E-filing of I-T returns to become easier

Filing income-tax returns electronically is set to become easier, with the I-T Department planning to do away with the mandatory submission of verification in paper form. At present, returns filed online without a ‘digital signature’ — a secure certificate that confirms the identity of the sender — require a verification form, ‘ITR V’, to be sent in physical form by post to the Department’s Central Processing Centre (CPC). The CPC, then, generates an electronic acknowledgement and sends it to the registered e-mail address in the returns. The Income-Tax Department says one in 10 assessees fails to send the ITR V to the CPC after e-filing. The Income-Tax Department had made e-filing mandatory for those with an annual taxable income of Rs 5 lakh or more for the financial year 2012-13 and assessment year 2013-14, for which returns are to be filed by July 31. In 2012-13, over 2.14 crore assessees filed the returns electronically.

Source : http://www.thehindubusinessline.com/features/taxation-and-accounts/efiling-of-it-returns-to-become-easier/article4766649.ece?homepage=true

Guidelines on appointment of statutory auditors in public sector banks

Based on the recommendations of a Working Group (WG) to review the norms for empanelment of statutory auditors for public sector banks and other related issues and after seeking the approval of GoI, it has been decided to revise the guidelines on appointment of statutory auditors in public sector banks with effect from the year 2013-14. The revised eligibility norms for empanelment of SCAs as prescribed by RBI in consultation with the WG have been indicated in Annex 1. The categorization/eligibility norms for empanelment of branch auditors which have been kept unchanged are indicated in Annex 2.

The guidelines/instructions relating to the selection procedure to be followed for appointment of statutory auditors in PSBs and details thereof are furnished in Annex 3. These guidelines will be effective from the financial year 2013-14 and onwards.

 

Annex 1

Norms of Empanelment for Statutory Central Auditors  of Public Sector Banks applicable from the year 2013-14

 

As on 1 January of the relative year the firm should have

(i) minimum 7 full time chartered accountants, of which at least 5 should be full time partners exclusively associated* with the firm. These partners should have minimum continuous association with the firm i.e. one each should have continuous association with the firm at least for 15 years and 10 years , two with a minimum of 5 years each and one with a minimum of one year. The remaining 2 full-time chartered accountants or partners, as the case may be, should also have a continuous association with the firm for a period of one year*. Four of the partners should be FCAs. Also at least two of the partners should have minimum 15 and 10 years experience in practice. In case the paid Chartered Accountant available with the firm without any break was admitted as a partner of the said firm at a future date, his association with the firm as a partner will be counted from the date of his joining the firm as a paid Chartered Accountant.

 

*Note:

1. The definition of ‘exclusive association’ will be based on the following criteria:

(a) The full time partner should not be a partner in other firm/s.

(b) He should not be employed full time / part time elsewhere.

(c) He should not be practicing in his own name or engaged in practice otherwise or engaged in other activity which would be deemed to be in practice under Section 2(2) of the Chartered Accountants Act, 1949.

(d) The total compensation@ of the partner from the firm should not be below the following limit:

In case the Head office of the firms located in

(i) Delhi, Mumbai, Chennai, Kolkata, Bangalore and Hyderabad

 

ACA partner ` 1.80 lakh in a year (` 15000/- per month)

FCA partner ` 3.00 lakh in a year (` 25000/- per month)

(ii) Other places:

 

ACA partner ` 1.20 lakh in a year (` 10000/- per month)

FCA partner ` 1.80 lakh in a year (` 15000/- per month)

(e) A partner whose total compensation@ from the firm is less than the following will not be treated as exclusively associated with the firm :

Firms having more than 14 partners 1%

Firms having 10 to 14 partners 3%

Firms having 5 to 9 partners 5%

Firms having less than 5 partners 8%

@Total compensation =Sum total of share of profit, remuneration and interest on capital.

2. Out of the 7 full-time chartered accountants, the remaining two chartered accountants/partners (besides the 5 exclusively associated partners) will be treated to be exclusively associated with the firm only if they are continuously associated with the firm for a period of one year as on January 1 of the relevant year. These norms will be made applicable from the financial year 2014-15 i.e. the chartered accountants/partners will have to comply with the norms as on January 1, 2014.

(ii) the number of professional staff (excluding typists, stenographers, computer operators, secretary/ies and sub-ordinate staff etc.), consisting of audit and articled clerks with the knowledge in book-keeping and accountancy and are engaged in outdoor audit should be 18.

 

(iii) the standing of the firm should be of at least 15 years which would be reckoned from the date of availability of one full time FCA continuously with the firm.

 

(iv) the firm should have minimum statutory central audit experience of 15 years of public sector banks (before or after nationalisation) and/or by way of statutory branch audit thereof or that of statutory audit experience of a private sector bank. In case any of the partner of an audit firm is nominated / elected for a period of at least 3 years or more on the Board of any public sector bank then his / her such experience for a maximum period of three years will be considered as bank audit experience, provided such experience has not been earned by him/her concurrently i.e. when his / her firm was assigned statutory audit of any PSB, select all India financial Institutions or RBI.

 

(v) the firm should have statutory audit experience of 5 years of the public sector undertakings (either Central or State Government undertaking). While calculating such experience, more than one assignment given to a firm during a particular year or more than one year’s statutory audit (audits in arrears) assigned to the firm will be reckoned, as one year experience only, for the purpose of counting such experience.

 

(vi) at least two partners of the firm or its paid Chartered Accountants must possess DISA/CISA or any other equivalent qualification.

 

Annex 2

Norms for the empanelment of audit firms to be appointed as statutory branch auditors for public sector banks (2013-14) Cate-gory	No. of CAs exclusively associated with the firm (Full time)	No. of partners exclusively associated with the firm (full time) (Out of 2)	Profe-ssional staff	Bank audit experience	Standing of the audit firm
(1)	(2)	(3)	(4)	(5)	(6)
I.	5	3	8	The firm or at least one of the partners should have a minimum of 8 years experience of branch audit of a nationalised bank and/ or of a private sector bank .	8 years
II.	3	2	6	The firm or at least one of the partners should have preferably conducted branch audit of a nationalised bank or of a private sector bank.	6 years (for the firm or at least one partner)
III.	2	1	4	The firm or at least one of the CAs should have preferably conducted branch audit of a nationalised bank or of a private sector bank for at least 3 years	5 years (for the firm or at least one partner)

 

 

Annex 3

 

PROCEDURE FOR APPOINTMENT OF  STATUTORY AUDITORS IN PUBLIC SECTOR BANKS

 

A. Statutory Central Auditors (SCAs)

1. For the year 2013-14 and onwards, GoI have approved the revision in the norms on the number of SCAs to be appointed in PSB as under:

i) Category “A” Banks (Large Banks viz. Bank of Baroda, Bank of India, Canara Bank, Punjab National Bank, Central Bank of India and Union Bank of India) shall not have more than 6 SCAs. However, in case of SBI the number of SCAs shall not be more than 14.

ii) Category “B” Banks (Medium Banks viz. Allahabad Bank, Corporation Bank, Indian Bank, Indian Overseas Bank, Oriental Bank of Commerce, Syndicate Bank and UCO Bank) shall not have more than 5 SCAs, and;

iii) Category “C” Banks (Small Banks viz. Andhra Bank, Bank of Maharashtra, Dena Bank, Punjab & Sind Bank, United Bank of India, Vijaya Bank, State Bank of Bikaner & Jaipur, State Bank of Hyderabad, State Bank of Mysore, State Bank of Patiala and State Bank of Travancore) shall not have more than 4 SCAs.

Actual numbers of SCAs to be appointed can be decided by respective boards subject to the above limit.

 

2. As per the existing practice, SCAs appointed will have a tenure of three years after which they will be rested for a period of two years. The appointment of SCAs will be made on an annual basis, subject to their fulfilling the eligibility norms prescribed by RBI from time to time and also subject to their suitability.

 

3. From the financial year 2013-14, selection of SCAs will be done by the Selection Committee constituted by GoI and the procedure that will be followed by RBI for forwarding the list of eligible audit firms for selection of SCAs by the Selection Committee constituted by GoI is as under :

 

• After receipt of the list of eligible auditors / audit firms, based on the eligibility norms for empanelment of auditors / audit firms prescribed by RBI from the Office of the Comptroller and Auditor General of India (C&AG), verification of eligibility of audit firms by RBI with respect to their bank audit experience available with RBI will be done by RBI.

• List of eligible firms after excluding the firms which are to be continued, rested and denied audit during the relevant year will be prepared by RBI and forwarded to GoI for selection by the Selection Committee.

• After selection, GoI will advise bank-wise names of the selected firms to the respective banks. As per the statutory requirement, banks, in turn, are required to forward the names of the selected SCAS to RBI for its prior approval before their actual appointment.

 

B. Statutory Branch Auditors (SBAs)

1. The norms for selection of branches of PSBs for statutory audit

from the year 2012-13 and onwards will be based on the following :

(i) For the year 2012-13, statutory branch audit of PSBs may be carried out for all branches with advances of ` 20 crore & above and 1/5^th of the remaining branches covering a representative cross section of rural/semi-urban/urban and metropolitan branches, predominantly including branches which are not subjected to concurrent audit, so as to cover 90% of advances of a bank. CPUs/LPUs/and other centralized hubs by whatever nomenclature called would be included in the one fifth of the remaining branches every year.

(ii) In respect of branches below the cut-off point, which are subject to concurrent audit by chartered accountants, henceforth, LFARs and other certifications done earlier by SBAs will now be submitted by the concurrent auditors and such branches may not generally be subject to statutory audit.

(iii) Going forward, in mutual discussions with GoI and SCAs, based, inter alia, on the operational efficiency and robustness of CBS, system driven identification of NPAs, and integrity of MIS,

 

 

managements of individual PSBs may decide on the threshold level of advances for the purpose of selecting branches for statutory audit.

(iv) Progressively, the threshold level of advances may be increased so that the number of branches to be taken up for statutory audit is phased down over a period of time.

 

2. The following procedure will be followed for appointment statutory branch auditors (SBAs) in public sector banks (PSBs):

(i) The list of eligible auditors/audit firms will be prepared by the Institute of Chartered Accountants of India (ICAI) as per the norms prescribed by RBI.

(ii) The above list will be subjected to scrutiny by RBI for identifying the continuing and rested firms and excluding audit firms against whom adverse remarks/disciplinary proceedings are pending or who have been denied audit.

(iii) RBI will, thereafter, forward the final list of all eligible auditors/audit firms to PSBs for selection.

 

(iv) The PSBs will select the required number of branch auditors/audit firms. Banks will be required to clearly advise the audit firms selected for consideration of appointment that each audit firm can take up audit assignment (branch audit) in one PSB only. The audit firm should give their consent in writing for consideration of appointment in the bank concerned for the particular year and the subsequent continuing years.

 

(v) The consent given by an audit firm will be treated as irrevocable and request, if any, from audit firms for changing the bank, after giving its consent to the bank concerned will not be entertained.

 

(vi) After the selection of branch auditors, PSBs will be required to recommend the names of both continuing and selected branch auditors to RBI for seeking its prior approval before their actual appointment, as per statutory requirement.

3. SBAs will have a maximum tenure of four years. The appointment of SBAs will be made on an annual basis, subject to their fulfilling the eligibility norms prescribed by RBI from time to time and also subject to their suitability.

 

4. The number of eligible auditors / audit firms is more than the number of branches to be audited at the following 33 centres (viz. Mumbai, Kolhapur, Pune, Solapur, Thane, Kolkata, Chennai, Coimbatore, Delhi/ New Delhi, Ajmer, Bikaner, Jaipur, Kota, Udaipur, Ahmedabad, Vadodara, Surat, Hyderabad, Chandigarh, Raipur, Faridabad, Gurgaon, Panchkula, Panipat, Sonipat, Bangalore, Ernakulam, Indore, Nagpur, Ludhiana, Jodhpur, Bhilwara, and Ghaziabad). In such centres, the auditors/ audit firms will be put to a period of compulsory rest for two years after completion of four years of continuous branch audit. In other centres, where the number of eligible auditors / audit firms is less than the number of branches to be audited, the branch auditors on completion of four years of continuous branch audit will be subjected to the policy of rotation.

 

5. While allotting branches, banks are required to select auditors/audit firms which are in close proximity to their offices/branches. Banks are also required to have a suitable mix of various categories of auditors / audit firms while selecting the branch auditors keeping in view the size of the branches to be audited.

 

6. As regards statutory branch audit to be carried out by SCAs, banks will allot the top 20 branches(to be selected strictly in order of the level of outstanding advances) in such a manner as to cover a minimum of 15% of total gross advances of the bank by SCAs.

 

C. General Guidelines applicable to both SCAs and SBAs

(i) All PSBs are required to have a Board approved policy for appointment of statutory auditors and the same may be hosted on the bank’s web-site. Banks are also required to ensure that the policy framed by the Board in the matter of selection of auditors/audit firms for appointment of auditors is strictly adhered to. Further, the list of firms selected for appointment as statutory branch auditors may be placed

before the ACB/Board of bank before for its concurrence before it is forwarded to RBI for final approval.

(ii) The policy of one audit firm for one PSB will be continued. Accordingly an audit firm will be eligible to be appointed as a central/branch auditor of only one PSB during a particular year.

(iii) Further, an audit firm which takes up statutory central audit assignment in a PSB will not be eligible to be appointed as a statutory central auditor in a private sector/foreign bank during that particular year and vice versa. The policy has been made applicable from the year 2012-13 onwards.

(iv) In order to protect the independence of the auditors/audit firms, banks will have to make the appointments of SCA/branch auditors for a continuous period of three and four years respectively subject to the firms satisfying the eligibility norms each year. Banks cannot remove the audit firms during the above period without the prior approval of the Reserve Bank of India.

 

Expression of Interest sought from Chartered / Cost accountants for Service tax retainership

Uranium Corpn of India Ltd is a public sector Enterprise under Deptt of Atomic  Energy, engaged in mining & processing of uranium ore for generating nuclear  power. UCIL is situated at Jaduguda mines,28 kms from tatanager rly stn.

UCIL invites “Expression of Interest”(EOI)from practicing Chartered / Cost Accountants Firms to provide consultancy on income tax and service tax matters on retainer-ship basis. Detailed firm price offer shall be called separately from the eligible & selected firms against complete coverage, scope of work &other terms & conditions.

2. Interested firms having requisite qualifications and experience in the above mentioned area, may submit their expression of interest to the undersigned within 15 days of publication of this advertisement. The requisite qualification and experience for the subject assignment shall be as under –

- An established firm having experience as practicing Chartered / Cost Accountants for more than ten years details of which shall be provided.

- Above firm should have experience dealing in income tax and service tax matter for the period of 8 years.

- Above firm should have been providing regular consultancy on retainer-ship in connection with service tax for a period of 3 years or more either to any PSU/PSUS or to any other company/companies of repute.

- Letters to this effect as will be submitted along-with this EOI.

3. Scope of work – The indicative scope of work shall be as under: -

(i) Examine & Filing of all types of return on periodic basis complete in all respects as per provision of the relevant Act/Rules.

(ii) To give written expert opinion on the subject matters as and when asked for.

(iii) To notify promptly the changes in tax rules or any relevant amendment and its impact or otherwise effect on working of UCIL and suggest measures there under to mitigate its adverse impact on profitability of the company.

(iv) To Conduct work shop on income tax / service tax matters on periodic basis – 3 to 4 times in a year.

(v) To suitably examine / draft the reply to any notice received from regulatory authority.

(vi) A talk on “Finance Budget” on annul basis immediately after its announcement/speech in Parliament, covering relevant aspects pertaining to UCIL and its employees.

(vii) Any other relevant matter, if required to be executed as per provision of the Act and if referred to.

4. Payment terms: -

(i) Payment shall be made on quarterly basis against submission of bills completed in all respect.

(ii) Rate to be quoted shall be inclusive of all taxes and duties and should be firm during the currency of the contract period.

(iii) In case consultant / retainer is required to perform journey to comply with the scope of work, actual T.A./D.A. shall be reimbursed through rail / road as the case may be.

(iv) Payment shall be made after deducting TDS as per applicable rules.

5. Other Terms and Conditions: - Only the firms of practising Chartered Accountants shall be considered for the purpose of income tax retainer ship.

- This EOI is initially for a period of 2 years subject to extension for another 2 years on satisfactory performance during the initial period of retainer ship.

- Please note this is an offer for submitting EOI. Firms therefore are not required to divulge their price details at this stage.

The firms situated in the near vicinity like Jamshedpur, Ghatsila, Ranchi, Kolkata will be preferred for better communication and for the interest of work. Interested firms meeting the above stipulations may send their detailed credentials/resume and their relevant details to shortlist the firms for call of firm price offer among the selected firms at the address given below.

 Management of UCIL reserves the right to select or reject any offer based upon submitted credentials/resume so submitted.

Dy. G.M. (Accounts) Works

Uranium Corporation of India Ltd.

Income Tax Department Sent Letters Yesterday to Another Batch of 35,000 Non-Filers:

Government Once Again Urges all Tax Payers to Disclose Their True Income and Pay Appropriate Taxes

As part of its ongoing initiative, the Income Tax Department has sent yesterday i.e. 27th May, 2013 letters to another batch of 35,000 non-filers. These persons were part of around 12 lakh non-filers identified as a result of data matching exercise. With this latest batch, the IT Department has now issued letters in 1,75,000 high priority cases.

The response to this initiative has been very encouraging and a large number of taxpayers have paid taxes and filed Income tax Returns. A compliance management cell has been set-up to monitor return filing and tax payment of the target segment.

The Income Tax Department has also initiated a Data Warehouse and Business Intelligence (DW & BI) Project to develop an integrated platform for effective utilisation of information to promote voluntary compliance and deter non-compliance.

The Government once again urged all the tax payers to disclose their true income and pay appropriate taxes............

Arrest and Prosecution under Central Excise and Service Tax

Article By CA Madhukar N Hiregange & CA G.K.Lakshmi

The recent announcement on arrest has seen a flurry of activity to those who have heard of the same to comply and avoid attracting them. However for those who have already committed the specified offences in the past few years, the sword hangs above their head. Maybe the option to go for the Voluntary Compliance Encouragement Scheme is a possible option which could save interest as well as penalty if eligible for the scheme.

This article provides some basic information to get an understanding of what the new provisions entail.

Background:

Meaning of Arrest:

An arrest is the act of depriving a person of his or her liberty usually in relation to the purported investigation or prevention of crime and presenting (the arrestee) to a procedure as part of the criminal justice system. The term is Anglo-Norman in origin and is related to the French word 'arrêt', meaning "stop".

Arrest provisions in Central Excise and Service Tax

"Arrest" which commonly used in criminal proceedings like murders etc., is now applicable for the person who does not pay tax liability. In central Excise the arrest provision is applicable from 2003 onwards.

Recently the same provisions has been inserted in the service tax from 2013 onwards by way of inserting section 91 to Finance Act, 1994 which provides arrest provision for the offences mentioned in section 89 and others.

Why was arrest provision required?

In case of Om Prakash 2011-TIOL-95-SC-CX-LB held that all offences under the customs and central excise act are bailable. To overcome with the said decision Finance Act, 2013 brings back the arrest provisions. Finance Act states "that Failure to pay excise duty and service tax could lead to arrest of defaulters, as per the provisions proposed in the Finance Bill 2013 introduced by Finance Minister P Chidambaram in the Lok Sabha".

As per the said provisions, offences relating to excise and customs duty evasion of over Rs.50 lakh would be made cognizable and non-bailable.

Similarly in case of service tax, the failure to deposit the tax amount exceeding Rs 50 lakh with the government would result in imprisonment up to seven years. The Finance Bill has proposed to introduce Section 91 to provide for power to arrest a person for specified offences, particularly non-payment of collected service tax, by an officer not below the rank of Superintendent of Central Excise.

Going by the content of this proposal, it is unmistakably clear that the Government intends to book mainly those who collect service tax in excess of Rs 50 lakhs but do not deposit the same with the Treasury or those who deal and avail services of "fake bills". The large tax payment evaders first cheat other taxpayers by collecting service tax and not paying same to the department. Ultimate suffers will be small taxpayers who avail cenvat credit on the invoices issued by the bigger tax evaders who collects but not pay. In this background, any defensive stance taken either by the CBEC or the Government may give the impression to the common taxpayers that the Government is siding with the abusers of the exchequer's interests. Ultimately, a simple analysis of lax tax administration and heightened tax evasion only mean greater 'subsidy burden' on honest taxpayers.

Provisions dealing with arrest:

<![if !supportLists]>1.   <![endif]>Central Excise Act – Section 13 and 18 deals with power to arrest. Section 9 deals with offences.

<![if !supportLists]>a.   <![endif]>Section 9A deals with non-cognizable offences.

<![if !supportLists]>b.   <![endif]>Section 9AA deals with offences by companies.  

<![if !supportLists]>2.   <![endif]>Finance Act (Service Tax) – Section 91 provides power to arrest – section 89 deals with offences and penalties.

Particulars	Cognizable	Non-cognizable
Central Excise	Section 9(1)(i)	Section 9(1)(ii) Section 9A except 9A(1A)
Service Tax	Section 89(1)(ii)	Other then Section 89(1)(ii)

Further to the above provisions the next question comes to mind is what is cognizable and non-cognizable and bailable and non-bailable:

As defined by first schedule of Code of Criminal Procedure in criminal justice system of India, a cognizable offence is a criminal offence in which the police is empowered to register an FIR, investigate, and arrest an accused without a court issued warrant. 

A non-cognizable offence is an offence where the police can neither register an FIR, nor effect arrest without the express permission or directions from the court.

Bailabe and non-bailable

Section 2(a) of the Cr PC defines both bailable and non-bailable offence which reads as under;

"Bailable offence" means an offence which is shown as bailable in the First Schedule or which is made bailable by any other law for the time being in force; and "non-bailable offence "means any other offence"

Table II of the First schedule to the code of Criminal procedures 1973 is shown below for ready reference.

II- Classification of Offences Against Other laws

Offence	Cognizable or non-cognizable	Bailable or non-Bailable	By what Court triable
1	2	4	4
If punishable with death, imprisonment for life, or imprisonment for more than 7 years.	Cognizable	Non-bailable	Court of Session
If punishable with imprisonment for 3 years, and upwards but not more than 7 years.	Ditto	Ditto	Magistrate of the first class.
If punishable with imprisonment for less than 3 years or with fine only.	Non-cognizable	Bailable	Any Magistrate

Looking at the above definition and table II of the First schedule the Code of Criminal Procedure 1973 we are able to differentiate between cognizable offence which is non-bailable and non-cognizable offence which is bailable. 

Non-bailable does not mean that the person would be put behind bars to never be released as many of us might understand. It means, the police have to produce the accused before the nearest Judicial Magistrate to obtain police custody remand. Bailable offences are offences wherein after arrest the accused can apply for bail to the police station officer or the Commissioner and need not go to the Court. Thus the release from police custody in case of bailable is faster, almost immediate and the arrest of the assessee may not come to light in the eyes of the society.

This provision could give wide powers to the officers to arrest even the innocent tax payers on the pretext of purported evasion of tax. Again, since the assessee has to go to the court to obtain bail, he is bound to remain in police custody for a while at least. Take an instance of a case where the arrest happens on a Friday night and Saturday is a public holiday. The hearing to obtain the bail would happen only on Monday at the earliest and the entire procedure of obtaining the bail would make it at least Tuesday. The "offender" has to remain in the police custody for 3 days.

Arrest provision in Central Excise Act, 1944

As discussed above section 13 gives power to arrest for the offences mentioned in Section 9 of the said Act. The offence under Section 9(1)(i) of Central Excise is punishable with imprisonment for a term which may extend to seven years and with fine and would fall under Entry 1 and Entry 2 of Table II of First Schedule above and once it falls in any one of these entries, it becomes cognizable and non-bailable.

Offences provided/given in Section 9(1)(i)

<![if !supportLists]>1.   <![endif]>Section 9(1)(b) "whoever evades the payment of any duty payable under this Act"

<![if !supportLists]>2.   <![endif]>Section 9(1)(bbbb) "whoever contravenes any of the provisions of this Act or the rules made thereunder in relation to credit of any duty allowed to be utilized towards payment of excise duty on final products."

<![if !supportLists]>Ø  <![endif]>If any body contravenes the above provisions i.e., to any excisable googds, the duty leviable thereon under this Act exceeds '50 Lakhs' of rupees (before to budget the monitory limit was 30 Lakhs), shall be punishable with imprisonment for a term which may extend to seven years and with fine.

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 less than six months.

<![if !supportLists]>Ø  <![endif]>In any other case, the imprisonment may extend to three years or with fine or with both.

If a person convict the offences of the above refered section i.e., Section 9(1)(i) another time  the punishment will be as follows:

<![if !supportLists]>Ø  <![endif]>With regard to duty leviable exceeding 50 Lakhs, every subsequent offence there shall be an imprisonment for a term which may extend to seven years and with fine.

In case of absence of special and adequate reasons to the contrary to be recorded in the judgment of the Court in such case imprisonment shall be less than a term of six months.

The following may not be considered as an adequate reason for awarding less than six months imprisonment.

<![if !supportLists]>1.   <![endif]>The fact that the accused convicted the offence for the first time

<![if !supportLists]>2.   <![endif]>If accused is already asked to pay penalty or the goods in relation to such proceedings have been ordered to be confiscated or any other action has been taken against him for the same act which constitutes the offences.

<![if !supportLists]>3.   <![endif]>The fact that accused was acting merely as a carrier of goods or otherwise was a secondary party in the commission of the offence.

<![if !supportLists]>4.   <![endif]>The age of the accused.

Offence by companies Section 9AA deals with offence offences committee by a company, every person who is in charge of or responsible to the conduct of the business of the company shall be deemed to be guilty and shall be liable to be proceeded against and punished accordingly. If he does not proves that the offence was committed without his knowledge or that he had exercised al due diligence to prevent the commission of such offence.

Compounding of Offences:

Compounding of offences is possible when there is more than one offence the same can be compounded by the Chief Commissioner of Central Excise before or after the initiation of prosecution on payment, by the person accused of the offence to the Central Government, as may be prescribed.

Who can arrest?

As per the provision of Section 13 of the Act, any Central Excise Officer not below the rank of Inspector of Central Excise may, with prior approval of the Commissioner of Central Excise arrest any person whom he has reason to believe to be liable to punishment under the act or rules made thereunder.

Prosecution under Central Excise

Prosecution means Legal proceedings in which a person accused of a criminal offense is tried in a  court by the government (state) appointed public prosecutor called district attorney (US) or public prosecutor.

How to launch Prosecution?

Let us understand same with example. You have arrested a person, got the sanction of the Chief Commissioner to prosecute him. The prosecution starts with filing a complaint. Now for an offence under Central Excise, who is to file the complaint? Neither under the Central Excise Act nor under the Customs Act, any officer has been specified as one authorised to file a complaint.

Under the Drugs and Cosmetics Act, an Inspector has been authorised to institute prosecution. Under the Companies Act, the Registrar is authorised to file a complaint. In our related Acts, under the FERA, the Director of Enforcement and certain other officers were authorised to file a complaint. Even under the old Sea Customs Act, the complaint had to be filed by the Chief Customs Officer or an Officer authorised by him not below the rank of Assistant Collector.

Instructions regarding launching of prosecution and arrest under the Central Excise Act, 1944.

Any Central Excise Officer not below the rank of Inspector with prior approval of the Commissioner can arrest any person under section 13 whom he has reason to believe is liable to punishment under the Central Excise Act or the rules made thereunder. Further prosecution can be launched under section 9 for the offences covered under section 9(1) of the Act. As per provisions of section 9AA, prosecution may be launched against any person, Director, Manager or any other person who is responsible for conduct of business of the company/firm and is found guilty of the offences under the Act/Rules. It has been provided that prosecution may be launched in cases involving duty amount of Rs. 25 lakh or more. However, prosecution can be considered in case of habitual offenders irrespective of monetary limit prescribed, if circumstances so warrant. As per the procedure laid down for launching of prosecution, the Commissioner of Central Excise should process and forward the proposal to the Chief Commissioner (or the Director General of Central Excise Intelligence as the case may be) in cases which are fit for launching of prosecution. As per the instructions issued in this regard, the Chief Commissioner or DG, (CEI) has power to sanction prosecution. It is also mentioned that the decision to launch prosecution should be taken by the adjudicating authority immediately after the passing of adjudication order.

In the regard, there cannot be two opinion, that the provisions regarding arrest, prosecution etc. are effective tools in the hands of the department to tackle the problem of evasion of duty and to raise the level of compliance to tax laws. There is need that best possible uses of these provisions are made by the departmental officers in appropriate cases. Therefore, it is once again reiterated that the guidelines regarding arrest and launching prosecution issued by the Board from time-to-time are followed scrupulously. All the cases involving duty amount of more than Rs. 25 lakhs should be examined from the point of view of launching prosecution. Further, once the prosecution is sanctioned, the compliant should be filed in court immediately.

The prosecution proceedings are generally initiated in serious cases having substantial revenue involvement.

If as a result of the trial the charges made in the complaint against the accused are proved the court may award the following punishments

• imprisonment up to 7 years depending upon the gravity of the case;
• imposition of fine as per the provisions;
• forfeiture of any goods in respect of which the court is satisfied that an offence has been committed - this may include vehicle used for carrying such goods, packages used for packing such goods and implements or machinery used in the manufacture of such goods; and
• Publication of name, place of business etc. of persons convicted under the Act.

General Points

<![if !supportLists]>     i.        <![endif]>An applicant may, either before or after the institution of prosecution, make an application under sub-section (2) of section 9A of Excise Act, made applicable to service tax vide section 83 of the Act, in the form appended to these rules, to the compounding authority to compound the offence.

<![if !supportLists]>   ii.        <![endif]>"compounding authority" means the Chief Commissioner of Central Excise, having jurisdiction over the place where the offence under the Act, have been or alleged to have been committed;

<![if !supportLists]>  iii.        <![endif]>Where an offence under the Act has been committed at more than one place falling under the jurisdiction of more than one compounding authority, then the Chief Commissioner of Central Excise having jurisdiction over such place where the amount of service tax evaded is more than the others, shall be the competent authority.

<![if !supportLists]>  iv.        <![endif]>On receipt of an application under rule 3, the compounding authority shall call for a report from the reporting authority with reference to the particulars furnished in the application, or any other information, which may be considered relevant for examination of such application.

<![if !supportLists]>    v.        <![endif]>Such report shall be furnished by the reporting authority within a period of one month or within such extended period as may be allowed by the compounding authority, from the date of receipt of communication from the compounding authority. 

<![if !supportLists]>  vi.        <![endif]>The compounding authority, after taking into account the contents of the said application, may, by order, either allow the application indicating the compounding amount in terms of rule 5 and grant him immunity from prosecution in terms of rule 6 or reject such application:

<![if !supportLists]>vii.        <![endif]>Provided that application shall not be rejected unless an opportunity has been given to the applicant of being heard and the grounds of such rejection are mentioned in such order:

<![if !supportLists]>viii.        <![endif]>Provided further that application shall not be allowed unless the service tax, penalty and interest liable to be paid have been paid for the case for which application has been made.

<![if !supportLists]>  ix.        <![endif]>A copy of every order under sub-rule (3) shall be sent to the applicant.

Arrest Provision under Service Tax

Recently i.e., in budget 2013-14 arrest provisions has been inserted in service tax. Power to arrest has been given in section 91 of the Finance Act, 1994 and offences under section 89 divided as cognizable and non-cognizable the words are already discussed above. Even bailable and non-bailable are discussed supra with regard to central excise and same will be applicable for the service tax also.

Power to arrest under service tax

 The 'power to arrest' could have significant ramifications. It is interesting to note that in 1998, prosecution provisions were removed from the statute as service tax was a new law. It remains to be seen whether the existence of such provisions will result in better tax compliance or may lead to harassment of the existing tax compliant payers. It is hoped that this power is not used by Revenue to coerce taxpayers to admit disputed tax liabilities in order to avoid arrest. It is important for taxpayers to prepare for this new 'normal'.

Section 91 provides power to arrest which empowers the Commissioner of Central Excise to arrest a person for an offence committed under the Act, does not augur well in regime where trust and confidence is the foundation stone of the Act. The power of arrest shall be exercised by the Commissioner through an officer not below the rank of the Superintendent of Central Excise.

How and when a person will be arrest and when such person will be presented before a magistrate is also provided in the section 91 of the Act, which is given below:

<![if !supportLists]>     i.        <![endif]>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.

<![if !supportLists]>   ii.        <![endif]>Where a person is arrested for any cognizable offence, every officer authorised to arrest a person shall, inform such person of the grounds of arrest and produce him before a magistrate within twenty-four hours.

<![if !supportLists]>  iii.        <![endif]>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 of a police in the police station.

<![if !supportLists]>  iv.        <![endif]>All arrests under this section shall be carried out in accordance with the provisions of the Code of Criminal Procedure, 1973 relating to arrests." Chapter V of Code of Criminal Procedure, 1973 deals with arrest of persons.

Offences which are non-cognisable and bailable:

The following offences are to be treated as non-cognizable and bailable offences, where the amount exceeds fifty lakhs 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 less than six months;

<![if !supportLists]>1.   <![endif]>Knowingly evades the payment of service tax.

<![if !supportLists]>2.   <![endif]>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 Finance Act.

<![if !supportLists]>3.   <![endif]>Maintain false books of account or fails to supply any information which he is required to supply, supplies false information.

Offences which are cognisable and non-bailable:

The following offences are to be treated as cognizable and non-bailable offences, where the amount exceeds fifty lakhs 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;

<![if !supportLists]>1.   <![endif]>Collects any amount as service tax but fails to pay the amount so collected to the credit of central government beyond a period of six months from the date on which such payment becomes due.

Conviction of offences more than onces

If any person convicted any offences of section 89 for more than once, then he shall be punishable for the second and for every subsequent offence 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 less than six months;

The following cannot be treated as adequate reason for reducing the imprisonment for a term of less than six months;

<![if !supportLists]>     i.        <![endif]>The fact that the accused convicted the offence for the first time

<![if !supportLists]>   ii.        <![endif]>If accused is already asked to pay penalty or the goods in relation to such proceedings have been ordered to be confiscated or any other action has been taken against him for the same act which constitutes the offences.

<![if !supportLists]>  iii.        <![endif]>The fact that accused was acting merely as a carrier of goods or otherwise was a secondary party in the commission of the offence.

<![if !supportLists]>  iv.        <![endif]>The age of the accused.

Compounding of Offences under Service Tax

Service Tax (Compounding of Offences) Rules, 2012 introduced through Notification No. 17/2012 ST dated 29.05.2012.

Fixation of the compounding amount - For the purpose of compounding of offences under the provisions of the Act, the compounding amount shall be as provided in the following Table, namely:-

S.No.	Offence	Compounding amount
(1)	(2)	(3)
1.	Offence specified under section 89 (1)(a) of the Act	Up to fifty per cent. of the amount of service tax evasion, subject to minimum of ten per cent. of amount of tax evaded
2.	Offence specified under section 89 (1)(b) of the Act	Upto fifty per cent. of the amount of CENVAT Credit wrongly taken or utilised, subject to minimum of ten per cent. of said amount.
3.	Offence specified under section 89 (1)(c) of the Act	Rupees fifty thousand for the first offence and to be increased by hundred per cent. of this amount for each subsequent offence
4.	Offence specified under section 89 (1)(d) of the Act	Upto twenty five per cent. of the amount of service tax not deposited subject to a minimum of two per cent. for each month for which the amount has not been so deposited.

Provided that if a person has committed offences falling under more than one category specified above and where the amount of service tax evasion or amount of CENVAT Credit wrongly taken or utilised is the same for all such offences, the compounding amount, in such cases, shall be the amount as determined for the offence for which a higher compounding amount has been prescribed.

Prosecution provision in Finance Act, 1994

Section 89 which provides prosecution of specified offences, prosecution was introduced mainly to develop a holistic compliance culture among the tax payers. Encouraging voluntary compliance and introduction of penalties based on the gravity of offences are some important principles which guide the changes made this year, in the penal provisions governing service tax. While minor technical omissions or commissions have been made punishable with simple penal measures, prosecution is meant to contain and tackle certain specified serious violations. Accordingly, it is imperative for the field formations, in particular the sanctioning authority, to implement the prosecution provision keeping in view the overall compliance philosophy.

Some important aspects of prosecution provisions are given below

<![if !supportLists]>1.   <![endif]>In case of issuance of invoice – prosecution provision is on the non-issuance of invoice within the prescribed period rather than non-mention of the technical details in the invoice that have no bearing on the determination on the tax liability

<![if !supportLists]>2.   <![endif]>In case of recipient is liable to pay service tax on reverse charge - required to ensure that the invoice is available at the time the payment is made or at least received within 14 days thereafter and in the case of associated enterprises, invoice should be available with the service receiver at the time of credit in the books of accounts or the date of payment towards the service received.

<![if !supportLists]>3.   <![endif]>Availment and utilization of the credit of taxes paid without actual receipt of taxable service or excisable goods. It may be noted that in order to constitute an offence under this clause the taxpayer must both avail as well as utilize the credit without having actually received the goods or the service. The clause is not meant to apply to situations where an invoice has been issued for a service yet to be provided on which due tax has been paid. It is only meant for such invoices that are typically known as "fake" where the tax has not been paid at the so called service provider's end or where the provider stated in the invoice is non-existent. It will also cover situations where the value of the service stated in the invoice and/or tax thereon have been altered with a view to avail Cenvat credit in excess of the amount originally stated. While calculating the monetary limit for the purpose of launching prosecution, the value shall be the amount availed as credit in excess of the amount originally stated in the invoice.

<![if !supportLists]>4.   <![endif]>The offence in relation to maintenance of false books of accounts or failure to supply the required information or supplying of false information, should be in material particulars have a bearing on the tax liability. Mere expression of opinions shall not be covered by the said clause. Supplying false information, in response to summons, will also be covered under this provision.

<![if !supportLists]>5.   <![endif]>When the amount has been collected as service tax. It is not meant to apply to mere non-payment of service tax when due. This provision would be attracted when the amount was reflected in the invoices as service tax, service receiver has already made the payment and the period of six months has elapsed from the date on which the service provider was required to pay the tax to the Central Government. Where the service receiver has made part payment, the service provider will be punishable to the extent he has failed to deposit the tax due to the Government.

<![if !supportLists]>6.   <![endif]>Therefore, where an offence specified in section 89(1), involves an amount of less than Rupees Ten Lakh, such case need not be considered for launching prosecution. However the monetary limit will not apply in the case of repeat offence.

<![if !supportLists]>7.   <![endif]>Prosecution should not be launched merely on matters of technicalities. Evidence regarding the specified offence should be beyond reasonable doubt, to obtain conviction. The sanctioning authority should record detailed reasons for its decision to sanction or not to sanction prosecution, on file.

<![if !supportLists]>8.   <![endif]>To launch prosecution against top management of the company, sufficient and clear evidence to show their direct involvement in the offence is required. Once prosecution is sanctioned, complaint should be filed in the appropriate court immediately. If the complaint could not be filed for any reason, the matter should be immediately reported to the authority that sanctioned the prosecution.

<![if !supportLists]>9.   <![endif]>Prosecution under Central Excise law will also be applicable to service tax, to the extent they are harmonious with the provisions of Finance Act, 1994 and instructions contained in this Circular for carrying out prosecution under service tax law.

Conclusion:

Finally, to avoid unnecessary invoking of these arrest provisions, the assessee requires comply with the provisions of Service Tax & Central Excise Act promptly. Further all the details of the transactions should be intimated to the department at regular intervals to avoid the suppression or limitation points from department side. In case of demand which is real the possibility of approaching the settlement commission could be an option.

The professional who wishes to advise in this segment maybe advised to read up the constitutional provisions which guarantees liberty to all and also those where one cannot be forced give evidence against oneself. The understanding of CRPC may also become important. The apex court judgments in these regard could also provide a better idea of the protection for the citizens.