Oral Order:
1. Heard the learned Counsel for the applicant. Also heard the learned Special Counsel for the respondent No.1. Also heard the learned APP for the respondent No.2.
2. Present application for bail is preferred by the applicant in the matter of offence punishable under Section 89 read with Section 90 of the Finance Act, 1994.
3. During the arguments it is submitted on behalf of the applicant that he is the Director of M/s. Prashant Transport Exchange Division, and the Managing Director of M/s. Naidu's Infracon Private Limited. He was arrested on 22nd January, 2014 at 9:00 p.m. under Section 89 read with Section 90 of the Finance Act, 1994 for non-payment of Service Tax for the period from 2010 to December, 2013.
4. Prior to discussing the rival submissions, the factual position is required to be mentioned inasmuch as the applicant had collected Rs.2.59 Cores of Service Tax during the period 2010-2011 to 2013-2014 but had not deposited the said amount except Rs.15 Lakhs. The applicant had in fact never filed any service tax returns and as such knowingly utilized the Government monies for his personal use.
5. The liability to pay the collected Service Tax to the Government is not disputed by the applicant. However, according to him there is no authority to the respondent No.1 to arrest the applicant in view of the amended provisions of Section 89(1)(d) of the Finance Act, 1994. The said amended provision came into effect from 10.5.2013 and said Section became cognizable. According to the applicant in view of the amended provision of Section 89(1)(d), the offence was made cognizable as mentioned above and vide Section 103(k) of the Finance Act, which came into force on 10.5.2013, Section 90 and Section 91 were introduced in the Finance Act. Due to this amendment, the punishment for the offence punishable under Section 89(1)(d)(ii) was enhanced from three years to seven years.
6. The relevant provisions of the Finance Act, 1994 are reproduced hereunder for the sake of ready reference:
œ89. Offences and Penalties.
(1) Whoever commits any of the following offences, namely, ”
(a) knowingly evades the payment of service tax under this Chapter; or
(b) avails and utilises credit of taxes or duty without actual receipt of taxable service or excisable goods either fully or partially in violation of the rules made under the provisions of this Chapter; or
(c) maintains false books of account or fails to supply any information which he is required to supply under this Chapter or the rules made thereunder or (unless with a reasonable belief, the burden of proving which shall be upon him, that the information supplied by him is true) supplies false information; or
(d) collects any amount as service tax but fails to pay the amount so collected to the credit of the Central Government beyond a period of six months from the date on which such payment becomes due, shall be punishable,”
(i) in the case of an offence specified in clause (a), (b) or (c) where the amount exceeds fifty lakh rupees, with imprisonment for a term which may extend to three years;
PROVIDED that in the absence of special and adequate reasons to the contrary to be recorded in the judgment of the court, such imprisonment shall not be for a term of less than six months;
(ii) in the case of the offence specified in clause (d), where the amount exceeds fifty lakh rupees, with imprisonment for a term which may extend to seven years;
PROVIDED that in the absence of special and adequate reasons to the contrary to be recorded in the judgment of the court, such imprisonment shall not be for a term of less than six months;
(iii) In the case of any other offences, with imprisonment for a term, which may extend to one year.
(2) ¦ ...
(3) ¦ ...
(4) ¦ ...
90. Cognizance of offences
(1) An offence under clause (ii) of sub-section (1) of section 89 shall be cognizable.
(2) Notwithstanding anything contained in the Code of Criminal Procedure, 1973, all offences, except the offences specified in sub-section (1), shall be non-cognizable and bailable.
91. Power to arrest
(1) If the Commissioner of Central Excise has reason to believe that any person has committed an offence specified in clause (I) or clause (ii) of sub-section (1) of section 89, he may, by general or special order, authorize any officer of Central Excise, not below the rank of Superintendent of Central Excise, to arrest such person.
(2) Where a person is arrested for any cognizable offence, every officer authorized to arrest a person shall, inform such person of the grounds of arrest and produce him before a magistrate within twenty-four hours.
(3) In the case of a non-cognizable and bailable offence, the Assistant Commissioner, or the Deputy Commissioner, as the case may be, shall, for the purpose of releasing an arrested person on bail or otherwise, have the same powers and be subject to the same provisions as an officer in charge of a police station has, and is subject to, under section 436 of the Code of Criminal Procedure, 1973 (2 of 1974).
(4) All arrests under this section shall be carried out in accordance with the provisions of the Code of Criminal Procedure, 1973 (2 of 1974) relating to arrests.?
7. By pointing out the above provisions, it is submitted on behalf of the applicant that there cannot be any retrospective effect to the penal provisions and as such considering the arrest of the applicant on 22.1.2014 and considering that the amount of tax collected and required to be deposited with the Government must exceed Rs.50 Lakhs and there must be failure to pay the amount so collected to the credit of the Central Government beyond a period of six months from the date on which such payment becomes due, the applicant was not liable for the arrest inasmuch as the amount collected between 10.5.2013 to 21.7.2013 is only Rs.5,00,887/-. In other words, it is submitted on behalf of the applicant that the maximum amount evaded, if any, under Section 89(1)(d) is less than Rs.50 lakhs for the relevant period and as such the provisions of Section 89(1)(d)(ii) are not applicable.
8. Counter to the arguments advanced on behalf of the applicant, it is submitted on behalf of the respondent No.1 and supported by filing an affidavit to that effect dated 5.2.2014 that the applicant had issued invoices to the customers and charged and claimed Rs.2.59 Crores (approximately) as Service Tax upto December, 2013 and only paid Rs.15 Lakhs to the Central Government treasury and failed to pay Rs.2.44 Crores approximately. In the balance sheet as on 31.3.2013, in Schedule-7, the applicant has accepted the liability to deposit the service tax of Rs.2.11 Crores to the Central Government. In his statements dated 21.1.2014 and 22.1.2014 the accused had admitted that he has collected Rs.2.59 Crores of Service Tax, but, had not deposited the same except Rs.15 Lakhs. It is further submitted that the applicant is aware about the provisions of the Service Tax law and had obtained Service Tax registration for rendering taxable service and in the invoices issued he had not only charged Service Tax but had also declared the Service Tax Registration number which is mandatory. As such, the applicant is well aware of the provisions of law governing the Service Tax and also the amended provisions. It is further the contention of the respondent No.1 that Section 73A of the Finance Act, 1994 requires any person who has collected any amount representing Service Tax to deposit the same forthwith to the Government. As per provisions of Section 89(1)(d)(ii), if any person who has collected the service tax in excess of Rs.50 Lakhs and failed to deposit the same within six months from the due date shall be punishable with imprisonment for a term upto seven years; and Section 90 of the Finance Act, 1994 specifies that the offence under Section 89(1)(d)(ii) of the Finance Act, 1984 shall be cognizable. According to the respondent No.1 the exact amount evaded by the applicant is yet to be ascertained and the investigation is continuing and is not yet completed. The applicant was summoned to the Anti-Evasion Office on 22.1.2014 and arrested under Section 91 of the Finance Act , 1994 for his direct involvement in the evasion of the Service Tax.
9. It is submitted on behalf of the respondent No.1 that non-deposit of the Service Tax with the Central Government after deducting it from the customers is an continuing offence and as such the entire amount of arrears is required to be construed as liable to be deposited with the Central Government when it become due and it being a continuing offence the applicant is liable to deposit the entire arrears “ which is admittedly more than Rs.50 lakhs.
10. It is also submitted on behalf of the respondent that the present applicant is the Managing Director of M/s. Naidu's Infracon Private Limited and is the person involved in all decision taking matters of company and as such have a potential to tamper with the official records which needs to be submitted to the bank.
11. In support of the submissions on behalf of the applicant, the following authority is cited before the Court:
CRM 10939 OF 2013
In the matter of Sudip Das (petitioner)
In the said matter before the Calcutta High Court, the bail was granted to the accused who had been charged for commission of offence punishable under Section 89(1)(d) of the Finance Act, 1994.
12. On carefully going through the ratio propounded by the aforesaid authority, it must be said that according to the Calcutta High Court it was the question of bailability or non-bailability almost comes to a point of merger and, therefore, the benefit of which should be extended to the accused person. In the earlier paragraph that Court held as follows:
œOn query, the learned lawyer of the Union of India could not satisfy me whether strictly custodial detention is necessary for interrogation or not vis-a-vis their prayer as embodied in the petition itself. It is correct that the offence is alive till now but it is not less than correct that when it was originated, the offence was bailable in view of the observation made by the Hon'ble Apex Court. It is also reckoned that the new Act does not have any retrospective effect. ¦ .?
By these observations the accused therein was granted bail.
13. In the considered opinion of this Court, it being continuing offence the entire outstanding amount to be deposited with the Central Government in the present matter is required to be taken into consideration inasmuch as on 10.5.2013 what was the arrears then accrued is required to be taken into account while calculating the amount of Rs.50 Lakhs as contemplated by Section 89(1)(d)(ii) of Finance Act, 1994.
14. During the arguments it was suggested on behalf of the applicant that he is ready and willing to deposit all the outstanding Service Tax to the Central Government but in a time bound programme. The written schedule of payments was given to the learned Counsel for the Respondent No.1 and he took time to take further instructions from the office of the respondent No.1. Subsequently, on the next date, the learned Counsel for the respondent No.1 stated that the said schedule is not acceptable to the respondent No.1 and insisted that the entire dues of Service Taxes, already collected by the applicant, shall be deposited with the respondent.
15. In the opinion of this Court considering that it is a continuing offence and as on 10.5.2013 there were huge outstandings definitely beyond the amount of Rs.50 Lakhs and more so said amount was outstanding even at the time of arrest of the applicant, it is not a case in which the applicant can be released on bail more so when the investigation is still going on. Consequently the present application for bail is dismissed and accordingly disposed of.