2016 (7) TMI 727 - HC - Service Tax

Bail application - Criminal prosecution for non payment of service tax - monetary jurisdiction - It was submitted that offence under section 89(1)(d)(ii) of the Finance Act has been inserted to be cognizable and punishment has been enhanced from three years to seven years and made the offence non-bailable. Thus, on and from 10.5.2013 if a person has collected any amount as service tax but failed to pay the amount so collected to the Central Government and if it exceeds ₹ 50.00 lakhs, then only the accused will be liable for punishment upto seven years. Drawing attention of this Court to the break-up of service tax liability shown by the Department for the period 2013-2014 till 31.12.2014, service tax liability even assessed by the Department was ₹ 30,32,939/- only and thus, no provision under section 89(1)(d)(ii) of the Act could have been resorted to by the authority. Held that - It is important to note that if at all initial partial payment had been made to come out of jail, it cannot be said to be compliance of bail conditions by the applicant and thus, learned Additional Sessions Judge had passed impugned order which is legal and proper and it does not warrant any interference in exercise of revisional jurisdiction more particularly when it is noticed that by one way or the other, the applicant is prolonging the time with calculative move just not to pay the amount which had prima facie appears to have been pocketed. It is also to be noted that the interim order passed by this Court dated 26.10.2015 in this Criminal Revision Application No.566 of 2014 has also not been complied with. Under the circumstances, no leniency can be shown to such an applicant who only desires to prolong the issue. Hence, this revision application deserves to be dismissed. - Decided against the applicant.

Summary

Issues Involved:
1. Legality of the order dated 11/9/2014 cancelling the applicant’s bail.
2. Compliance with bail conditions imposed by the Sessions Court.
3. Interpretation and application of section 89(1)(d)(ii) of the Finance Act, 1994.
4. Applicant’s conduct and cooperation with the investigation.

Detailed Analysis:

1. Legality of the Order Cancelling Bail:
The primary issue is the legality of the order dated 11/9/2014 passed by the Additional Sessions Judge, Vadodara, which cancelled the bail granted to the applicant. The applicant had initially been granted bail with specific conditions, including the payment of a certain percentage of the outstanding service tax. The applicant failed to comply with these conditions, leading to the cancellation of bail. The court held that the applicant’s failure to adhere to the bail conditions justified the cancellation.

2. Compliance with Bail Conditions:
The applicant was required to deposit 30% of the outstanding amount within two months of release and 10% of the outstanding amount monthly thereafter. The applicant failed to meet these conditions, prompting the original complainant to file for cancellation of bail. The court noted that despite the applicant’s partial payments and efforts to recover funds, the conditions were not fulfilled. The applicant’s non-compliance with the bail conditions was a significant factor in the cancellation of bail.

3. Interpretation and Application of Section 89(1)(d)(ii) of the Finance Act, 1994:
The applicant argued that the offence under section 89(1)(d)(ii) of the Finance Act, 1994, which became cognizable and non-bailable from 10.5.2013, was not applicable as the service tax liability for the period 2013-2014 was only ?30,32,939/-. The court dismissed this argument, stating that the legal position was well-known at the time of the initial bail order and could not be raised for the first time in the revision application. The court emphasized that ignorance of the law by the applicant’s advocate was not a valid ground for revising the order.

4. Applicant’s Conduct and Cooperation with the Investigation:
The applicant’s conduct, including the failure to pay the outstanding amount and non-cooperation with the investigation, was scrutinized. The court highlighted that the applicant had floated another company and evaded service tax payments, which demonstrated a lack of intent to comply with legal obligations. The applicant’s actions were seen as a calculated move to delay payment, further justifying the cancellation of bail.

Conclusion:
The court dismissed the revision application, upholding the cancellation of bail due to non-compliance with bail conditions and the applicant’s conduct. The court found no merit in the applicant’s arguments regarding the interpretation of section 89(1)(d)(ii) of the Finance Act and emphasized the importance of adhering to legal obligations and conditions imposed by the court.

Further Order:
The applicant’s request for an extension of the interim order dated 6.5.2016 was rejected, with the court noting the peculiar circumstances under which the order was initially passed. The court found no justification for granting the extension, given the applicant’s conduct and the legal findings in the judgment.