At a time when the heads of many large businesses are agitated over the name of Kumar Mangalam Birla appearing in a First Information Report filed by the Central Bureau of Investigation, it is useful for the trade to note the stringent provisions for arrest and non-bailable offences under the indirect tax laws.
Since May 10 this year, all offences under the Customs Act, 1962, are bailable, except offences relating to evasion or attempted evasion of duty exceeding Rs 50 lakh, prohibited goods notified under section 11 of the Act, import or export of any goods not declared in accordance with the Act's provisions and the market price of which exceeds Rs 1 crore, or fraudulently availing of or attempt to avail of a drawback or any exemption from duty if this amount exceeds Rs 50 lakh.
Similarly, all offences under the Central Excise Act, 1944, are bailable, except offences involving duty of Rs 50 lakh or more, evasion of payment of any duty or contravention relating to credit of any duty allowed to be utilised towards payment of excise duty on a final product. Where a person collects any amount exceeding Rs 50 lakh service tax but fails to pay that amount to the government within six months from the date on which such payment becomes due is also a non-bailable offence.
The powers to arrest have been vested with departmental officers even in the case of bailable offences such as clandestine removal of manufactured goods, removal of goods without declaring the correct assessable value and receiving a portion of the sale price in cash which is in excess of the invoiced price and not accounted for in the books of account, taking Cenvat credit without actual receipt of taxable services or duty-paid goods specified in the invoice, taking Cenvat credit on fake invoices, issuing Cenvatable invoices without delivering the goods specified in the said invoice, wilful evasion of service tax, maintenance of false books or failure to supply information.
The Central Board of Excise & Customs issued detailed guidelines on September 17, explaining the conditions precedent to arrest, procedure for arrest, post arrest formalities and reporting disciplines to be followed. Their essence is that the power to arrest a person needs to be exercised with utmost caution. Chief commissioners or commissioners of central excise or customs or service tax should grant approval for arrest on a non-bailable offence only where the intent to evade duty is evident and an element of mens rea (criminal intent) is palpable.
Also, in such cases, the guidelines of the Supreme Court in the case of D K Basu versus State of West Bengal have to be followed. The decision to arrest must be taken on a case-to-case basis, considering various factors such as nature & gravity of offence, quantity of duty evaded or credit wrongfully availed, nature & quality of evidence, possibility of evidence being tampered with or witnesses being influenced, cooperation with the investigation, etc.
In the case of companies, every person who, at the time the offence was committed was in charge of and responsible for the conduct of business shall be deemed guilty. Unless he or she can prove the offence was committed without his or her knowledge or all due diligence was exercised to prevent commission of such an offence.
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