2014 (12) TMI 749 - HC - Service Tax

Analysis of Service Tax Liability in Criminal Case Under Finance Act, 1994

The Court considered whether service tax was leviable in the context of a case where petitioners sought anticipatory bail in a criminal matter related to ... Bail Application - anticipatory bail under Section 438 Cr.P.C. - evasion of service tax - commission of offence punishable under Section 83 read with Section 89 (1) (ii) - petitioners claim that they were service providers for extending sanitation services to the Municipal Corporation, which included cleaning of the sewerage - Held that:- At this stage, no impediment can be caused in the investigation, which is in progress, and therefore, free hand ought to be given to the investigator. However, this Court will trust the better sense and discretion of the Investigating Officer to the effect that he shall affect the arrest of the petitioners only; after if he comes to a definite conclusion that prima-facie, offence is made out, arrest of the petitioners necessary to arrive at a truth. - application for grant of pre-arrest bail is, hereby, disposed of, without granting bail to the petitioners. Issues:1. Whether service tax is leviable in the present caseRs.2. Whether the petitioners/company calculated and received service taxRs.Analysis:Issue 1: The petitioners approached the Court seeking anticipatory bail in a criminal case related to the alleged commission of an offense under the Finance Act, 1994. The petitioners claimed they were service providers for sanitation services to the Municipal Corporation, including sewerage cleaning. The company's representative argued that as service providers, they were not liable to pay service tax, except in the case of supplying manpower. The Additional Commissioner, Central Excise, relied on Section 73-A(2) of the Finance Act, stating that if service tax was charged, it must be deposited even if not chargeable. The Department had collected costing notes before the bid, showing inclusion of service tax. The Court considered whether service tax was leviable in this context.Issue 2: The second issue was whether the petitioners had calculated and received service tax. The investigation was ongoing, and the Additional Commissioner emphasized the need for the Investigating Agency to determine the nature of the contract and whether service tax had been received. The Court decided not to impede the investigation and granted freedom to the Investigating Officer. It was stated that the petitioners could be arrested if the Investigating Officer found a prima facie offense. The application for pre-arrest bail was disposed of without granting bail. The company offered to deposit the due amount, and the Department agreed to consider any proposal before arrest.In conclusion, the Court addressed the issues of service tax liability and calculation in the context of the petitioners' case. The decision emphasized the importance of the ongoing investigation and the discretion of the Investigating Officer. The judgment highlighted the need for thorough examination before any arrest and the willingness of the company to cooperate in resolving the financial aspects of the case within the legal framework.