New Delhi: The government may find itself in hot water on budget proposals that make duty evasion beyond a certain threshold a non-bailable offence, allow arrest on suspected withholding of service tax, and provide tax authorities powers to recover dues from a defaulter’s bankers.

Although finance minister P. Chidambaram in his budget presentation on 28 February promised a stable and non-
adversarial tax regime, the fine print seeks to provide sharper teeth to tax officials to deter and prosecute suspected evaders.

These stringent suggestions are likely to raise an outcry in Parliament when the matter is taken up for discussion and debate.

“Tax evasion is a civil offence. Mere avoidance of tax cannot be a criminal act unless it is proved that it was done with a criminal intention," said Yashwant Sinha, a former finance minister and a parliamentarian from the principal opposition Bharatiya Janata Party (BJP). “I’m personally against giving too much power to the tax authorities because they tend to misuse it. One has to be very careful in giving powers of arrest and seizure to authorities."

The government wants to make offences non-bailable where evasion of duty exceeds 50 lakh. It proposes to introduce arrest provisions under service tax.

It has also proposed that customs and excise officials recover money from an entity other than the defaulter if the former holds money on behalf of the latter—essentially helping them to recover dues of a defaulter from the latter’s bank.

The budget proposes to provide a maximum of one year up to which the tax appellate tribunal can grant a stay on a case. The stay will be vacated even if disposal of the case remains pending due to no fault of an assessee.

There is also a provision to make management of companies accountable in case of service tax evasion by imposition of a penalty. Earlier, a penalty could be imposed only on the offending firm.

“The government has proposed some bitter pills on the indirect tax side, about which there was no mention in the finance minister’s speech," said J.P. Singh, a partner at Luthra and Luthra Law Offices.

Since there is a huge number of cases pending for more than one year before the tribunal, the provision that the stay be vacated in a year is harsh.

“This means that even if the assessee is not to blame for non-disposal of the case by the tribunal, he will be at a loss if the tribunal doesn’t decide the case within one year," he said.

Government officials could not be contacted on Sunday to comment on these proposals. There was no response to a message left on the mobile phone of a top revenue official.

The government may find it difficult to get these provisions approved in Parliament. In last year’s budget proposals, then finance minister Pranab Mukherjee had proposed similar provisions to make certain offences under the customs and excise act non-bailable.

But the administration had to backtrack after strong opposition from BJP. Arun Jaitley, the opposition leader in the Rajya Sabha, had then equated those provisions to laws to fight terrorism. “There is no better advice you can give to businesses than this—don’t invest in India, because if you do, these are going to be the consequences," he had then said.

“The party’s stand in Parliament is likely to be the same as last year," Sinha said on Sunday.

The ruling United Progressive Alliance has been finding it difficult to meet the government’s tax revenue collection target due to a slowing economy and the administration’s inability to widen the taxpayer base and check tax evasion.

The revised estimates for the current fiscal year to March show that the tax collection target is short by nearly 30,000 crore.

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