Offences and prosecution [Section 89] :
(1) Categories of offences: The offences described in section 89 can be divided into two categories, namely category ‘A‘ and category ‘B‘.
Category “A‟ offences are:
(a) willful evasion of payment of service tax; or
(b) availment and utilization of credit of service tax / excise duty without actual receipt of taxable service / excisable goods either fully or partially in violation of the rules made under the provisions of Chapter V; or
(c) maintenance of false books of account or failure to supply any information which a person is required to supply or knowingly supplying false information.
Category “B‟ offence is collection of any amount as service tax but failure to pay the amount so collected to the credit of the Central Government beyond a period of six months from the date on which such payment becomes due [Sub-section (1)].
(2) Prosecution provisions:
(i) Category „A‟ offences
(a) If any person commits any of the category ‘A‘ offences, he shall be punishable with imprisonment for a term which may extend from six months to three years if the amount involved in the offence exceeds Rs 50 lakh.
(b) In case, the amount involved in respect of the category ‘A‘ offence does not exceed Rs 50 lakh, the imprisonment shall be for a term which may extend to one year.
(c) Any second or subsequent offence from category ‘A‘ offences (whether the amount involved exceeds Rs 50 lakh or not) would be punishable with imprisonment for a term which may extend to three years.
(ii) Category “B‟ offence
(a) A person who has committed category ‘B‘ offence will be punishable with imprisonment for a term which may extend from six months to seven years if the amount exceeds Rs 50 lakh.
(b) In case, the amount involved in respect of the category ‘B‘ offence does not exceed Rs 50 lakh, the imprisonment shall be for a term which may extend to one year.
(c) A second or subsequent category ‘B‘ offence (where the amount involved does not exceed Rs 50 lakh) would be punishable with imprisonment for a term which may extend to three years.
(d) A second or subsequent category ‘B‘ offence (where the amount involved exceeds Rs 50 lakh) would be punishable with imprisonment for a term which
may extend to seven years.
(iii) It may be noted that in case where a person has been convicted of an offence of category ‘A‘ and category ‘B‘ offences for the first time, the term of imprisonment cannot be less than six months if the amount involved in the offence exceeds Rs 50 lakh. However, the punishment can be reduced if there are special and adequate reasons, which would be recorded in the judgment of the Court, for granting lesser punishment.
(3) Cases not to be regarded as special and adequate reasons for awarding lesser imprisonment: Following shall not be considered as special and adequate reasons for awarding a sentence of imprisonment for a term of less than six months, namely:—
(i) the fact that the accused has been convicted for the first time for an offence under this Chapter;
(ii) the fact that in any proceeding under this Act, other than prosecution, the accused has been ordered to pay a penalty or any other action has been taken against him for the same act which constitutes the offence;
(iii) the fact that the accused was not the principal offender and was acting merely as a secondary party in the commission of offence;
(iv) the age of the accused [Sub-section (3)].
On the above grounds, sanctioning authority cannot refrain from launching prosecution against an offender.
(4) Prior sanction of Principal Chief Commissioner/ Chief Commissioner of Central Excise mandatory: A person shall not be prosecuted for any offence under this section except with the previous sanction of the Principal Chief Commissioner/ Chief Commissioner of Central Excise [Sub-section (4)].