TMI Blog2018 (8) TMI 1292X X X X Extracts X X X X X X X X Extracts X X X X ..... at as per the scheme of the Finance Act an offence under Section 89 of Act is a cognizable offence by virtue of Section 90 and in Section 91 power of arrest is conferred upon an officer of the Central Excise Department not below the rank of Superintendent of Central Excise nominated by the Principal Commissioner of Central Excise or Commissioner of Central Excise who would adopt the same procedure as provided under Cr.P.C. for arrest. It is also made clear by the respondents that even if any Director resigns, he cannot seek exoneration from liability of making payment of service tax, simply because he resigned from the post of Director, if the service tax due is for the period when the accused was a Director. In the case at hand it is clarified by the respondents that there is a huge amount of service tax outstanding belonging to the period when the petitioner was one of the Directors of the said Company, therefore he cannot take the plea of not being liable to pay in terms of the “Deed of Settlement” which is alleged to have been executed between other two Co-Directors and him, the dues being statutory duty to be cleared. No case is made out in favour of the petitioner to p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... from 27.5.2015 which was duly communicated by them through their letter issued to the banker of the said Company, therefore, since the petitioner had nothing to do with the business carried out by the said Company from which, he had to finally resign on 12.12.2016, the business of the said Company continued to be done by Satyendra Singh Tomar and Pawan Kumar Jasuja. On 25.10.2017, the petitioner and Satyendra Singh Tomar entered into a Deed of Settlement in order to settle the business dispute which was executed in presence of their well-wishers according to which it was decided that the petitioner will control and handle the businesses of five Companies scheduled thereto whereas Satyendra Singh Tomar will control and handle the businesses of three Companies scheduled thereto, which included M/s Proplarity Infratech Private Limited. It was also agreed between them that they would continue to be responsible for all the liabilities of the respective Companies controlled by them including the statutory liabilities and customers advances etc. It subsequently transpired that the service tax allegedly due upon the said Company i.e. M/s Proplarity Infratech Private Limited remained unpa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... aid down that there must be some reasonable justification in the opinion of arresting officer to justify the necessity of arrest. Thereafter, in another case i.e. Arnesh Kumar Vs. State of Bihar , (2014) 8 SCC 273 it has been laid down that the power of arrest in cases involving offence punishable with imprisonment up to 7 years shall not be resorted to, unless there exist exceptional condition as given under Section 41 of Cr.P.C., therefore, in terms of aforementioned law, the interest of the petitioner needs to be protected. It is further mentioned by him that in respect of the Companies which have been under the control and management of the petitioner after Deed of Settlement dated 25.10.2017, all the due taxes have been paid regularly to the concerned authorities by him from time to time and there has never been any complaint. It is further argued by the learned counsel for the petitioner that an amount of Rs. one crore was deposited by the petitioner but no such averment has been found to have been made in the affidavit or in rejoinder-affidavit filed on behalf of the petitioner. However, the said contention of depositing of the said amount has been vehemently denied by ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the Companies Act, 2013) cannot be overwritten by contractual Deed of Settlement . Therefore, the contention of the petitioner regarding Deed of Settlement does not stand scrutiney of law. The petitioner himself has accepted the fact that the service tax was due from M/s Proplarity Infratech Private Limited which remained unpaid, as a result of which, an inquiry/investigation was started by the respondent against the said Company and its Directors for evasion of service tax which is an offence punishable under Section 89(1) (ii) of the Finance Act, 1994. It is further submitted that only those documents related to the said Company may be seized which were found available in the premises of the said Company. For further investigation, the searches have also been made at the premises of other Directors and other concerned persons. Further, it is submitted that there is no requirement of any prior notice before issuing summons under Section 14 of the Said Act. In fact, the summons can be issued to any person whose attendance is considered necessary either to give evidence or to produce the document or any other thing in any inquiry which a Central Excise Officer is making for an ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e service tax collected but not deposited for the period of 2014- 2015, 2015-2016 and 2016-2017 goes beyond ₹ 4.80 crores and the alleged offender has neither shown any intention of assisting in the investigation nor he deposited at least half of the evaded tax and there was great probability of destruction of evidence, therefore, the arrest became inevitable. Further, it is mentioned that simply because the offence is compoundable, does not place any embargo on the power of arrest vested in Section 91 of the Finance Act. All the Directors are passing their responsibility on one another and none of them has paid full dues towards the service tax along with interest and penalty nor have they provided requisite details to the department. Also the cash transactions figures of around 45 crore remain unexplained by the three accused Directors, thus, they have committed a crime against the country by collecting taxes from the customers and not depositing the same to the Government rather misappropriated the said money. This is an offence of grave and serious nature, hence, no indulgence should be granted to the petitioner. 7. The rejoinder affidavit has been filed from the side ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... als that no deposit of the said amount has been made with the respondents, therefore against the Directors of the said Company an offence punishable under Sections 89 (1) (ii) of the Finance Act is made out. It is further apparent that the petitioner has also been issued a notice under Section 14 of the Central Excise Act, 1944 as made applicable to service tax matters vide Section 83 of the Finance Act, to interrogate the petitioner, to which the petitioner avoided from appearing before the investigating officer and has taken shelter of court by filing the present writ petition. It is also apparent that as per the scheme of the Finance Act an offence under Section 89 of Act is a cognizable offence by virtue of Section 90 and in Section 91 power of arrest is conferred upon an officer of the Central Excise Department not below the rank of Superintendent of Central Excise nominated by the Principal Commissioner of Central Excise or Commissioner of Central Excise who would adopt the same procedure as provided under Cr.P.C. for arrest. It is also made clear that it being an economic offence separate guidelines have been issued by the Department of the respondents which need to be follo ..... 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