Preheat oven to 180 degrees C. Line 24 cupcake cups with paper liners.
Empty the boxed cake mix into a mixing bowl and whisk in 1 1/2 teaspoon of chilli powder and 1/4 teaspoon of cayenne pepper. Using an electric mixer on medium speed, beat in the water, vegetable oil and eggs; beat for 2 minutes. Spoon the batter into the prepared cupcake cups, filling them 2/3 full.
Bake in the preheated oven until a toothpick inserted into the centre of a cupcake comes out clean, 18 to 22 minutes. Remove and cool completely before icing.
In a bowl, sift 1 teaspoon of chilli powder, 1/8 teaspoon of cayenne pepper and the cinnamon with the icing sugar. Beat in the cream cheese and butter with an electric mixer on medium speed until the icing is smooth; mix in the vanilla extract. Spread the icing onto the cooled cupcakes in attractive swirls and poke a small dried chilli, stem-side up, into the frosting as a garnish.