The director of a Mumbai-based interior-designing firm was arrested for not remitting service tax to tune of Rs one crore, officials of the central excise, customs and service tax commissionerate said here on Tuesday.

Salim Sheik alias Salim Rauf, one of the founders of Klass Kone Engineering Pvt Ltd, was in-charge of the firm's routine affairs, including those related to service tax.

"This is the first arrest in a case related to service tax evasion in the state," said K N Raghavan, commissioner, central excise. He added that 12.36% of the bill amount, collected as service tax, should be remitted to the government.

Preliminary investigation revealed that the company failed to remit service tax collected since 2009.

The commissioner said the voluntary compliance encouragement scheme (VCES) in service tax would be operational till December 31 this year. Service providers, who have not remitted the tax, could avail the scheme.

"But for availing the facility, there should not be any ongoing investigation against the company or show-cause notice issued against the company for service tax evasion," said Raghavan.

Though the company, Klass Kone, was registered in Mumbai, it has major business interest in the state, central customs officials said.

Sheik was produced before the additional chief judicial magistrate court (economic offences) and remanded in judicial custody for 14 days.

More than 40 other firms, too, have been under central excise scanner for tax evasion. Officials said stringent action would be initiated against defaulters.