Audit: Frequently Asked Questions

Comments on Answer given for Question 15:

MMCM means Monthly Monitoring Committee Meeting being chaired by Commissioner (Audit).

As regards payment of Penalty, prior to enactment of the Finance Bill, 2015, there were provisions in Central Excise and Service Tax law to the effect that in respect of the objections raised by Audit (where details were available in specified records), assessee can pay duty/tax, interest and penalty @1% of duty/tax per month (not exceeding 25% of duty/tax) and in such case SCN was not required to be served. Provisions of Section 11A (5), (6) and (7) of CE Act, 1944 and Section 73(4A) of Finance Act, 1994 be referred. These provisions have been omitted by the Finance Act, 2015.

Now, penalty in respect of the short payment or non-payment detected by Audit depends upon whether there was any fraud, suppression of facts, contravention with intention to evade payment of duty/tax etc. If short payment is not attributable to fraud, suppression etc. and duty with interest has been paid either before issuance of SCN or within 30 days from SCN, no penalty is payable as per the substituted Section 11AC(1)(a). There are similar provisions for service tax.

In view of the above, it is felt that penalty, if any, can be imposed only after following the adjudication process.

Settlement of Audit Para in MMCM on voluntary payment of duty, interest and PENALTY is not supported by any statutory provision.

The views expressed are personal views.

Shvetal Parikh 01/07/2015