Service tax law was amended with arrest provisions w.e.f. 10th May 2013. Section 89(1)(d) was amended to provide that non-payment of amount collected as service to government treasury will be liable for prosecution for period up to seven years. A question would come to mind that what would happen in cases where the amount as described in section 89(1)(d) is collected prior to the date when this section became effective i.e. 10th May 2013.
High Court of Bombay has given its judgement on the same matter which is as below.
Assessee-director was arrested on 22-1-2014 under section 89(1)(d)(ii), read with sections 90 and 91 for non-payment of service tax of Rs. 2.44 crores by his company despite having collected same from customers - Assessee argued that : (a) said offence had become cognizable vide Finance Act, 2013 only on 10-5-2013; (b) amended provisions could not be applied retrospectively for dues pertaining to prior period; and (c) dues for period on or after 10-5-2013 were only Rs. 5 lakhs i.e., not exceeding Rs. 50 lakhs, therefore, assessee was to be granted bail - Department argued that : (a) in balance sheet dated 31-3-2013, liability to pay tax was admitted; (b) non-payment of outstanding dues was a continuing offence; therefore, amended provisions were applicable - HELD : It being a continuing offence, entire outstanding/arrears as on 10-5-2013 was to be taken into consideration while calculating limit of Rs. 50 lakhs under section 89(1)(d)/(ii) - Since, as on 10-5-2013, there was huge outstanding beyond Rs. 50 Lakhs and said amount continued to be outstanding even at time of arrest, assessee could not be granted bail, more so, when investigation was still ongoing and assessee's payment plan was not agreed to by department [Paras 13 to 15] [In favour of revenue]
Case : Kandrarameshbabu Naidu vs. Superintendent (AE) Service Tax, Mumbai-II