Circular 171/6/2013-Service Tax
F.No. 137/47/2013-Service Tax
Government of India
Ministry of Finance
Department of Revenue
Central Board of Excise & Customs
Service Tax Wing
***
New Delhi, the 17th September, 2013
To,
All Chief Commissioners of Central Excise
All Chief Commissioners of Customs and Central Excise
All Directors General
All Commissioners of Service Tax
All Commissioners of Central Excise
Subject: Guidelines for arrest and bail in relation to offences punishable under the Finance Act, 1994
Section 103 (K) of the Finance Act, 2013 has introduced Sections 90 & 91 in the Finance Act, 1994, with effect from 10
th
May,
2013. In terms of section 90 of the Finance Act , 1994, as amended, offences under section 89(1) (ii) shall be cognizable and
all other offences shall be non-cognizable and bailable. In terms of section 91(1) read with section 89(1) (i) and (ii) of the
Finance Act, 1994, as amended, the power to arrest has been introduced in cases involving evasion of service tax covered
under section 89(1) (i) and (ii) of the Finance Act, 1994, as amended and the amount of service tax evaded exceeds rupees
fifty lakh. In this context, the following points may be noted for strict compliance:-
1.2 The following cases are covered under section 89(1) (i):
1.2.1 where a person knowingly evades the payment of service tax, or
1.2.2 avails and utilizes credit of taxes or duty without actual receipt of taxable service or excisable goods either fully or partially
in violation of the rules, or
1.2.3 maintains false books of accounts or fails to supply any information which he is required to supply or supplies false
information,
and the amount of service tax involved is more than fifty lakh rupees.
In such cases, the Assistant Commissioner or the Deputy Commissioner 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). This is in terms of section 91(3)
of the Finance Act, 1994, as amended.
1.3 The following cases are covered under section 89(1) (ii):
1.3.1 where a person has collected any amount exceeding fifty lakh rupees as service tax but fails to pay the amount as
collected to the credit of the Central Government beyond a period of six months from the date on which such payment becomes
due.
In such cases, after following the due procedure of arrest, the arrested person must be produced before the magistrate without
unnecessary delay, and definitely within 24 hours. This is in terms of section 91(2) of the Finance Act, 1994, as amended. The
magistrate will decide on whether or not to grant bail.
2.0 Conditions precedent
2.1 Since arrest impinges on the personal liberty of an individual, this power must be exercised carefully . The Finance Act
1994, as amended, has specified categories of offences in respect of which only powers of arrest may be exercised and these
offences are covered under clause (i) or clause (ii) of sub-section (1) of section 89 of the Finance Act, 1994. Further, the
Finance Act 1994 has also prescribed value limits of evasion of service tax exceeding Rs 50 lakh, for exercising the powers of
arrest.
2.2 The legal stipulations in the Finance Act 1994 , as amended, contained in section 91 read with section 89 must be strictly
adhered to. An officer of Central Excise not below the rank of Superintendent of Central Excise can carry out an arrest on being
authorized by the Commissioner of Central Excise. To authorize the arrest the Commissioner should have reason to believe
that the person proposed to be arrested has committed an offence specified in clause (i) or clause (ii) of sub-section (1) of
section 89. The reason to believe must be based on credible material which will stand judicial scrutiny.
2.3 Apart from fulfilling the legal requirements, the need to ensure proper investigation, prevention of the possibility of
tampering with evidence or intimidating or influencing witnesses and large amounts of service tax evaded are relevant factors
before deciding to arrest a person.
3.0 Procedure for arrest
3.1 The provisions of the Code of Criminal Procedure 1973 (2 of 1974) relating to arrest and the procedure thereof must be
adhered to . It is therefore advised that the Commissioner should ensure that all officers are fully familiar with the provisions of
the Code of Criminal Procedure 1973 (2 of 1974).
3.2 There is no prescribed format for arrest memo but an arrest memo must be in compliance with the directions in D.K Basu
vs State of West Bengal reported in 1997(1) SCC 416 ( see paragraph 35). The arrest memo should include:
3.2.1 brief facts of the case;
3.2.2 details of the person arrested;
3.2.3 gist of evidence against the person;
3.2.4 relevant section (s) of the Finance Act, 1994 or other laws attracted to the case and to the arrested person;
3.2.5 the grounds of arrest must be explained to the arrested person and this fact noted in the arrest memo;
3.2.6 a nominated person (as per the details provided by arrested person) of the arrested person should be informed
immediately and this fact also may be mentioned in the arrest memo;
3.2.7 the date and time of arrest may be mentioned in the arrest memo and the arrest memo should be given to the person
arrested under proper acknowledgment;
3.2.8 a separate arrest memo has to be made and provided to each individual/arrested person. This should particularly be
kept in mind in the event that there are several arrests in a single case.
3.3 Further there are certain modalities that should be complied with at the time of arrest and pursuant to an arrest, which
include the following:
3.3.1 A female should be arrested by or in the presence of a woman officer;
3.3.2 Medical examination of an arrested person should be conducted by a medical officer in the service of Central or State
Governments and in case the medical officer is not available , by a registered medical practitioner, soon after the arrest is
made. If an arrested person is a female then such an examination shall be made only by, or under supervision of a female
medical officer , and in case the female medical officer is not available, by a female registered medical practitioner.
3.3.3 It shall be the duty of the person having the custody of an arrested person to take reasonable care of the health and safety
of the arrested person.
4.0 Post arrest formalities
4.1 The procedure is separately outlined for the different categories as listed in section 89(1) (i) and (ii) of the Finance Act,
1994, as amended:
4.1.1 In cases covered under section 89(1) (i), the Assistant Commissioner or Deputy Commissioner is bound to release a
person on bail against a bail bond. The bail conditions should be informed in writing to the arrested person and also informed
on telephone to the nominated person of the person (s) arrested .The arrested person should be also allowed to talk to a
nominated person. The conditions will relate to, inter alia, execution of a personal bail bond and one surety of like amount given
by a local person of repute, appearance before the investigating officer when required and not leaving the country without
informing the officer. The amount to be indicated in the personal bail bond and security will depend, inter alia, on the amount of
tax involved.
4.1.2 If the conditions of the bail are fulfilled by the arrested person, he shall be released by the officer concerned on bail
forthwith. However, only in cases where the conditions for granting bail are not fulfilled, the arrested person shall be produced
before the appropriate Magistrate without unnecessary delay and within twenty-four (24) hours of arrest. The arrested person
may be handed over to the nearest police station for his safe custody, within 24 hours, during the night under a challan, before
he is produced before the Court.
4.2 In cases covered under section 89(1) (ii) and only in the event of circumstances preventing the production of the arrested
person before a Magistrate without unnecessary delay, the arrested person may be handed over to nearest Police Station for
his safe custody, within 24 hours, under a proper challan, and produced before the Magistrate on the next day, and the
nominated person of the arrested person may be also informed accordingly.
4.3 Formats of the relevant documentation i.e. the Bail Offer Letter, the Bail Bond and the Challan for handing over to the
police, in the Code of Criminal Procedure, 1973. ( 2 of 1974) may be followed.
4.4 Every Commissionerate should maintain a Bail Register which will have the details of the case, arrested person, bail
amount, surety amount. The money/instruments/documents received as surety should be kept in safe custody. The money
should be deposited in the treasury. The other instruments/documents should be kept in the custody of a single nominated
officer. It should be ensured that the instruments/documents received as surety are kept valid till the bail is discharged.
5.0 Reporting System
5.1 A report on every person arrested should be sent to the jurisdictional Chief Commissioner with a copy to DGCEI
(Headquarters) the same day or on the next day.
5.2 Chief Commissioners shall send a report on every arrest to the Zonal Member within 24 hours of the arrest giving such
details as prescribed in the monthly report . To maintain an all India record of arrests made in service tax, a monthly report of all
persons arrested in the Zone shall be sent by the Chief Commissioner to DGCEI (Headquarters), New Delhi, by the 5
th
of the
succeeding month, in the following format:
Monthly Report on Persons Arrested in a Zone
S.No
Name, designation
and age of
arrested person
Date of
arrest
Commissionerate
Name and
Registration
Number of
Company
Amount of
duty evaded
Role in
evasion
and
nature of
evidence
collected
Total
Yours faithfully
(Rajeev Yadav)
Director (Service Tax)
