In a major relief to the Centre, the Supreme Court has stayed an order of the Delhi High Court curbing the power of Customs and Excise officials to arrest service tax defaulters in tax evasion cases.
The Bench of Justices Dipak Misra and UU lalit stayed the order of the High Court passed on September 1, 2016 after Attorney General Mukul Rohatgi informed the Court that impossible conditions have been imposed by the HC before a defaulter is to be arrested.
He explained that with this order, the Directorate General of Central Excise Intelligence (DGCEI) cannot arrest anybody found to evade tax till a decision has been taken to launch prosecution. This would be the ultimate stage as prior to it, the DGCEI will be required to issue the show-cause notice, consider any explanation given by the defaulter, conduct adjudication proceedings and pass a decision to launch prosecution.
The case related to default of over Rs 200 crore by online travel booking companies such as MakeMyTrip and E-biz and Ibibo group. Rohatgi said that these companies were required under law to deposit two components of service tax. One related to the 10 per cent of gross value on the cost voucher payable by them as tour operators and the other component relating to service tax on 60 per cent of rate negotiated by them with hotels towards renting of hotel rooms.
The Bench posted the matter for hearing on November 9 while asking the Centre not to take any coercive steps against the petitioner companies or their employees. The companies represented by senior advocate P Chidambaram complained that action against them amounted to “tax terrorism”.