Tax Consultant Arrested - for Service Tax Evasion?
IT was just ten days ago that DDT quoted the British Public Accounts Committee Chairman -.. a tax avoidance industry, comprising many large accountancy firms, tax advisers and lawyers, all of whom are making lucrative business out of designing and selling ways for their clients to avoid taxs
And here is a tax consultant who swindled his client and got arrested by the Service tax department.
Mumbai Service Tax has arrested one S. Shivaraman Tax Consultant for evasion of Service Tax amounting to Rs.89 lakhs! How can a tax consultant evade service tax? Read on the Press Note issued by Mr.Sushil Solanki, the Service Tax Commissioner.
During verification of Service Tax payment by M/s. Unison Security Force, a Security Services provider, it was noticed that they have appointed Mr. S. Shivaraman as a Tax Consultant in the year 2009 for looking after Service Tax related work including filing of S.T returns and payment of Service Tax. ACES system of the service provider was also operated by the said Tax Consultant. As per the statement given by the owner of the firm, he used to provide the details of the Sales Invoice raised by him to his Tax Consultant and based upon the information of the Tax Consultant, he was making payment of Service Tax to the Consultant. However, the Consultant was depositing only a small amount and the balance amount was swindled by him. In order to cover up the fraud the Tax Consultant used to prepare forged tax payment challans and give it to the owner of the firm. In fact he had also prepared the Return showing the reduced amount only. The owner of the Security firm had made payment of Service Tax of Rs.1.8 crore from 2009 to the Consultant but the consultant has made payment to the Government only Rs.90 lakhs (Approx.). In the process Mr.S.Shivaraman, Consultant had pocketed the Service Tax amount of Rs.90 lakhs. During investigation the Tax Consultant has paid Service Tax of Rs.55 lakhs. The Chief Metropolitan Magistrate Court has granted bail on the condition of payment of balance amount of Service Tax within 15 days.
While it is appalling to note that a Consultant can defraud his client so blatantly, it is also surprising that an assessee paid Rs. 1.8 Crores to the consultant as service tax to be paid to the department.
In this case, has the consultant evaded Service Tax? And is he liable to be arrested? An officer told us, "yes, otherwise how did the magistrate grant him bail?". In this case, the security firm was liable to pay service tax and the consultant cheated the firm, but has the consultant evaded service tax and could he be arrested by the service tax department?
We tried to find out and were told that he was arrested under Section 89 (1) (d) of the Finance Act, which reads as, "(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, -..."
If somebody pays you money to pay service tax, and you don't pay it, are you liable to be arrested under the above provision? YES, according to service tax authorities. And they actually arrested such a person.
Four years ago a consultant was arrested in Pune for collecting service tax money from some assessees and pocketing it without paying it to the Government. But he was arrested under Sections 420 (cheating), 468 (forgery), 470 (forged document) and 471 (Using as genuine a forged document) of the Indian Penal Code, but not the Service Tax statute.
This is perhaps the first time in the country that the service tax department has arrested a tax consultant for service tax evasion but it certainly is not the first time that we hear of swindling consultants.
Please see Neha Enterprises - and Shreeji Travels -