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Vijay Mallya seeks exemption from court appearance in service tax dues case
December, 15th 2014

Kingfisher Airlines chairperson and managing director Vijay Mallya has sought exemption from appearance before a magistrate in Mumbai in connection with a cheating case filed by the service tax commissioner against the airline for failing to pay Rs 33 crore, due since 2011, to the central government.

The Esplanade court on Friday gave Mallya and the airline CEO Sanjay Aggarwal a "last chance" to appear in court on January 9 and granted provisional bail of Rs 50 lakh till that date to A Raghunathan, chief financial officer and T R Venkatadri, assistant vice president of the airlines, who were also named as accused. The court, said Advait Sethna, counsel for the government department, also directed that Raghinathan and Venkatadri cannot leave the country without prior court permission, a condition which the service tax authorities had sought to be imposed.

The chief metropolitan magistrate at the Esplanade court in Mumbai heard arguments all day on Friday in the case. Raghunathan and Venkatadri had sought bail in a complaint filed by Sarika Shah, assistant commissioner of service tax, Mumbai against Kingfisher Airlines Ltd, Mallya, Aggarwal and them. The complaint was filed in December 2012. The magistrate, however, said he would have to hear the bail plea on January 9 after the service tax authorities files their reply and granted them the provisional bail till then.

The case of the service tax department is that the Airlines failed to pay its service tax dues worth Rs 79 crore — collected from customers — between April and Noveber 2011 and also failed to file service tax returns for April-September 2011 on its due date. The airline made some adhoc payment towards the unpaid dues, the department said, adding that however Rs 33 crore remains unpaid.

"Ample opportunities were given to the airline to pay the service tax but time and again it defaulted on the arrears," said the complaint. The court was told that the Kingfisher Airlines CEO and MD said that since the Airlines was "facing acute financial crises," they were "constrained to utilise all amounts including service tax collected to make critical payments to fuel suppliers and airports and essential spares for aircraft safety to keep the airline flying and protect its Air Operative Permit." They had offered to make the payments soon.

The diversion of the money collected on behalf of the central government for day-to-day activities of the airline, however, amounts to an offence of criminal breach of trust and cheating under the Indian Penal Code too as well as an offence under the Finance Act attracting punishment of up to three years' imprisonment, said the complaint which sought orders to summon the accused.

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