New Penalty Provisions Under Cenvat Credit Rules

Vide Notification No. 6/2015-ST dated
1.3.2015, following amendments have been made in Rule 15containing penal
provisions to rationalize penalties w.e.f. date of enactment of Finance
Act, 2015(14.05.2015)

Under
Penalties Imposable
Rule 15(1)
As per Section 11AC(1) (a) or
(b) of Central Excise Act, 1944
or
As per section
76(1) of Finance Act, 1994
Rule 15(2)
As per section 11AC (1) (c) and (d)
or (e) of Central Excise Act, 1944
Rule 15(3)
As per section 78(1) of Finance
Act, 1994
The aforementioned penalties shall be over
and above interest recoverable under Rule 14 of Cenvat Credit
Rules, 2004. Readers may refer to Topic No. 25 for penalties
under section 76 and 78 of theFinance Act, 1994
Penalties for short /
non-payment of duty under Section 11AC of Central Excise Act,
1944
Penal provisions have been rationalised
and the amount of penalties is sought to be reduced significantly. The amended
penalties under section 11AC under different situations will be as under:
(a) For show cause notices issued after
enactment of the Finance Act, 2015 (i.e, 14.05.2015)-
1. For cases not involving fraud,
collusion, wilful-misstatement etc. with the intent to evade duty
  1. Amount
    of maximum penalty shall be limited to the extent of 10% of the duty
    demanded or ₹ 5,000/-, whichever is higher.
  2. No
    penalty to be levied if duty and interest is paid with in 30days from the
    service of show cause notice
  3. Penalty
    shall be reduced to 25% of the penalty demanded if duty, interest and reduced
    penalty is paid within 30days from the communication of the adjudication
    order or the appellate order, as the case may be.
2. For cases involving fraud, collusion,
willful-misstatement etc. with the intent to evade duty-
  1. Penalty
    shall be leviable equivalent to 100% of the duty amount.
  2. Penalty
    shall be reduced to 15 % if the duty and interest is paid with in 30 days
    from the service of show cause notice.
  3. Penalty
    shall be reduced to 25% of the penalty demanded, if duty, interest and
    reduced penalty paid within 30days from the communication of the
    adjudication order or the appellate order, as the case may be.
(b) For the pending SCN’s before
adjudication at the time of enactment of the Finance Act, 2015, i.e. on
14.05.2015 (where the assessee does not wish to wait for adjudication) –
  1. Cases
    can be closed upon the payment of duty, interest and penalty @ 15% of the
    duty in the matters involving fraud, collusion, willful-misstatement etc.
    within 30days from the enactment of the Finance Act, 2015.
  1. Cases
    can be closed upon the payment of duty and interest in the matters not
    involving fraud, collusion, willful-misstatement etc. within 30days from
    the enactment of the Finance Act, 2015.(i.e. from 14.05.2015)
(c) For show cause notices issued before
and adjudicated after the enactment of the Finance Act, 2015 (i.e.
after 14.05.2015) –
  1. Reduced
    penalty of 25% of duty payable shall be applicable in the matters
    involving fraud, collusion, willful-misstatement etc. if the duty, penalty
    and interest is paid within 30 days from the communication of the order.
  2. Reduced
    penalty shall be payable @ 25% of the penalty imposed in the order for
    cases not involving fraud, collusion, willful-misstatement etc. if the
    duty, penalty and interest is paid within 30 days from the communication
    of the order.
3.   
Further, for penalty under section 11A, availability of
specified records shall no more be a criteria for issuing show cause notice to
demand reduced penalty.
4.   
Where only interest is to be demanded and a show cause notice is
to be issued for recovery of interest, relevant date shall be the date of
payment of duty to which such interest relates.

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