Imagine the predicament of an officer when he gets in his hand the latest circular on prosecution dated 12th May 2011 for service tax cases. It says that all previous instructions and guidelines in Central Excise are also applicable mutatis mutandis. Now when I look for the Central Excise Circulars I find that there are far too many and the same point has been discussed in different circulars in different ways . That is hardly any finality on some crucial points. Moreover, Custom circulars have not been referred to. This is a wrong approach because both Customs, Excise and Service Tax should have the same principles regarding prosecution. This circular should have ideally, incorporated the general principles enunciated in the Customs and Excise circulars into this circular. That would have made the circular self contained and not an open ended one. This circular is in a letter form with F. No.354/45/2011-TRU issued from Tax Research Unit, whereas all circulars on prosecution have been issued from the administrative sections.

Multitudinous circulars,guidelines, letters and manual instructions on Customs, Excise, Service tax on prosecution, have invariably led to inconsistencies and vagueness as discussed below.

The crucial point is about filing prosecution before or after adjudication. The Service Tax circular dated 12th May 2011 says that prosecution should be initiated after departmental adjudication though there is no legal bar against prosecution before adjudication. However, the circular No.15/90-CX-6 dated 9.8.1990 lays down at para 6 that the decision on prosecution should be taken on completion of adjudication proceedings. The Supreme Court in the case of Radheshyam Kejriwal vs. State of West Bengal-2011(266)ELT294(SC), has very clearly observed that while adjudication and criminal proceedings can legally be launched together since they are independent proceedings, if in adjudication, the decision is that the allegation against the accused is unsustainable on merits, criminal prosecution on same sets of facts and circumstances cannot be allowed to continue. So it is necessary for the CBEC to clearly indicate under what circumstances prosecution can be launched even before adjudication. I can say where. Where smuggled goods have been found with carriers whereas the goods belong to somebody else who is not traceable, and the carriers can easily run away if they get a bail, prosecution should be launched immediately. In 'Preventive' Department cases where they deal with clandestinely smuggled goods, prosecution should be launched earlier than adjudication which takes long time. In appraising cases adjudication must be done first. This deserves to be clearly stated. In the absence of that there has been misuse in the past and there is no guarantee that it will not be repeated.

There are contradictory instructions regarding who will decide about prosecution. In the circular dated 12th May 2011 it is said that the adjudicator should write whether it is a fit case for prosecution though it is not necessary to do so.

Such vagueness should be avoided. There are circulars which empower the Chief Commissioner to decide it. So a clarification is necessary to say that the adjudicator need not write about prosecution since there is a separate procedure laid down.

My conclusion and suggestions are the following.

(a) Since prosecution is a very general subject, a consolidated circular on all these points in different circulars should be issued applicable to all three taxes. This should cover all the common issues namely, (i) not filing prosecution for offenses of technical nature, (ii) prosecuting directors of companies, (iii) prosecuting nominee directors (iv) whether to arrest before prosecution, (v) who will decide about the prosecution, (vi) withdrawal of prosecution, (vii) how to follow up prosecution, (viii) compounding of prosecution and (ix) where prosecution should be filed before or after adjudication.

(b) Where the issues are different such as the threshold above which prosecution can be launched, they should be indicated separately in the same circular.

(c) Circular should be issued with a certain amount of precision (avoiding verbosity) and from the proper section with a circular number and not in a letter form.

(d) The Supreme Court has accorded a very high degree of importance to the circulars of the Board and called them binding. So matching amount of importance should be accorded to drafting the circular.