Health Security SE National Security Cess Bill 2025 Key Features

Hello! As a Chartered Accountant, you’ll find the Health Security se National Security Cess Bill, 2025 very relevant, especially since it deals with a new tax levy, compliance, and penalties.

Here is a key point-wise analysis of the Bill, focusing on the levy, collection, and compliance mechanisms:

Analysis of the Health Security se National Security Cess Bill, 2025

I. Core Levy and Purpose

•  Levy and Collection: The cess is called the ‘Health Security se National Security Cess  It is levied and collected from every taxable person on the machines installed or other processes undertaken by them for the manufacture or production of specified goods referred to in Schedule I

• Purpose: The cess is levied to augment resources for meeting expenditure on national security and public health

• Additive Nature: This cess is in addition to any other duties or taxes chargeable on the specified goods under any law

• Specified Goods (Initial List): Initially, the specified goods listed in Schedule I is Pan masala (Tariff Item 21069020). The Central Government has the power to add more goods to Schedule I by notification.

II. Taxable Person and Scope

• Definition: A taxable person is defined as any person who owns, possesses, operates, manages, or is otherwise in control of the machine or undertakes any process by which specified goods are manufactured or produced

• Inclusion of Alternative Schemes: A person is treated as a taxable person irrespective of whether they are availing of any composition scheme, concessional levy, or other alternate scheme of taxation applicable to the specified goods under any other law

• Ownership/Control: Mere ownership, possession, or control over the machine or processes is sufficient to constitute a person as a taxable person, regardless of the actual quantity manufactured.

III. Computation and Payment

• Capacity-Based Levy: The cess is linked to the production capacity of machines or other processes rather than the quantity actually produced.

• Computation Factors: The cess is computed based on:

  The relevant process (machine or manual)

  • Speed of the machine or capacity of other processes

  • The weight of the specified goods packed.

  • The amount specified in Schedule II

• Machine-Based Computation (Table 1): The cess is levied on the maximum rated speed of the machine (in pouches/tins per minute) and the weight of the specified goods, at a monthly amount specified in Schedule II, Table 1

  • For machine speeds above 1500 pouches per minute, the amount is a formula:

  • Up to 2.5 grams = *(101 X S/450)

  • Above 2.5 grams but below 10 grams=  *(364 x S/450,) 

  • Above 10 grams =*(849 x S/450)

  •  (where ‘S’ is the maximum rated speed)

  • * Amount of cess  per month per machine (rupees in lakhs) 

•  Manual Process Computation (Table 2): For wholly manual processes, a fixed monthly amount (11 lakh rupees) is levied per factory, irrespective of capacity or weight

• Payment Due Date: The cess is collected at the beginning of each month, but not later than the 7th day of that month.

IV. Compliance and Administration (Key for CAs)

• Registration: Every taxable person must register with the jurisdictional proper officer

• Self-Declaration and Verification:

  • Taxable persons must file a self-declaration of their machines/processes and parameters (like maximum rated speed, weight of packing, etc.)

     

  • This declaration is subject to calibration, verification, and confirmation by the proper officer (with approval of an officer not below the rank of Joint Commissioner)

• Returns: Every taxable person must self-assess the cess and furnish a monthly return

• Audit and Assessment:

  • The proper officer can scrutinize the returns and initiate action if discrepancies are found.

  • Best judgment assessment is provided for in cases of failure to file returns or failure to register.

  • Audit can be conducted by an officer not below the rank of Commissioner, with a notice of not less than fifteen working days, and must be completed within three months (extendable by six months).

• Interest: Interest is payable at the rate of fifteen per cent. per annum for delay in payment of cess

• Penalties and Offences:

  • General Penalty (Non-fraud): For non-payment/short-payment, the penalty is 10% of the cess due or ₹10,000, whichever is higher.

  • Fraud/Wilful Misstatement Penalty: The penalty is equivalent to 100% of the cess due.

  • Punishment/Imprisonment: Contraventions like operating without declaration, failing to pay cess beyond three months, or falsifying records (section 18(1)(a) to (d)) are punishable with imprisonment, depending on the amount of cess evaded (e.g., up to five years for evasion exceeding ₹500 lakh).

    Cognizable and Non-Bailable Offences: Offences involving cess evasion (fraud/wilful misstatement/suppression of facts), fraudulent refund, or operating without a declaration are cognizable and non-bailable.

    I. Cess Computation: Schedule II (Table 1) – Machine-Based Levy

    The cess is levied on a monthly basis per machine and is calculated based on three parameters derived from the machine’s capacity, as per Table 1 of Schedule II. This is a capacity-linked levy, independent of actual monthly production.

    A. Computation Parameters

    The cess amount is determined by the intersection of the machine’s speed and the weight of the packed product:

• Sl. No.	Number of pouches/tins per minute (Maximum Rated Speed ‘S’)	Weight of the Specified Goods per pouch/tin	Amount of Cess per Month per Machine (₹ in Lakhs)
  1.	Up to 500	Up to 2.5 grams	101.00
  		Above 2.5 grams but below 10 grams	364.00
  		Above 10 grams	849.00
  2.	501 to 1000	Up to 2.5 grams	202.00
  		Above 2.5 grams but below 10 grams	728.00
  		Above 10 grams	1698.00
  3.	1001 to 1500	Up to 2.5 grams	303.00
  		Above 2.5 grams but below 10 grams	1092.00
  		Above 10 grams	2547.00
  4.	Above 1500	Up to 2.5 grams	101 x  S/450
  		Above 2.5 grams but below 10 grams	364 x S/450
  		Above 10 grams	849 x S/450

That’s a great request, especially given the new shift to a capacity-based levy. Here is a detailed breakdown of the cess computation under Schedule II, Table 1 and the significant powers related to inspection, search, and seizure that a Chartered Accountant needs to be aware of.

⚙️ I. Cess Computation: Schedule II (Table 1) – Machine-Based Levy

The cess is levied on a monthly basis per machine and is calculated based on three parameters derived from the machine’s capacity, as per Table 1 of Schedule II. This is a capacity-linked levy, independent of actual monthly production.

A. Computation Parameters

The cess amount is determined by the intersection of the machine’s speed and the weight of the packed product:

B. Special Considerations

• Final Cess Payable: The total cess payable by a taxable person is the aggregate of the cess calculated for each machine installed in a factory.

• Capacity Definition (‘S’): The term ‘S’ in the formula for speeds above 1500 represents the maximum rated capacity of the machine.

• Multiple Tracks/Lines: If a packing machine has multiple tracks/lines and performs supplementary processes (like moulding for brand distinction or anti-counterfeiting), two such tracks or lines are deemed to constitute one individual packing machine for calculating the cess liability.

• Abatement: If a machine remains inoperative for a continuous period of fifteen days or more, the cess is abated proportionately for the period of non-operation, subject to prescribed conditions.

• Power to Increase Cess: The Central Government can increase the specified amount of cess up to twice the amount in Schedule II for a specified period, if required in the public interest.

II. Compliance and Enforcement: Inspection, Search, and Seizure

The Bill grants the Proper Officers significant powers to ensure compliance, similar to those under the GST and Customs Acts.

A. Power of Inspection (Section 24(1))

• Who Authorises: A Proper Officer, not below the rank of Joint Commissioner, must have reasons to believe that a taxable person is manufacturing specified goods without complying with the law.

• Who Inspects: They can authorise, in writing, any officer not below the rank of Assistant Commissioner to inspect.

• Where: Any place of business of the taxable person, or their warehouse or godown where specified goods are stored.

B. Power of Search and Seizure (Section 24(2))

• Who Authorises/Conducts: The Proper Officer, not below the rank of Joint Commissioner, may, upon inspection findings or otherwise, himself search and seize, or authorise another proper officer to do so.

• When: If the officer has reasons to believe that:

  • Specified goods or machines liable to confiscation are secreted in any place.

  • Any documents, books or things useful for or relevant to any proceedings under this Act are secreted.

• If Seizure is Not Practicable: The officer may serve an order on the owner/custodian prohibiting them from removing, parting with, or otherwise dealing with the goods/machine without prior permission.

• Access Denial: If access is denied, the authorised officer has the power to seal or break open the door of any factory, or break open any almirah, electronic device, box, or receptacle where goods, accounts, or documents are suspected to be concealed.

• Retention of Records: Seized documents/books can be retained only as long as necessary for examination, inquiry, or proceedings. Documents not relied upon for issuing a notice must be returned within thirty days of the notice issuance.

• Provisional Release: Seized goods or machines may be released provisionally upon the execution of a bond and furnishing of a security (manner/quantum to be prescribed by rules), or on payment of applicable cess, interest, and penalty.

• Confiscation: The goods or machines are liable to confiscation if the taxable person contravenes any provision with the intent to evade payment of cess.

C. Power of Arrest (Section 26)

• Who Authorises: A Proper Officer, not below the rank of Commissioner, has reasons to believe that an offence specified under Section 18(1)(a), (b), (c), or (d) has been committed.

• Who Arrests: The Commissioner can authorise any other proper officer below him to arrest such person.

• Offences Leading to Arrest: These are contraventions related to:

  1. Operating a machine/process without declaration.

  2. Failing to pay cess beyond three months from the due date.

  3. Falsifying records, furnishing false information/return to evade cess.

  4. Fraudulently obtaining a refund of cess.

This structure puts a high premium on accurate self-declaration (Section 9) and maintaining impeccable records, as the enforcement mechanism is robust and closely aligned with the new assessment methodology.

This Bill introduces a significant new compliance burden based on manufacturing capacity rather than production quantity, which will require careful machine inventory and declaration management for your clients in this sector.

Download The Government has introduced ‘Health Security SE National Security Cess Bill, 2025’