The service tax department has arrested a top official of a city-based human resources firm for failing to pay service tax of Rs 5 crore.

The department arrested the Director of the Manpower Supply Company in Chennai, after it failed to pay the tax collected, a release quoted Service Tax Commissioner G Ravindranath as saying on Thursday.

"The company failed to deposit the service tax collected to the exchequer. It had floated fake entities as sub-contractors and generated fake invoices to avail input tax credit," he said.

"This way, the company has been evading payment of service tax since October 2012 and the quantum of service tax evasion is more than Rs five crore," Ravindranath said.

He said the Survey, Intelligence and Research (SIR) wing of the department gave enough opportunities to the firm to comply with the law, but it was "uncooperative and evasive", leading to the arrest of the Director.

The Director was produced before Chief Metropolitan Magistrate, Economic Offences Court, Egmore yesterday and remanded to judicial custody.

He has been lodged in Puzhal prison.