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INTHEHIGHCOURTOFJUDICATUREATBOMBAY
CRIMINALAPPELLATEJURISDICTION
CRIMINALBAILAPPLICATIONNO.202OF2014

..Applicant

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KandraRameshbabuNaidu
Versus
1. Superintendent(A.E.)
ServiceTax,MumbaiII
2.
StateofMaharashtra

..Respondents

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Mr.YusufIqbalYusufa/w.Mr.NevilleMajra,Ms.Tabassum
AnsariAbdulRahmani/b.M/s.Yusufs&Associates,Advocate
fortheapplicant.
Mr.N.Natrajan,SpecialCounselforRespondentNo.1.
Mr.RajeshMore,APP,fortheRespondentState.
.
CORAM

:A.R.JOSHI,J.

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RESERVEDON:25thFEBRUARY,2014
PRONOUNCEDON:05thMARCH,2014

ORALORDER:
1.

HeardthelearnedCounselfortheapplicant.Alsoheard

the learned Special Counsel for the respondent No.1. Also

heardthelearnedAPPfortherespondentNo.2.

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Presentapplicationforbailispreferredbytheapplicant

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2.

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in the matter of offence punishable under Section 89 read

withSection90oftheFinanceAct,1994.

3.

During the argumentsitissubmittedonbehalfofthe

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applicantthatheistheDirectorofM/s.PrashantTransport
Exchange Division, and the Managing Director of M/s.

Naidu's Infracon Private Limited. He was arrested on 22 nd

January,2014at9:00p.m.underSection89readwithSection

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90oftheFinanceAct,1994fornonpaymentofServiceTaxfor
theperiodfrom2010toDecember,2013.

Prior to discussing the rival submissions, the factual

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4.

position is required to be mentioned inasmuch as the

applicanthadcollectedRs.2.59CoresofServiceTaxduring
theperiod20102011to20132014buthadnotdepositedthe
saidamountexceptRs.15Lakhs. Theapplicanthadinfact
never filed any service tax returns and as such knowingly

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5.

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utilizedtheGovernmentmoniesforhispersonaluse.

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The liability to pay the collected Service Tax to the

Government is not disputed by the applicant. However,

accordingtohimthereisnoauthoritytotherespondentNo.1

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toarresttheapplicantinviewoftheamendedprovisionsof
Section89(1)(d)oftheFinanceAct,1994.Thesaidamended

provision came into effect from 10.5.2013 and said Section

becamecognizable.Accordingtotheapplicantinviewofthe

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amendedprovisionofSection89(1)(d),theoffencewasmade
cognizableasmentionedaboveandvideSection103(k)ofthe
FinanceAct,whichcameintoforceon10.5.2013,Section90

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andSection91wereintroducedintheFinanceAct. Dueto

thisamendment,thepunishmentfortheoffencepunishable
underSection89(1)(d)(ii)wasenhancedfromthreeyearsto
sevenyears.

6.

The relevant provisions of the Finance Act, 1994 are

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89. Offences and Penalties.

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reproducedhereunderforthesakeofreadyreference:

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(1) Whoever commits any of the following offences, namely,

(a) knowingly evades the payment of service tax under
this Chapter; or
(b) avails and utilises credit of taxes or duty without
actual receipt of taxable service or excisable goods
either fully or partially in violation of the rules
made under the provisions of this Chapter; or
(c) maintains false books of account or fails to supply
any information which he is required to supply
under this Chapter or the rules made thereunder or
(unless with a reasonable belief, the burden of
proving which shall be upon him, that the
information supplied by him is true) supplies false
information; or
(d) collects any amount as service tax but fails to pay
the amount so collected to the credit of the Central
Government beyond a period of six months from the
date on which such payment becomes due, shall
be punishable,
(i) in the case of an offence specified in
clause (a), (b) or (c) where the amount
exceeds fifty lakh rupees, with
imprisonment for a term which may
extend to three years;
PROVIDED that in the absence of
special and adequate reasons to the
contrary to be recorded in the
judgment
of
the
court,
such
imprisonment shall not be for a term of

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(2) ...
(3) ...
(4) ...

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less than six months;

(ii) in the case of the offence specified in
clause (d), where the amount exceeds
fifty lakh rupees, with imprisonment
for a term which may extend to seven
years;
PROVIDED that in the absence of
special and adequate reasons to the
contrary to be recorded in the
judgment
of
the
court,
such
imprisonment shall not be for a term of
less than six months;
(iii) In the case of any other offences, with
imprisonment for a term, which may
extend to one year.

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90. Cognizance of offences

(1) An offence under clause (ii) of sub-section (1) of
section 89 shall be cognizable.
(2) Notwithstanding anything contained in the
Code of Criminal Procedure, 1973, all offences, except the
offences specified in sub-section (1), shall be non-cognizable
and bailable.
91. Power to arrest
(1) If the Commissioner of Central Excise has
reason to believe that any person has committed an offence
specified in clause (I) or clause (ii) of sub-section (1) of
section 89, he may, by general or special order, authorise
any officer of Central Excise, not below the rank of
Superintendent of Central Excise, to arrest such person.

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(2) Where a person is arrested for any cognizable

offence, every officer authorized to arrest a person shall,
inform such person of the grounds of arrest and produce
him before a magistrate within twenty-four hours.
(3) In the case of a non-cognizable and bailable
offence, the Assistant Commissioner, or the Deputy
Commissioner, as the case may be, shall, for the purpose of
releasing an arrested person on bail or otherwise, have the
same powers and be subject to the same provisions as an
officer in charge of a police station has, and is subject to,
under section 436 of the Code of Criminal Procedure, 1973
(2 of 1974).
(4) All arrests under this section shall be carried
out in accordance with the provisions of the Code of
Criminal Procedure, 1973 (2 of 1974) relating to arrests.

Bypointingouttheaboveprovisions,itissubmittedon

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7.

behalfoftheapplicantthattherecannotbeanyretrospective

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effect to the penal provisions and as such considering the

arrestoftheapplicanton22.1.2014andconsideringthatthe

amountoftaxcollectedandrequiredtobedepositedwiththe
Government must exceed Rs.50 Lakhs and there must be
failure to pay the amount so collected to the credit of the
CentralGovernmentbeyondaperiodofsixmonthsfromthe

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dateonwhichsuchpaymentbecomesdue,theapplicantwas

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not liable for the arrest inasmuch as the amount collected

between10.5.2013to21.7.2013isonlyRs.5,00,887/.Inother
words, it is submitted on behalf of the applicant that the

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maximumamountevaded,ifany, underSection89(1)(d)is
lessthanRs.50lakhsfortherelevantperiodandassuchthe

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provisionsofSection89(1)(d)(ii)arenotapplicable.

Counter to the arguments advanced on behalf of the

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applicant, it is submitted on behalf of the respondent No.1

and supported by filing an affidavit to that effect dated
5.2.2014 that the applicant had issued invoices to the

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customers and charged and claimed Rs.2.59 Crores

(approximately)asServiceTaxuptoDecember,2013andonly
paid Rs.15 Lakhs to the Central Government treasury and
failed to pay Rs.2.44Croresapproximately. In thebalance
sheet as on 31.3.2013, in Schedule7, the applicant has
accepted the liability to deposit the service tax of Rs.2.11
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CrorestotheCentralGovernment.Inhisstatementsdated

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21.1.2014and22.1.2014theaccusedhadadmittedthathehas
collectedRs.2.59CroresofServiceTax,but,hadnotdeposited
thesameexceptRs.15Lakhs.Itisfurthersubmittedthatthe

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applicantisawareabouttheprovisionsoftheServiceTaxlaw
and had obtained Service Tax registration for rendering
taxable service and in the invoices issued he had not only

charged Service Tax but hadalsodeclaredtheService Tax

Registration number which is mandatory. As such, the

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applicantiswellawareoftheprovisionsoflawgoverningthe
ServiceTaxandalsotheamendedprovisions. Itisfurther

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thecontentionoftherespondentNo.1thatSection73Aofthe
FinanceAct,1994requiresanypersonwhohascollectedany

amount representing Service Tax to deposit the same

forthwith to the Government. As per provisions of Section
89(1)(d)(ii),ifanypersonwhohascollectedtheservicetaxin
excessofRs.50Lakhsandfailedtodepositthesamewithin

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six months from the due date shall be punishable with

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imprisonmentforatermuptosevenyears;andSection90of
theFinanceAct,1994specifiesthattheoffenceunderSection
89(1)(d)(ii) of the Finance Act, 1984 shall be cognizable.

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AccordingtotherespondentNo.1theexactamountevadedby
theapplicantisyettobeascertainedandtheinvestigationis
continuing and is not yet completed. The applicant was

summoned to the AntiEvasion Office on 22.1.2014 and

arrestedunder Section91oftheFinanceAct,1994for

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hisdirectinvolvementintheevasionoftheServiceTax.

9.

Itissubmitted on behalfoftherespondentNo.1that

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nondepositoftheServiceTaxwiththeCentralGovernment

afterdeductingitfromthecustomersisancontinuingoffence
andas such theentireamountofarrearsisrequiredtobe
construed as liable to be deposited with the Central
Government when it become due and it being acontinuing
offencetheapplicantisliabletodeposittheentirearrears
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10.

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whichisadmittedlymorethanRs.50lakhs.

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Itisalsosubmittedonbehalfoftherespondentthatthe

present applicant is the Managing Director of M/s. Naidu's

Infracon Private Limited and istheperson involved in all

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decision taking matters of company and as such have a

potentialtotamperwiththe officialrecordswhichneedsto

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besubmittedtothebank.

Insupportofthesubmissionsonbehalfoftheapplicant,

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thefollowingauthorityiscitedbeforetheCourt:
CRM10939OF2013

InthematterofSudipDas(petitioner)

InthesaidmatterbeforetheCalcuttaHighCourt,the

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bail was granted to the accused who had been charged for
commissionofoffencepunishableunderSection89(1)(d)ofthe
FinanceAct,1994

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Oncarefullygoingthroughtheratiopropoundedbythe

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aforesaid authority, it must be said that according to the

Calcutta High Court itwasthequestionofbailabilityor
nonbailability almost comes to a point of merger and,

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therefore, the benefit of which should be extended to the

accusedperson. IntheearlierparagraphthatCourtheldas

follows:

On query, the learned lawyer of the Union

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of India could not satisfy me whether strictly

custodial detention is necessary for interrogation or
not vis-a-vis their prayer as embodied in the
petition itself. It is correct that the offence is alive
till now but it is not less than correct that when it
was originated, the offence was bailable in view of
the observation made by the Hon'ble Apex Court.
It is also reckoned that the new Act does not have

any retrospective effect.

Bytheseobservationstheaccusedthereinwasgranted

bail.

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In the considered opinion of this Court, it being

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continuing offence the entire outstanding amount to be

depositedwiththeCentralGovernmentinthepresentmatter
is required to be taken into consideration inasmuch as on

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10.5.2013whatwasthearrearsthenaccruedisrequiredtobe
taken into account while calculating the amount of Rs.50

1994.

Duringtheargumentsitwassuggestedonbehalfofthe

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LakhsascontemplatedbySection89(1)(d)(ii)ofFinanceAct,

applicant that he is ready and willing to deposit all the

outstandingServiceTaxtotheCentralGovernmentbutina

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timeboundprogramme. Thewrittenscheduleofpayments

wasgiventothelearned CounselfortheRespondentNo.1
andhetooktimetotakefurtherinstructionsfromtheofficeof
the respondent No.1. Subsequently, on the next date, the
learnedCounselfortherespondentNo.1statedthatthesaid
scheduleisnotacceptabletotherespondentNo.1andinsisted
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applicant,shallbedepositedwiththerespondent.

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thattheentireduesofServiceTaxes,alreadycollectedbythe

In the opinion of this Court considering that it is a

continuing offence and as on 10.5.2013 there were huge

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outstandings definitely beyond the amount of Rs.50 Lakhs

andmoresosaidamountwasoutstandingevenatthetimeof

arrestoftheapplicant,itisnotacaseinwhichtheapplicant
canbereleasedonbailmoresowhentheinvestigationisstill

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going on. Consequently the present application for bail is

dismissedandaccordinglydisposedof.

(A.R.JOSHI,J.)

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