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Press Note regarding nonpayment of Service Tax - Commte of Central Excise & Service Tax, Mangalore
December, 05th 2014
C.No. IV/06/56 /2013-14 SIV Cell                                              Dated: 26.11.2014

                                        PRESS NOTE


       On specific information recorded by the officers of the Central Excise & Service Tax
Commissionerate, Mangalore, which was further developed, a proprietor of one of the major
construction companies has been arrested for service tax evasion of over one crore. Out of the
amount evaded, about Rs.84 lakhs of service tax has been collected from the customers but the
same has not been credited to the Government exchequer.

2.      During the detailed investigation carried out by the officers of the Commissionerate, it
has been revealed that the service provider though had been providing taxable service of works
contract service and others, failed to take service tax registration which was taken only after the
lapse of considerable period. Further he has not been filing the statutory returns to the
department regularly and neither discharged the appropriate service tax liability. It needs to be
highlighted that the service provider has not even been crediting the service tax collected from
the customers to the Government exchequer. The service provider though has been providing
the taxable services to various customers including their sister concern, the details have neither
been properly captured in their financial accounts nor correctly declared to the department.
During the investigation, the service provider has admitted to the contraventions.

3.      As the service tax collected but not paid to the exchequer for more than six months
exceeded Rs.50 lakhs, the acts of omission and commission on the part of the service provider
constituted an offence prescribed under Section 89(1)(d) of the Finance Act, 1994 thereby
attracting imprisonment extending to seven years in terms of Section 89(1)(ii) of the said Act.
Further such offences shall be cognizable as per Section 90 of the Finance Act.

4.     The service provider was therefore, arrested today, the 26th November, 2014 under
Section 91 of the Finance Act, 1994 and produced before the Hon'ble Principal Civil Judge

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Senior Division and Chief Judicial Magistrate, Mangalore who remanded him to judicial
custody. Further investigation is under progress.

5.      The Commissionerate equipped with data received from various sources has been
proactively developing the data base of assessees providing various services including service
tax payment particulars on regular basis. The investigations initiated have prompted a few of
such defaulters to discharge their liability during the stages of investigation itself. However, in
instances where the service providers who had not credited the service tax amount collected to
the Government exchequer and where the contraventions attracted Section 89(1)(ii) as aforesaid,
arrest of such defaulters have been resorted to pending further investigations. It may be recalled
that this is the fourth arrest made by the Commissionerate in the recent past for such gross and
intentional violations of statutory provisions to evade payment of service tax.


                                                            (Dr. M. SUBRAMANYAM)

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