CBEC issues clarification on Arrest Procedure under Service Tax [Read Circular]

Gujarat High Court Arrested - Trader

The Finance Act, 2016 has amended the provisions relating to arrest procedure under sections 89,90 and 91 of the Finance Act, 1994 w.e.f. 14.05.2016. According to these provisions, a person who collects service tax but fails to pay the same to the Government within 6 months from the due date is liable to be arrested. For this, the amount so collected should exceed Rs. 2 crores. The present circular instructs the officials to comply with conditions, i.e, both legal and factual while exercising the power to arrest.

With regard to the legal conditions, the officer should have a ‘reason to believe’ that there exists a need to arrest the person who has committed the above mentioned offence.Such reasons must be recorded with clear and unambiguous noting.There should be clear evidence to prove that the person has collected service tax, the amount so collected exceeds Rs. 2 crores and he failed to make payments to government even after 6 months of the due date.

The factual conditions necessary to exercise the power to arrest are that, the officer can arrest a defaulter in order to ensure proper investigation and prevention of the possibility of tampering with evidence or intimidating or influencing witnesses etc.

The circular clearly directs that the arrest cannot be resorted to in relation with cases having technical nature. It is further emphasized that since arrest impinges on the personal liberty of an individual, the power to arrest must be done with utmost caution after analyzing the factual and legal precedents given above.

Read the full text of the circular below.