Power tends to corrupt, and absolute power corrupts absolutely.
Prior to 2013 there was no power to arrest vested in Service Tax officers,
later on they were provided powers to arrest and prosecute Service Tax evaders.
Any unchecked power is likely to be abused. The Finance Act 1994, as amended in
2013, 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. Further, the Finance Act 1994 had
also prescribed value limits of evasion of service tax exceeding Rs. 50 lakh,
for exercising the powers of arrest.
However, it was noticed that with power to recover Service Tax
upto five years and continuous inflation during last few years, many assessee
were covered within the above limit of Rs.50 Lakhs. Thus many a times it was
observed that relatively small assessee were coerced into making payments
because of fear of arrest. The CBEC has noticed such irregularities and thus,
The Central Board of Excise and Customs has instructed all their officers that
since, arrest impinges on the personal liberty of an individual, this power
must be exercised carefully.
Notwithstanding the above limit, prosecution can be launched in
the case of assessee habitually evading tax/duty or misusing Cenvat Credit
facility. An assessee would be treated as habitually evading tax/duty or
misusing Cenvat Credit facility, if he has been involved in three or more cases
of confirmed demand (at the first appellate level or above) of Central Excise
duty or Service Tax or misuse of Cenvat credit involving fraud, suppression of
facts etc. in past five years from the date of the decision such that the total
duty or tax evaded or total credit misused is equal to or more than Rs.1 Crore.
CBEC vide its another Circular
No. 1009/16/2015-CX dated 23.10.2015 has
prescribed that Sanction of prosecution has serious repercussions for the
assessee and therefore along with the above monetary limits, the nature of
evidence collected during the investigation should be carefully assessed. The
evidences collected should be adequate to establish beyond reasonable doubt
that the person, company or individual had guilty mind, knowledge of the
offence, or had fraudulent intention or in any manner possessed mens-rea
(guilty mind) for committing the offence.
Now, with such clear guidelines, CBEC has made sure that habitual
offenders are not let off easily and at the same time only in cases involving
duty or tax of Rs.1 Crore the arrest provisions will be applicable. These
Circulars will definitely help the medium sized assessee from the threat of
arrest.