To arrest first and then proceed with rest is despicable: High Court
Service Tax - Threat of Arrest, denial of bail and tarnishing of image - What does Department get out of it?
HERE is a classic case:
A Managing Director of a Company was summoned by the Service Tax Department on 06.02.2014. He appeared on 28.02.2014, 08.05.2014, 20.08.2014, 11.03.2015 etc and claimed the benefit of a circular dated 24.05.2010 whereby the applicability of service tax of laying of cables along with the roads etc. and other electricity connected services had been exempted. But the officials were resorting to arm-twisting and he had deposited some amounts as part payment of the service tax. An amount of Rs.36,82,685/-till 14.08.2014 had been deposited and even Service Tax Voluntary Compliance Encouragement Scheme had been opted for. This slow process of investigation suddenly culminated in the arrest of the MD on 08.04.2015. That is, he was arrested more than one year after he first appeared before the officers in response to summons. All these days, he was not a threat to society or investigation, but suddenly after his arrest his existence in society became a danger and bail was denied to him. His appeal to a Higher Court for bail was also rejected on strong objection from the department.
He, then approached the High Court.
It may be noted that:
1. Show Cause Notice was issued on 23.04.2015, fifteen days after arrest.
2. There was neither a notice nor a quantification of demand on the date of his arrest.
3. The High Court asked the Revenue as to whether any time frame could be indicated as to when the investigation process would be completed or when the adjudication order could be passed or a formal complaint alleging the violations of the provisions of the Act, would be filed. The revenue could not indicate any time frame.
4. The accused had already paid an amount of over Rs. 36 lakhs.
5. The judicial remand had been ordered on 09.04.2015 and no effort, thereafter, has been made to seek any further information from the petitioner.
The High Court made some interesting observations:
1. We feel this attempt at justification of the action by the counsel for the respondents, prima facie at this stage, is unjustified as it amounts to putting the cart before the horse.
2. The hurry to arrest, in such circumstances prima-facie amounts to a punitive measure, prejudging the issue.
3. It is also admitted by counsel for respondent No.2 that after the arrest of the petitioner on 08.04.2015, the judicial remand had been ordered on 09.04.2015 and no effort, thereafter, has been made to seek any further information from the petitioner which goes contrary to the argument that investigation is in progress and his personal custody is required.
4. Once such was the situation, the requirement of arrest for the arrears due for the last more than 4 years, of which, there was no quantification, prima facie, would only infringe on the fundamental rights of the petitioner, as the calculations on the basis of which, he is sought to be arrested, as per the arrest memo, was issued only at his back and without having given him appropriate opportunity to file reply to the show cause notice, which admittedly was issued on 23.04.2015, post his arrest.
5. Further detention of the petitioner, in such facts and circumstances, amounts to taking away his liberty in the absence of any complaint having been filed against him.
6. 'The attitude to arrest first and then proceed with the rest is despicable.'
The High Court released him on bail but on stiff conditions.
The Department can arrest an assessee for no good reason, he will be denied bail for no good reason and the officer making the improper, if not totally illegal, arrest has absolutely no accountability.
Lawyers, fixers, officers - all make merry while the assessee languishes in jail. The threat of arrest is more damaging than arrest itself. One arrest and they can threaten a hundred others with arrest and this is a lucrative business.