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2016 (4) TMI 1078 - HC - Service TaxSeeking declaration that the search conducted and summons issued to be illegal and ultra vires to the provisions of the Finance Act 1994 - Wrong availment of exemption under Notification No. 26/2012-ST dated 20th June 2012 from payment of Service tax on some of the services provided by claiming to be a tour operator - evasion of payment of service tax. Held that - it is not clear whether the DGCEI was conscious of the pending proceedings and show cause notices issued by the CST under Section 73(1) of the Finance Act 1994 and the proceedings consequent thereto. This aspect is significant since the invocation of the powers of arrest without warrant under Section 90(1) read with Section 89(1)(ii) of the Finance Act 1994 presupposes the arrival of a satisfaction regarding the Assessee having collected service tax but failing to pay to the Department as envisaged in Section 89(1)(d) thereof. The question that would arise is whether there can be a pre-determination regarding the offence under Section 89(1)(d) of the Finance Act 1994 without issuance of a notice under Section 73(1) regarding the alleged evasion of payment of service tax followed by an adjudication. In such circumstances the Court is satisfied that the Petitioner has made out a prima facie case and accordingly an interim direction is hereby issued restraining the DGCEI from taking any further coercive action against the Petitioner or any of its officers or employees till the next date of hearing. As far as the proceedings consequent upon the arrest of the MD of the Petitioner pending in the Court of the learned ASJ is concerned it will proceed in accordance with law and this Court expresses no opinion in that regard. Further it is made clear that the Petitioner will continue to cooperate with the DGCEI answer the queries and provide whatever documents are available in its possession as and when required by the DGCEI. - Adjourned for next hearing
Issues:
1. Legality of search and summons by DGCEI 2. Arrest of Managing Director 3. Coercive actions by DGCEI 4. Interim relief sought by the Petitioner Analysis: Issue 1: Legality of search and summons by DGCEI The writ petition filed by EBIZ.Com. Private Limited challenges the legality of a search conducted by the DGCEI on their premises, suspecting evasion of service tax payment. The Petitioner also contests the legality of summons issued by the DGCEI. The Petitioner's counsel argues that the search and summons are illegal and ultra vires to the provisions of the Finance Act, 1994. The DGCEI alleges that the Petitioner wrongly claimed exemption from service tax, resulting in evasion of payment amounting to Rs. 17 crores. The Court notes the contentions of both parties and examines the legality of the actions taken by the DGCEI. Issue 2: Arrest of Managing Director The Managing Director of the Petitioner was arrested by the DGCEI on allegations of evasion of service tax payment. The Court considers the circumstances leading to the arrest, including statements from accountants and business associates, as well as seized documents. The Petitioner's counsel argues that the MD's arrest was unwarranted, highlighting previous audits and compliance with service tax regulations. The Court evaluates the grounds for arrest and the necessity of such action by the DGCEI. Issue 3: Coercive actions by DGCEI The DGCEI's proposal to arrest the MD without clear examination of previous records and pending proceedings raises concerns regarding the legality of coercive actions. The Court questions whether the DGCEI followed due process before resorting to extreme measures like arrest. The invocation of arrest powers under the Finance Act, 1994 necessitates a satisfaction of tax evasion, which should be established through proper notices and adjudication. The Court restrains the DGCEI from taking further coercive actions against the Petitioner pending further hearings. Issue 4: Interim relief sought by the Petitioner The Petitioner seeks interim relief from coercive actions by the DGCEI, emphasizing compliance with tax regulations and challenging the allegations of tax evasion. The Court grants interim relief, restraining the DGCEI from taking coercive steps against the Petitioner or its officers. The Court clarifies that the ongoing legal proceedings related to the MD's arrest will continue independently, while the Petitioner is expected to cooperate with the DGCEI in providing necessary information. In conclusion, the High Court's judgment addresses the legality of the search and summons by the DGCEI, the arrest of the Managing Director, concerns over coercive actions, and the interim relief sought by the Petitioner. The Court provides detailed analysis and directions to ensure a fair and lawful resolution of the dispute between EBIZ.Com. Private Limited and the DGCEI.
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