Circular No 201/11/2016-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
Ke*
New Delhi, the 30" September, 2016
To
All Principal Chief Commissioners/ Chief Commissioners of Central
Excise/Service Tax
Principal Directors General/ Directors General of Goods & Service
Tax/Systems/Central Excise Intelligence/ Audit/Tax Payer Services
Chief Commissioner AR CESTAT
All Principal Commissioners/Commissioners of Central Excise/Service Tax
All Principal Additional Directors General/ Additional Directors General Audit
Madam/Sir,
Subject: Guidelines for arrest in relation to offences punishable under the
Finance Act, 1994 and Central Excise Act, 1944
Tam directed to draw your attention to the fact that the arrest provisions in Service
Tax were introduced with effect from 10.05.2013 vide sub-sections (J) and (K) of section
103 of the Finance Act, 2013 which introduced sections 90 and 91 in the Finance Act, 1994
and also amended section 89 of the Finance Act 1994. Vide sections 155, 156 and 157 of the
Finance Act 2016, with effect from 14.05.2016, sections 89, 90 and 91 of the Finance Act,
1994 have been amended. As a consequence of these amendments, 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 rupees
two crore.
2.0 Vide paragraph 2 of Board Circular F.No. 137/47/2013-Service Tax dated 17.09.2013
certain conditions precedent to carrying out arrests were indicated. These were:
2.1 Careful exercise of this power since arrest impinges on the personal liberty of an
individual.
2.2 The reason to believe that a person has committed the specified offence which is
rendering the person liable for arrest must be based on credible material which will stand
judicial scrutiny.
2.3 The relevant factors before deciding to arrest a person must be, apart from fulfillment
of the legal requirements, the need to ensure proper investigation and prevention of the
possibility of tampering with evidence or intimidating or influencing witnesses.
3.0 In the context of the legislative amendments vide the Finance Act 2016 and the single
offence for which the power of arrest exists, it is necessary to again emphasize and indicate
the factors which must invariably be kept in mind before arresting a person:
4.0 Conditions precedent- Legal
4.1. At the outset there must be clear and unambiguous notings in the file, bringing out how
all the ingredients of the offence have been established. The notings must specifically refer to
evidence relating to-
4.1.1 Amount collected as service tax: Collection of an amount as service tax should be
clear and self-evident from the invoices, bills, contracts, etc. An amount should be clearly
indicated as service tax. The copies of sample invoices /bills, contracts, ete. which cover the
period being investigated should be in the file.
4.1.2 Amount should exceed Rs 2 crore.
4.1.3 Failure to pay the amount so collected to the credit of the Central Government:
The ST3 return filed by the assessee for the relevant period, showing the self-assessed value
of taxable services and service tax paid should be available in file. Where no such return has
been filed, an observation to this effect should be made since this will make the departmental
case stronger.
4.1.4 Such a failure should be beyond the period of six months from the date on which
such payment becomes due: Fulfillment of the condition relating to the time period must be
verified carefully, and a month wise abstract of the invoice numbers, due date of payment of
service tax and date when the six month period was completed must be kept ready.
4.2 The suggestions in the preceding paragraph are intended at bringing uniformity in the
approach to such matters and ensuring that evidence relating to the alleged offence is readily
available for perusal by a judicial body, when necessitated.
5.0 Conditions precedent- factual
5.1 Even ifall the legal conditions precedent mentioned in paragraph 4.1 to 4.2 are fulfilled,
that will not, ipso facto, mean that an arrest must be made. Once the legal ingredients of the
offence are made out, the Commissioner must then determine if the answer to the following
questions is in the affirmative
5.1.1 Is the alleged offender likely to hamper the course of further investigation by his
unrestricted movement?
5.1.2 Is the alleged offender likely to tamper with evidence or intimidate or influence
witnesses?
5.2 If the answer to both the questions is yes, then the decision to arrest can be made.
5.3 If the alleged offender is assisting in the investigation and has deposited at least half of
the evaded tax, then the need to arrest may not arise.
6.0 The Guidelines issued vide Board Circular F.No. 137/47/2013-Service Tax dated
17.09.2013 may be referred to for the procedure for arrest, post-arrest formalities and the
reporting system.
7.1. It has been decided to revise the monetary limits for arrests and prosecution in Central
Excise to maintain uniformity of practice in Central Excise and Service Tax. It is directed that
henceforth arrest and prosecution of a person in relation to offences specified under clause (a)
to (d) of sub-section (1) of section 9 of the Central Excise Act, 1944 may be considered only
in cases where evasion of Central Excise duty or misuse of CENVAT Credit is equal to or
more than rupees two crore. Central Excise Circular No. 974/08/2013-CX dated 17.09.2013
and 1009/16/2015-CX dated 23.10.2015 stand amended accordingly. Circular No.
1010/17/2015-CX dated 23.10.2015 is rescinded in view of the revision of monetary limits
prescribed by this circular. It is again reiterated that arrest and prosecution should not be
resorted to in cases of technical nature i.e. where the additional demand of duty/tax is based
totally on a difference of opinion regarding interpretation of law.
7.2 Transitional provisions as prescribed in para 11 of the Circular No. 1009/ 16/2015-CX
dated 23.10.2015 shall apply mutatis-mutandis i.e. all cases where sanction for prosecution is
examined and accorded after the issue of this circular, shall be dealt in accordance with the
provisions of this circular, irrespective of the date of the offence. Cases where prosecution
was sanctioned but no complaint has been filed before the magistrate shall also be reviewed
by the prosecution sanctioning authority in light of the enhanced monetary limit and sanction
withdrawn for cases where evasion of Central Excise duty or misuse of CENVAT Credit is
below the revised monetary limit of rupees two crore.
8.0 It is emphasized once again that since an arrest impinges on the personal liberty of an
individual, this power should be exercised with great responsibility and caution and only after
a careful examination of the legal and factual aspects indicated in the preceding paragraphs.
Yours faithfully
(Sreeparvathy'S.L)
Officer on Special Duty
Service Tax Wing
Phone :011-23095438
sreeparvathy.s|@gov.in
