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Power of arrest is to be used with great circumspection and not casually

In Make My Trip (India) Pvt. Ltd v. Union Of India & Ors., writ Petitions were filed by two entities operating on-line platforms/web portals raise important questions involving powers of Directorate General of Central Excise Intelligence (DGCEI) of arrest, investigation and assessment of service tax under provisions of the Finance Act, 1994. In both writ petitions, applications were filed for interim directions to restrain DGCEI from taking any coercive steps against the entities and their officers.

Scheme of provisions of Finance Act 1994 (FA), do not permit DGCEI or for that matter Service Tax Department (ST Department) to by-pass procedure as set out in Section 73A (3) and (4) of Act before going ahead with arrest of a person under Sections 90 and 91 of Act. Power of arrest is to be used with great circumspection and not casually. It is not to be straightway presumed by DGCEI, without following procedure under Section 73A (3) and (4) of Finance Act, that a person has collected service tax and retained such amount without depositing it to the credit of the Central Government. Where an assessee has been regularly filing service tax returns which have been accepted by ST Department or which in any event have been examined by it, as in case of two Petitioners, without commencement of process of adjudication of penalty under Section 83 A of Act, another agency like DGCEI cannot without an SCN or enquiry straightway go ahead to make an arrest merely on suspicion of evasion of service tax or failure to deposit service tax that has been collected.

Article referred: http://roundup.manupatra.in/asp/content.aspx?issue=77&icat=1

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