By Puloma Dalal, Jayesh Gogri, Mandar Telang; Chartered Accountants
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Unless investigation is completed and prosecution is launched, coercive measures including arrest cannot be taken by Department.
Facts
Petitioners were engaged in facilitating provision of services of hotel accommodation and travel. The hoteliers collect and discharge appropriate service tax and the Petitioner does not collect any service tax on room bookings through their portal. Department had arrested officials of Make-My-Trip since they had collected and failed to deposit service tax. Since the Petitioner is in similar line of business, assuming similar case under service tax, department officials demanded service tax. On the apprehension that the department may take coercive actions including arrest without issuance of Show Cause Notice or adjudication, Writ Petition is filed. Department contested that on the facts of the case, service tax was collected more than what was permissible under service tax Laws. Further, department assured that due process of law would be followed for adjudication and prosecution.
Held
When investigation is underway, it does not mean that arrest would be effected. Arrest under Finance Act, 1994 could arise only when investigation is completed and prosecution is launched. Further, there is no question of recovery by coercive means unless SCN is issued, opportunity of being heard is given and reasoned adjudication order is passed. Therefore, in view of facts and circumstances of the case it was held that any recovery by coercive measures is not permissible straightway without following the due process of law.
