2016 (6) TMI 835 - HC - Service Tax

Probability of arresting the Directors or employees of the petitioner - non payment of service tax - investigation are on - fear of coercive proceedings for recovery of the amount, styled as Service Tax , under the provisions of Finance Act, 1994, without following the mandate of Section 73 and/or 73A thereof - he Petitioners claim that they carry on a legitimate business activity by arranging for hotel accommodation for those travelling and that is how they provide online air, rail, cab and hotel booking through a website www.cleartrip.com. Petitioner No.1-Company states that it allows its customers, inter alia, to book hotels through its online portal. Held that - The Petitioners do not dispute the right to investigate and in accordance with law. That they have already attended the offices of the concerned Respondents and once the statement of the Petitioners was recorded goes without saying that on further summons being issued and on called upon to attend the Officers of the Respondents, they will attend and co-operate in these investigations by producing all the documents and answering the requisite queries, subject, of-course, to their rights in law. It is only when these investigations conclude that the authorities would be in a position to take a decision whether to launch any prosecution. In such a prosecution as well, if the provisions of the Criminal Law, which enable arrest in cases of cognizable offences and nonbailable, that the Petitioners can have an apprehension and which also can be taken care of by approaching a competent Criminal Court. Secondly, there is no question of any recovery of tax by coercive means, unless the investigation results into issuance of a show cause notice, an opportunity to the Petitioner to resist the demand, a adjudication thereof by a reasoned order and protective remedies such as appeals. We do not think that any recovery by coercive measures is straightway permissible and particularly in the given facts and circumstances of the case. Once we also note the stand of the Respondents as not precipitating the matter particularly harming the life and liberty of those, who are in-charge of Petitioner No.1-Company, then, all the more, any detailed discussion by referring to the arguments in-depth, consideration of the case law becomes unnecessary. The Writ Petition is disposed of.

Issues:
1. Petition for direction to Respondents to refrain from coercive recovery of Service Tax.
2. Allegations of non-payment of service tax and potential arrest of company officials.
3. Dispute over service tax collection and payment process.
4. Concerns regarding coercive measures without due process.
5. Interpretation of provisions under Service Tax Act and Finance Act, 1994.
6. Respondents' contention on service tax collection and payment by the Petitioners.
7. Enquiry and investigation by the Department into the Petitioners' affairs.
8. Clarification on potential prosecution and arrest of company officers.
9. Legal analysis of coercive measures and arrest in relation to investigations.
10. Disposition of the Writ Petition.

Detailed Analysis:

1. The Petitioners sought a direction to the Respondents to refrain from initiating coercive recovery proceedings for Service Tax without following due process as per the Finance Act, 1994. They were concerned about potential arrest of company officials without proper investigation or adjudication.

2. The Petitioners, engaged in travel services, claimed to be discharging their service tax liability diligently. However, they faced pressure from Respondents based on allegations of non-payment similar to another company. This led to fears of coercive measures without proper legal procedures.

3. The Petitioners argued that their business model involved facilitating hotel bookings without directly owning accommodations. They collected service tax on behalf of hoteliers but did not charge customers separately for it. This distinction in their process was crucial to their defense against the allegations.

4. The Petitioners raised concerns about the Respondents' intention to take coercive actions without issuing show cause notices or following adjudication procedures. They emphasized the need for a lawful assessment of dues before resorting to forceful recovery measures.

5. Both parties relied on various provisions of the Service Tax Act and Finance Act, 1994, along with legal judgments to support their respective positions on the collection and payment of service tax. The interpretation of these laws played a significant role in the arguments presented before the Court.

6. Respondents contended that the Petitioners had not paid service tax on the full amount charged to customers, including commissions to sub-agents. They argued that collecting excess service tax beyond legal requirements could lead to legal consequences.

7. The Department conducted an enquiry into the Petitioners' activities, focusing on the collection and payment of service tax. Statements were recorded, and the Department highlighted the similarities between the Petitioners' services and those of hoteliers, raising questions about the tax collection process.

8. The Court sought clarification on potential prosecution and arrest of company officers. The Respondents assured that thorough investigation would precede any such actions, and prosecution would only be pursued with strong evidence and legal grounds.

9. The Court analyzed the legal framework governing coercive measures and arrest in connection with ongoing investigations. It emphasized the importance of completing investigations before considering arrests and highlighted the rights of the Petitioners to defend themselves in accordance with criminal law provisions.

10. Ultimately, the Court disposed of the Writ Petition, considering the assurances provided by the Respondents regarding the handling of the matter without immediate coercive actions. The judgment underscored the necessity of following legal procedures and conducting thorough investigations before resorting to punitive measures.

← Previous Next →