Dr. Sanjiv Agarwal
Very soon, Service Tax, which is considered to be a relatively young baby in the tax universe, will make the assessees scared of penalties, prosecution and arrests. The Budget which is likely to be passed by both the houses of the Parliament and soon become an enactment thereafter will make all such provisions operational (may be from some date in May, 2013).
Service Tax law has always been considered as a simple and an assessee friendly law but now it may not be so. The government has thought it fit, after 19 years of Service Tax in the country, to have in place stricter penal and prosecution provisions. The ongoing advertisement campaign of Central Board of Excise and Customs is only a reflection of serious intention of the government. Some of the advertisements read like this – ‘pay your Service Tax correctly and on time or be ready to face the consequences – recovery of duty alongwith interest and penalty going upto 100%, attachment of property, prosecution’; ‘What would you like to be served – relaxation or legal consequences’; ‘you can’t get away – wrong actions, strong reactions’ and so on.
The new provisions provide for personal penalty of company officials. Thus where a company is a defaulter, besides company, its officers (director, secretary manager or officer) can be punished for defaults made by the company provided such defaults have been made knowingly in respect of Service Tax evasion, issuance of fake invoices, availment of wrong credit or failure to pay Service Tax beyond six months of due date. The personal penalty could go upto Rs. one lakh in each case.
As if this was not enough, another penal provision talks of making these offences cognizable and power to arrest has been granted. While other offences will be bailable (arrest warrant is a must), non-payment of Service Tax will be a cognizable offence and arrest can be made without a warrant. However, reasons for arrest would have to be informed and arrested person produced before the Magistrate within 24 hours. Such arrests could be made by officer of the rank of Superintendent or above, of course, duly authorized by the Commissioner. Bail could be granted by Assistant or Deputy Commissioner.
Such arrest will be made under Code of Criminal Procedure and the arresting authority will have all powers of an Incharge of a Police Station. Arrests for various offences shall range between 6 months and 7 years.
All said and done, such powers go against the fiscal and tax policy of the government and may prove to be retrogatory in result. The assessees ought to be cautioned to comply with the law in letter and spirit and in cases, where there is a doubt, it would be desirable to follow a conservative path. Being an indirect tax, the stakes will be large and one would not want to be of pocket. So, better to pay tax, wherever in doubt.