w.e.f. 01st March’ 2015)•The cenvat credit of service tax paid under partial reverse charge mechanism can now be taken after the payment of service tax. Pre amendment, the value of taxable service must also be paid for taking the cenvat credit under partial reverse charge. (Applicable w.e.f. 01st April’ 2015)

5. Rule 5 specifying the “Refund of cenvat credit to exporter of goods and services” has been amended.(Applicable w.e.f. 01st March’ 2015)•The definition of “export goods” has been inserted to mean any goods which are to be taken out of India to a place outside India.

6. Rule 6(1) specifying the condition of “non-availment of cenvat credit on Input and Input services used in relation to the exempted goods or exempted services” has been amended. (Applicable w.e.f. 01st March’ 2015)


•Exempted Goods shall now include Non–Excisable Goods. Thus, the cenvat credit shall also be reversed in respect of non excisable goods.•Value of non excisable goods for the purpose of reversal of cenvat credit shall be the invoice value.

7. Rule 9(4) has been amended to specify that the importer shall also make records for transferring cenvat credit.(Applicable w.e.f. 01st March’ 2015)

8. Rule 14 relating to the “Recovery of Cenvat credit wrongly taken or erroneously refunded” has been substituted for a greater clarity. (Applicable w.e.f. 01st March’ 2015)

9. Rule 15 relating to the “Confiscation and Penalty” has been amendment to give effect to the amendments made by Finance Bill’ 2015. (Applicable w.e.f. the enactment of Finance Bill’ 2015)

AMENDMENTS IN CENTRAL EXCISE BY NOTIFICATIONSNotification No 07/2015- CE Dt. 1st March, 2015 (Applicable w.e.f. 1st March, 2015)

Simplification of Registration Procedure

Registration process in Central excise is being simplified to ensure that registration is granted within two working days of the receipt of a duly completed application form.

Verification of documents and premises, as the case may be, shall be carried out after the grant of the registration.

In this regard, Circular No.997/4/2015-Central Excise dated 28th February, 2015 has also been issued and may be referred for details of the simplified process.

AMENDMENTS IN CENTRAL EXCISE BY NOTIFICATIONSNotification No 08/2015- CE Dt. 1st March, 2015 (Applicable w.e.f. 01st March’ 2015)

Central Excise Rules’ 2002 amended

Amendments in Central Excise Rules (CER), 2002 are being done to provide for-1. Direct dispatch of goods to registered dealer’s/ registered importer’s customers without first bringing them to the

dealer’s / importer’s registered premises subject to the conditions specified therein (Rule 11 of CER), 2. Direct dispatch of inputs and capital goods to job worker without first bringing them to the manufacturer’s /output

service provider’s premises subject to the conditions specified therein (Rule 11 of CER), 3. Definition of “export” inserted (rule 18 of CER), 4. Application of certain provisions of these rules, presently applicable to the registered dealers, to apply to the

registered importers also.

5. Central Excise Rules, 2002 are also being amended to provide for issue of digitally signed invoices and preservation of records in electronic form by a manufacturer (Rule 10 and 11 of CER).


6. Amount of Rs. 100 per day for late submission of any return or Annual Financial Information Statement or Annual Installed Capacity Statement referred to in rule 12.

7. Amount of Rs. 100 per day for late submission of return by 100% EOU. (Rule 17)

8. In Rule 25, the minimum penalty of Rs. 2000 has been increased to Rs. 5000.

Notification No 09/2015- CE Dt. 1st March, 2015 (Applicable w.e.f. 01st March’ 2015)

Central Excise (Removal of Goods at Concessional Rate of Duty for Manufacture of Excisable Goods) Rules, 2001 amended

These rules have been amended to allow submission of Letter of Undertaking in lieu of bond with surety and security by a manufacturer with clean track record.

AMENDMENTS IN CENTRAL EXCISE BY NOTIFICATIONS

Notification No 10/2015- CE Dt. 1st March, 2015 (Applicable w.e.f. 01st March’ 2015)

Seeks to amend Notification No. 16/2014-CE (NT) dated 21st March 2014 to make its provisions applicable to registered importers.


Advance Ruling

With this notification, the central government has notified the “Resident Firm” who can also make an application to the advance ruling, where,(a) “Firm” shall have the meaning assigned to it in section 4 of the Indian Partnership Act, and includes-

i. The limited liability partnership as defined in the Limited Liability Partnership Act, 2008; orii. Limited liability partnership which has no company as its partner; or iii. The sole proprietorship; or iv. One Person Company.

(b) (i) “Sole proprietorship” means an individual who engages himself in an activity as defined in sub-clause (a) of section 96A of the Finance Act, 1994.

(ii) “One Person Company” means as defined in section 2 of the Companies Act, 2013.(c) “Resident” shall have the meaning assigned to it in section 2 of the Income-tax Act, 1961 in so far as it applies to

resident firm.

DETAILED AMENDMENTS THROUGH FINANCE BILL, 2015(All provisions of Finance Bill to be applicable from the date of its enactment)

Section 28RECOVERY OF DUTIES NOT LEVIED OR SHORT-LEVIED OR ERRONEOUSLY REFUNDED

(1) A proviso in sub-section (2) has been inserted to provide that in cases not involving fraud or collusion or wilful mis-statement or suppression of facts or contravention of any provision of the Act or rules with the intent to evade payment of duty, • No penalty shall be imposed if the amount of duty along with interest is paid in full within 30 days from the

date of receipt of the notice;

(2) Sub-section (5) has been amended to provide that in cases involving fraud or collusion or wilful mis-statement or suppression of facts or contravention of any provision of the Act or rules with the intent to evade payment of duty, • The amount of penalty payable shall be 15% instead of the present 25%;

(3) Explanation 3 has been inserted to provide that where a notice has been served but an order determining duty has not been passed before the enactment of Finance Bill, 2015, then, the new provisions shall apply.

DETAILED AMENDMENTS THROUGH FINANCE BILL, 2015Section 127A to 127L

CHAPTER OF SETTLEMENT COMMISSION

Chapter of Settlement Commission has been amended to amend various sections which are now redundant.

Major amendment is that when any proceeding is referred back, whether in appeal or revision or otherwise, by any court, Appellate Tribunal Authority or any other authority to the adjudicating authority for a fresh adjudication or decision, then such case shall not be entitled for settlement.

DETAILED AMENDMENTS THROUGH FINANCE BILL, 2015CUSTOMS TARIFF ACT

(Changes Applicable immediately)First Schedule

Highlights

1) The tariff rate of basic customs duty on bituminous coal is being reduced from 55% to 10%.

2) The tariff rate of basic customs duty on goods falling under all the tariff items of Chapters 72 and 73 that is iron andsteel and articles of iron & steel, is being increased from 10 to 15%. However, there is no change in the existing effectiverates of basic customs duty on these goods.

3) The tariff rate of basic customs duty on goods falling under all the tariff items of heading 8702 that is motor vehiclesfor the transport of ten or more persons, including the driver and 8704 that is motor vehicles for the transport of goods,is being increased from 10% to 40%. This change will come into effect immediately owing to a declaration under theProvisional Collection of Taxes Act, 1931. The effective Basic customs duty on Commercial Vehicles is being increasedfrom 10% to 20%. However, customs duty on commercial vehicles in Completely Knocked Down (CKD) kit and electricallyoperated vehicles including those in CKD condition will continue to be at 10%.

AMENDMENTS IN CUSTOM LAW BY NOTIFICATIONSNotification No 27/2015- CE Dt. 1st March, 2015 (Applicable w.e.f. 01st March’ 2015)

Advance RulingWith this notification, the central government has notified the “Resident Firm” who can also make an application to the

advance ruling, where,(a) “Firm” shall have the meaning assigned to it in section 4 of the Indian Partnership Act, and includes-

•The limited liability partnership as defined in the Limited Liability Partnership Act, 2008; or•Limited liability partnership which has no company as its partner; or •The sole proprietorship; or •One Person Company.

(b) (i) “Sole proprietorship” means an individual who engages himself in an activity as defined in sub-clause (a) of section 96A of the Finance Act, 1994.(ii) “One Person Company” means as defined in section 2 of the Companies Act, 2013.

(c) “Resident” shall have the meaning assigned to it in section 2 of the Income-tax Act, 1961 in so far as it applies to a resident firm.

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