With the Finance Bill 2013 allowing arrest and imprisonment of service tax defaulters, the officials of central excise and service tax department may soon crackdown on defaulters.
Under the bill, which was passed recently, the defaulters of service tax can be arrested and imprisoned for up to seven years.
However, in an attempt to encourage the assessees, who have to submit due service tax and encourage registration of those, who are liable to pay service tax, the department has also introduced a voluntary compliance scheme.
Sources said there were a number of defaulters in the Ludhiana commissionerate of central excise department which fit the category of liable to be arrested and department might crackdown on these persons in the coming time. However, they could avoid action by availing of the benefits under the voluntary compliance scheme.
“As per the provisions of Finance Bill 2013, the service tax defaulters, who have collected the service tax from customers but didn't deposit it with the department, will invite penal action from the department and can be arrested,” said sources.
“The department does not even need to issue show-cause notices to the defaulters,” they added.
The violators have been divided into two categories. The first category comprises violators, who even after collecting service tax from customers, which got accumulated over Rs. 50 lakh over a period of six months, did not deposit it with the department. They will invite non-bailable warrants and if held guilty of deliberately not depositing the service, they can be sentenced to seven years imprisonment.
The second category would comprise defaulters with service tax less than Rs. 50 lakh. However, their offence is bailable, and bail can be sought from an assistant commissioner officer or through court.
Sources said the government had deliberately made these two provisions in the same bill. “One will make the defaulters pay their due service tax by offering them relaxation in paying penalty, interests and exempting them from any prosecutions. The other will also serve the purpose of making defaulters to pay service tax but by creating a sense of fear among them as they can face an arrest and imprisonment up to seven years if found guilty,” sources said.
Sources also revealed that as there was no need of serving notices to defaulters, the department could arrest violators after conducting surveys to ascertain the degree of default.