By TIOL News Service

CHANDIGARH, JUNE 05, 2015: IN the instant writ petition, the challenge is to the arrest memo dated 08.04.2015 issued by Superintendent (Anti-Evasion) Central Excise & Service Tax Commissionerate, Rohtak, Haryana and the orders of the Chief Judicial Magistrate, Rohtak, granting judicial remand to the petitioner on 17.04.2015 along with dismissal of the bail application orders by the Addl. Sessions Judge, Rohtak.

The petitioner submits that he is the Managing Director of M/s Sanga Energy Pvt. Ltd. (SEPL). Summons had been issued to him on account of evasion of service tax, on 06.02.2014 by the Service Tax Department, to appear on 19.02.2014 and he had put in appearance on 28.02.2014, 08.05.2014, 20.08.2014, 11.03.2015 etc. He had sought the benefit of a circular dated 24.05.2010 whereby the applicability of service tax of laying of cables along with the roads etc. and other electricity connected services had been exempted. But the officials were resorting to arm-twisting and he had deposited some amounts as part payment of the service tax. Accordingly, it was submitted that an amount of Rs.36,82,685/- till 14.08.2014 had been deposited and even Service Tax Voluntarily Compliance Encouragement Scheme had been opted for which, however, was not as such adhered to apart from the deposit of 50% of the amount. The petitioner's case is that the balance amount was not deposited on account of the respondents' default as they refused to fill in the recovery form. The petitioner was arrested by the Service Tax officials on 08.04.2015. The arrest made on 08.04.2015 was in a high-handed manner and the orders rejecting the bail application were also not justified on account of the fact that there was no quantification of the amount at the time of his arrest and the show cause notice issued was of 23.04.2015 and he was liable to be released on interim bail during the pendency of the present petition.

The High Court asked the Revenue as to how the interest of the Revenue could be prejudiced in case the petitioner is to be granted the benefit of interim relief, as admittedly, at this stage, there is neither any adjudication order passed against him, quantifying the amount of arrears of service tax which he has alleged to have received nor any complaint has been filed against him under the provisions of the Act, for the violation of the provisions under which he has been arrested, mainly on the ground that the arrears are more than Rs. 50 lacs and therefore, there is a power to arrest.

The High Court felt that the attempt at justification of the action by the counsel for the respondents, prima facie at this stage, is unjustified as it amounts to putting the cart before the horse. There is no denying the fact that the petitioner has been called for enquiry and investigation time and again regarding the contracts he had entered into and the amount of service tax which he has received and which was payable. Counsel for the petitioner has argued that some of the work carried out by him pertains to manufacture and others of job workers/works contract, which in some cases, does not come within the ambit of service tax clause and secondly, different slabs are provided for the same.

The High Court observed,

A perusal of the show cause notice which was issued on 23.04.2015, i.e. after the date of arrest on 08.04.2015, would go on to show that the petitioner was carrying on the allied business since 2007. The said show cause notice also goes on to show that work had been done from the year 2009-10 onwards. The statements of various persons had been recorded and on the strength of the same, the show cause notice was issued subsequently, after arrest which is yet to be adjudicated upon. The hurry to arrest, in such circumstances prima-facie amounts to a punitive measure, prejudging the issue. It is also admitted by counsel for respondent No.2 that after the arrest of the petitioner on 08.04.2015, the judicial remand had been ordered on 09.04.2015 and no effort, thereafter, has been made to seek any further information from the petitioner which goes contrary to the argument that investigation is in progress and his personal custody is required. Once such was the situation, the requirement of arrest for the arrears due for the last more than 4 years, of which, there was no quantification, prima facie, in our opinion, would only infringe on the fundamental rights of the petitioner, as the calculations on the basis of which, he is sought to be arrested, as per the arrest memo, was issued only at his back and without having given him appropriate opportunity to file reply to the show cause notice, which admittedly was issued on 23.04.2015, post his arrest.

The High Court asked the department as to whether any time-frame could be indicated as to when the investigation process would be completed or when the adjudication order could be passed or a formal complaint alleging the violations of the provisions of the Act, which admittedly is a non-cognizable offence, would be filed. Even after seeking instructions, counsels for the respondents could not confirm as to when the said process will be completed

The High Court observed, "further detention of the petitioner, in such facts and circumstances, amounts to taking away his liberty in the absence of any complaint having been filed against him and it would be a fit case where the extraordinary jurisdiction of this Court under Article 226 of the Constitution of India is liable to be exercised. The interest of the Revenue can be safeguarded by imposing certain conditions which the petitioner will adhere to."

The High Court granted interim bail with certain stiff conditions.

(See 2015-TIOL-1405-HC-P&H-ST)