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    Circulars Central Excise
    Authority to inspect the prosecution work and performance? FOR EVASION OF SERVICE TAX OR CENTRAL EXC...
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Circulars Central Excise
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Inspection of prosecution work: ensure compliance with prosecution guidelines and address pendency and non-compliance in tax enforcement.
Inspection of prosecution work requires the Director General, Directorate of Performance Management and Chief Commissioners to inspect Commissionerates to verify scrupulous compliance with the Circular's guidelines for launching prosecution. Inspections must examine reasons for pendency and non-compliance in prosecution cases and ensure recording of statistical data during field visits to support oversight of prosecution performance.
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Compounding of offences: administrative authorities may permit settlement by payment and written offer when prosecution is initiated.
Compounding of offences for evasion under central excise and service tax allows the Principal Chief/Chief Commissioner to compound offences on payment of the compounding amount; Section 9A(2) of the Central Excise Act as applied to service tax via section 83 of the Finance Act authorises this, and circulars require that persons against whom prosecution is initiated or contemplated be informed in writing of the offer to compound.
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Prosecution guidelines: sanctions granted after the circular govern cases regardless of offence date, with sanctioned cases reviewed.
Prosecution guidelines apply to all cases where sanction for prosecution is accorded after the circular's issue date, and such cases must be prosecuted according to the circular regardless of the offence date. Sanctioning authorities must review cases in which prosecution has been sanctioned but no complaint filed, reassessing them against the circular's provisions before any complaint is presented.
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Withdrawal of prosecution permitted after final exoneration in parallel quasi judicial proceedings; formal application required to seek withdrawal.
Withdrawal of prosecution is permitted where identical allegations led to the noticee's exoneration in quasi judicial proceedings and that order is final; the senior tax or investigative leadership shall direct the commissionerate to file an application through the public prosecutor requesting judicial permission to withdraw the complaint in accordance with law and prosecution guidelines.
Circulars Central Excise
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Publication of convicted persons' names may be sought by the department through courts under central excise and service tax law.
Power exists under the Central Excise statutory framework, as applied to service tax by the Finance Act, to publish the name and place of business of persons convicted under the relevant enactments; courts have exercised this power sparingly, and the department is directed to request courts to invoke this publication power in deserving cases for all convicted persons.
Circulars Central Excise
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Prosecution monitoring: Principal Commissioners must track and review cases monthly to ensure satisfactory progress.
The Principal Commissioner/Commissioner must monitor prosecution files monthly, take corrective action where necessary, and inspect the prosecution register in the Prosecution Cell at least once every quarter. Designated supervisors in zonal investigative units must oversee prosecution work. Prosecution registers in prescribed formats are to be maintained, regularly updated and kept in the Commissionerate Prosecution Cell and in zonal units to enable systematic tracking of prosecution cases.
Circulars Central Excise
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Prosecution Sanction: mens rea and evidentiary sufficiency determine whether tax evasion prosecution proceeds.
Prosecution proposals for service tax or excise evasion must be examined and forwarded by the adjudicating authority to the sanctioning Principal Chief/Chief Commissioner or Principal/Director General; prosecution requires evidence of mens rea and should not be launched in purely technical or interpretation disputes. Criminal standards (beyond reasonable doubt) must be weighed separately from adjudication findings; prosecution may be initiated before adjudication in serious cases. Investigation reports must be prepared within one month and sanction obtained prior to filing; authorised officers must secure exhibits and coordinate with public prosecutors, with reporting obligations for delays and monthly updates to the sanctioning authority.
Circulars Central Excise
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Sanction for prosecution: designated senior authorities must authorize and formalize prosecution before filing criminal complaints.
Sanction for prosecution is required before initiating criminal complaints in service tax and central excise matters. The Principal Chief/Chief Commissioner must sanction routine cases, while the Principal Director General/Director General, CEI must sanction cases investigated by the Directorate General of Central Excise Intelligence. The sanctioning authority issues a written order and forwards it to the Commissionerate for expeditious filing of the complaint.
Circulars Central Excise
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Habitual evasion: prosecution permitted where repeated confirmed demands and substantial cumulative tax evasion or credit misuse.
Prosecution may be initiated against a company or assessee classified as a habitual evader where multiple confirmed demands (at first appellate level or above) for Central Excise duty or Service Tax, or findings of Cenvat credit misuse arising from fraud or suppression, occur within a prior period and the cumulative duty or tax evaded or credit misused meets a substantial monetary threshold; the Offence Register (335J) may be used to identify such assessees.
Circulars Central Excise
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Prosecution threshold: prosecution requires evasion exceeding the prescribed monetary limit before proceeding for excise or service tax offences.
Prosecution for evasion of Central Excise duty or Service Tax, or misuse of Cenvat credit in relation to offences specified under sub section (1) of Section 9 of the Central Excise Act, 1944 or sub section (1) of Section 89 of the Finance Act, 1994 should normally not be launched unless the evasion meets or exceeds the prescribed monetary threshold set out in the departmental guideline.
Circulars Central Excise
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Corporate criminal liability: officers and partners can be prosecuted for company service tax or excise evasion.
Persons in charge of and responsible for a company's business are prosecutable alongside the company for service tax or central excise evasion; where an offence by a company is shown to involve the consent, connivance or neglect of a director, manager, secretary or other officer, that individual is deemed guilty. The statutory definition of company includes firms and associations and treats a partner as a director, extending corporate liability principles to service tax prosecutions.
Circulars Service Tax
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Swachh Bharat Cess applicability: applies to all taxable services except services fully exempt or not leviable to service tax.
Swachh Bharat Cess applies to all taxable services except those that are fully exempt under a statutory notification or are otherwise not leviable to service tax; the cess was imposed by government authority to cover the taxable service base while preserving existing exemptions and non leviability rules.
Circulars Service Tax
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Cenvat credit reversal does not require separate reversal of Swachh Bharat Cess under the applicable rule per FAQ.
The circular states that Swachh Bharat Cess is not integrated into the Cenvat credit chain; the reversal under Rule 6 requires payment based on the value of exempted services, and therefore a separate reversal of Swachh Bharat Cess is not required when reversing credit under Rule 6 of the Cenvat Credit Rules.
Circulars Service Tax
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Point of taxation determines Swachh Bharat Cess liability; payment date triggers reverse charge cess on taxable service.
Point of taxation governs SBC liability for reverse-charge services: the date of payment is the point of taxation and SBC is payable on the value of the taxable service at the prescribed rate when consideration is paid to the service provider.
Circulars Service Tax
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Swachh Bharat Cess option for services under specified service-tax rule; SBC computed by prescribed formula and fixed for financial year.
Persons liable to pay service tax under the sub rules of rule 6 may elect to discharge Swachh Bharat Cess by applying a prescribed computation to their Service Tax liability; once exercised the election must be applied uniformly to such services and cannot be changed during the financial year.
Circulars Service Tax
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Swachh Bharat Cess on restaurant services is calculated on the value determined under Service Tax valuation rules, creating a combined levy.
Swachh Bharat Cess on restaurant services is payable on the taxable value determined under the Service Tax (Determination of Value) Rules, 2006; for restaurants, eating joints or messes with any air-conditioning or central heating, the cess and service tax are each applied to the portion of the total charge treated as taxable under those rules, and the combined levy is the sum of the service tax rate and the cess rate applied to that taxable portion.
Circulars Service Tax
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Service tax calculation for services under Rule 2A/2B/2C: apply combined service tax and SBC to the rule determined value.
Service tax and Swachh Bharat Cess on services governed by Rule 2A, 2B or 2C are computed by multiplying the combined service tax plus SBC rate by the value determined under the relevant rule. For works contract services, applying the combined rate to the rule specified taxable fraction of the contract value produces the operative tax liability; the same approach applies to restaurant and outdoor catering services.
Circulars Service Tax
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Point of taxation for Swachh Bharat Cess: levy applies where service, invoice and payment occur on or after commencement date.
Because SBC is a new levy on taxable services not in the Negative List or wholly exempt, the Point of Taxation Rules determine liability. SBC does not arise where payment and invoice are issued before the levy's commencement or where payment precedes commencement but invoice is issued within the short prescribed period. SBC is chargeable where service provision, invoice issuance and payment occur on or after the commencement date; it also applies if service is provided on or after commencement but payment was received earlier and invoice is not issued within the short post-commencement period.
Circulars Service Tax
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Cenvat credit of Swachh Bharat Cess disallowed; SBC not in Cenvat credit chain and not payable using credits.
Cenvat credit for the Swachh Bharat Cess (SBC) is not available because SBC is not integrated into the Cenvat credit chain; consequently SBC cannot be claimed as input credit nor paid using credits of any other duty or tax.
Circulars Service Tax
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Swachh Bharat Cess calculation: SBC applies same abatement percentage as service tax, on combined taxable rate.
Swachh Bharat Cess is to be levied on the same abatement percentage that applies to service tax; the notification prescribing abatement for service tax applies equally to SBC, so the combined rate (service tax plus SBC) is applied to the abated value to determine the effective levy.

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Comparison of section 406 "Payment of advance tax by assessee on his own accord." between the Income-Tax Act, 2025 (as passed) and the Income-Tax Bill, 2025 (as originally introduced)

15 September, 2025

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Section 406 Payment of advance tax by assessee on his own accord

Income-tax Act, 2025

At a Glance

The provided document is Clause 406 of the Income Tax Bill, 2025 (Old Version) setting out the assessee's obligation to pay advance tax on his own accord. It matters because it prescribes the manner, timing and flexibility for instalment payments of advance tax by taxpayers; it affects taxpayers who are liable to pay advance tax and tax administration insofar as enforcement and compliance monitoring are concerned. Effective date or enactment date: Not stated in the document.

Background & Scope

Statutory hooks: Clause 406 refers to other provisions within the same enactment-section 404 (liability to pay advance tax), section 405 (calculation of specified sum), and section 408 (due dates of instalments). The clause is part of a Bill titled "Income Tax Bill, 2025 - Old Version." The clause addresses advance payment of tax by an assessee on his own accord. Definitions provided: the clause expressly defines "specified sum" in sub-section (3) as "current income as estimated by the assessee." No further definitions or explanatory notes are included in the clause text itself.

Statutory Provision Mode

Text & Scope

Coverage: Clause 406 imposes a duty on every person liable to pay advance tax u/s 404 to pay advance tax on the "specified sum" (current income as estimated by the assessee) calculated as per section 405. This duty applies "whether or not he has been previously assessed by way of regular assessment." The advance tax is to be paid "at the appropriate percentage" and "on or before the due date of each instalment, as specified in section 408." Sub-section (2) permits the taxpayer who has paid one or more instalments to increase or reduce advance tax payable in remaining instalments to align with revised estimation of the specified sum and the tax thereon. Sub-section (3) defines "specified sum."

Interpretation

Legislative intent indicated by the text: The clause aims to place an affirmative, self-initiated obligation on taxpayers to estimate their current income and make graduated advance tax payments at prescribed percentages by prescribed instalment dates. The provision emphasises taxpayer self-assessment and flexibility to adjust subsequent instalments when estimates change. The language "on his own accord" underscores voluntary initiation by the assessee rather than assessment-triggered demands. No express guidance on sanctions, interest, or penalties for underpayment is provided in this clause-those matters are Not stated in the document.

Exceptions/Provisos

No provisos, carve-outs or exceptions are present in Clause 406 itself. It does not exempt any class of person, nor does it state thresholds, exclusions, or special regimes (for example, for salaried taxpayers, small taxpayers, or presumptive taxpayers). Any such exclusions are Not stated in the document and would need to be located in other parts of the Bill or Rules.

Illustrations

  • Example 1: An assessee estimates current income for the year and pays the first instalment of advance tax as required by section 408 dates. Later in the year the assessee revises the estimate upwards and increases the amount payable in remaining instalments to accord with the increased specified sum. (This follows sub-section (2).)
  • Example 2: An assessee pays an instalment but subsequently estimates lower current income and reduces the amount payable in remaining instalments accordingly. (Permitted by sub-section (2).)
  • Example 3: A person who has never been subject to regular assessment but is liable u/s 404 must nevertheless comply with sub-section (1) and pay advance tax on his estimated current income. (Direct application of the opening phrase of sub-section (1).)

Interplay

The clause expressly refers to sections 404, 405 and 408 for liability, method of calculation and instalment due dates respectively, indicating that full compliance requires reading Clause 406 in conjunction with those sections. The clause itself does not reference Rules, Notifications, or Circulars. Any interplay with interest provisions for default, determination of "appropriate percentage," or administrative procedure is Not stated in the document and therefore must be read from the other specified sections or secondary legislation.

Differences Between the Two Provisions and Practical Impact

  • Minor punctuation and word-order differences in sub-section (2):

    Document 1 reads: "may increase or reduce the amount of advance tax payable in the remaining instalment or instalments to accord with specified sum and the advance tax payable thereon, and make payment of the said tax in the remaining instalment or instalments accordingly." Document 2 reads: "may increase or reduce the amount of advance tax to accord with specified sum and the advance tax payable thereon, and make payment of the said tax in the remaining instalment or instalments, accordingly."

    Practical impact: Substantively identical-both permit reconciliation of future instalments to reflect the assessee's revised estimate of current income. The corrigendum note in Document 1 corrects a typographical duplication ("tax tax").

Practical Implications

  • Compliance and risk areas: Taxpayers who fall within the ambit of section 404 must proactively estimate current income and ensure instalment payments at the "appropriate percentage" by the due dates in section 408. The clause allows later adjustments, but initial non-payment or materially inaccurate estimation may trigger consequences under other provisions (interest/penalties), which are Not stated in the document.
  • Record-keeping/evidence points: Given the self-estimation requirement, taxpayers should maintain contemporaneous records and documentation supporting the estimate of current income (working papers, projections, assumptions). The clause itself does not mandate specific records or forms-those requirements are Not stated in the document.

Key Takeaways

  • Clause 406 mandates that every person liable u/s 404 must pay advance tax on the assessee's own estimate of current income ("specified sum").
  • Advance tax must be calculated per section 405 and remitted at the appropriate percentages by the installment due dates in section 408.
  • The provision expressly permits the taxpayer to increase or reduce remaining instalments to reflect revised estimates of income and tax during the year.
  • "Specified sum" is defined as current income as estimated by the assessee; no further elaboration of "current income" is provided in the clause.
  • The clause emphasises voluntary self-compliance ("on his own accord"); enforcement, consequences for default, and specific procedural requirements are Not stated in the document.
  • Differences between the Bill (Document 2) and the enacted Section (Document 1) are typographical and ordering changes; substantive obligations remain the same. A corrigendum in the enacted text corrects a typographical duplication.

Full Text:

Section 406 Payment of advance tax by assessee on his own accord

Topics

Acts Income Tax