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2021 (4) TMI 430 - HC - Service TaxEvasion of Service Tax - Punishable offence - initiation of criminal proceedings - The amount involved is less than Rupees two crores - Site Formation and Clearance Service - Erection, Commissioning or Installation Service - Interior Decorators Service - Supply of Tangible Goods Service - HELD THAT - By virtue of Circular No.201/11/2016-Service Tax vide Annexure-R4, produced by the respondent, as a consequence of the amendment, the power of arrest in Service Tax is available only if a person collects any amount as service tax but fails to pay the amount so collected to the credit of the Central Government beyond the period of six months from the date on which such payment becomes due and the amount exceeds ₹ 2 crores. The amount involved in this case is less than Rupees two crores. The learned counsel for petitioners would also contend that out of the total tax dues amounting to ₹ 1,38,88,566/- for the period from April 2009 to December, 2012, the assessee had remitted 50% of the tax dues i.e., ₹ 69,44,254/- during December, 2013 and the remaining tax dues to the tune of ₹ 69,44,254/- has been paid along with interest. However, the same has to be verified by the respondent and it is always open for the Department to recover the dues from the petitioners, if any, in accordance with law. Petition allowed.
Issues:
Challenge to proceedings under Sections 89 and 90 of the Finance Act, 1994. Analysis: The petitioners challenged the proceedings initiated against them by the respondent under Sections 89 and 90 of the Finance Act, 1994. The petitioners are partners of a partnership firm accused of evading service tax amounting to ?1,38,88,566 from 2009-2010 to December 2012. The petitioners were arrested and produced before the Magistrate, who took cognizance of the offence under the Finance Act. However, it was noted that no complaint was filed before the Magistrate, and the procedure followed was not in accordance with the law. The learned counsel for the respondent conceded this fact, leading to the conclusion that the criminal proceedings against the petitioners should be quashed. The Circular No.201/11/2016-Service Tax introduced amendments regarding the power of arrest in service tax cases. It specified that arrest is permissible if a person collects service tax but fails to remit it to the Central Government beyond six months from the due date, and the amount exceeds ?2 crores. In this case, the amount involved was less than ?2 crores. The petitioners had already remitted 50% of the tax dues and paid the remaining amount along with interest. The petitioners argued that the Department could recover any outstanding dues in accordance with the law. Considering the Circular and the facts of the case, the Court allowed the petitions and quashed the proceedings pending before the Prl. Civil Judge and JMFC. In conclusion, the Court found that the criminal proceedings against the petitioners were initiated without a formal complaint being filed before the Magistrate, rendering the procedure incorrect. Additionally, the amount involved in the case did not meet the threshold for arrest as per the Circular. The petitioners had partially paid the tax dues and were willing to comply with any further recovery actions by the Department. Consequently, the Court allowed the petitions and quashed the ongoing proceedings against the petitioners.
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