Attempts by tax officials to garner power of arrest over individuals guilty of not paying service taxexceeding Rs 50 lakh has run into opposition from members of Parliament (MPs) across parties. Finance Minister P Chidambaram's proposal in the Budget to introduce Section 91, which will empower officials to arrest service tax evaders, has evoked concerns within the ruling party as much as the Opposition over possible misuse of the provision. The measure designed to check tax evasion is likely to lead to harassment of assessees and bring back memories of bad old days of "inspector raj", critics of the proposal have pointed out. 

A group of Congress MPs is set to raise the issue with the FM while the main Opposition, the BJP, has decided to demand withdrawal of the proposal when theFinance Bill comes up for discussion. According to the proposal, failure to deposit service tax will result in arrest by an official not below the rank of superintendent of central excise and imprisonment of up to seven years. 

"Many small and medium entrepreneurs will be subjected to harassment if the provision is made part of law. The service tax payers in the category do not run manufacturing units," said a Congress minister, who sought anonymity. 

The proposal is one of two in the budget this year empowering tax officials to make arrests. The other proposal, with respect to Customs and excise duties, seeks to overcome a Supreme Court ruling in 2011 that evasion of Customs and excise tax cannot be equated with non-cognisable and non-bailable criminal offences, and that an accused cannot be arrested without a warrant. A threemember bench, headed by Justice Altamas Kabir, had ruled that all offences under the Central Excise Act, 1944, and the Customs Act, 1962, are bailable. 

A similar proposal was part of Budget 2012-13, but the government was forced to withdraw it. However, it has found its way into this year's budget as Customs and excise officials insist they need the power of arrest. 

Referring to the provision, the leader of the Opposition in Rajya Sabha, BJP's Arun Jaitley said, "The bail provision was similar to that of the scrapped anti-terror law Pota (Prevention of Terrorism Act). The government was forced to withdraw it." 

Jaitley, a former law minister, said the law should distinguish between a genuine defaulter and disputes with a particular levy, adding, "This can be decided only by adjudication." 

The government has, however, maintained that tougher rules are needed to check "blatant misuse" of legal provisions by tax assessees. According to the Central Board of Excise & Customs chairperson Praveen Mahajan, only 26 people were arrested while 527 commercial frauds in service tax were detected by her department in 2011-12. 

It is up to the government to thrash out a workable solution, said NK Singh, a Rajya Sabha member of the JD (U). "With the progress towards a uniform goods & services tax, there is merit in harmonising provisions of central excise and service tax to bring in uniformity. And in doing so, the provisions with respect to preventive action and arrests need to be suitably calibrated," he said. * (Economic Times)