Finance minister P Chidambaram has inserted at least half-a-dozen provisions to make certain offenses related to customs and excise duty non-bailable, while providing for arrest for violation of service tax law, raising fresh concerns over powers being vested with revenue authorities. For instance, for offenses related to service tax evasion —especially for non-payment of collected service tax—a commissioner rank officer can order arrest.
So, if an airline or a restaurant collects service tax from customers but doesn’t deposit it with the tax department, the service provider can be arrested in future. Similarly, in case of customs duty, there are at least four cases where the government has proposed to make the offences non-bailable under Section 135 of the Customs Act. Attempted duty evasion of over 50 lakh made non-bailable. Duty evasion or even “attempted evasion” of over Rs 50 lakh has now been made non-bailable. Similarly, failure to properly disclose import or export of goods worth over Rs 1 crore will face the same treatment as will fraudulently claiming drawback or exemptions.
In case of the Central Excise Act, the Finance Bill has proposed to amend the law to make duty evasion or improper availing of Cenvat credit of over Rs 50 lakh cognizable offence and also non-bailable. Cenvat credit refers to taking credits or seeking refunds for excise paid by a vendor of product. “Section 91 (for service tax) is a retrograde step. The government is trying to squeeze service tax payers to increase collections by 45% to Rs 1.8 lakh crore,” said Bishwajit Bhattacharya, a former additional solicitor general. He said the powers for prosecution had been removed from the statute several years ago and were now being brought back.
For the industry, the bigger fear is misuse of the provisions by junior officers. “The government will have to ensure that the powers are not used to harass taxpayers. But in general, it goes against the intent of ushering in a non-adversarial tax regime,” added Pratik Jain, partner at consulting firm KPMG. Over the years, when it came to economic offences, the government had started shifting to a simpler regime but in the last two years, the trend seems to be changing. Even last year, Pranab Mukherjee’s move to increase powers with customs and excise officials had come in for criticism. As a result, the government dropped its plans to make certain violations of the customs and excise laws cognizable and non-bailable.
- New provision of arrest for non-payment of service tax
- Extends jail term to 7 yrs, with fine, if leviable duty is over Rs 30 lakh
- If duty liability crosses Rs 50 lakh, govt plans to make offense cognizable and non-bailable
- Evasion/attempted evasion made non-bailable if duty exceeds Rs 50 lakh
- Fraudulently availing exemptions of over Rs 50 lakh made non-bailable offense