Issuing a stern warning to tax evaders, the government on Wednesday said evaders of excise, customs and service tax could pay up their dues and avail themselves of the benefit of reduced penalty or face penal action like arrest, prosecution and property attachment.

Revenue Secretary Sumit Bose cautioned that the government was keeping a very close watch on tax evaders. He stressed that while the finance ministry was making all possible efforts to boost trade & industry, many traders were not playing their part by paying their due taxes in time.

Cautioning tax evaders, Bose said, "They [tax evaders] should be ready for the consequences which include recovery of duty along with interest and penalty up to 100 per cent, suspension of Cenvat credit, provisional attachment of property, and arrest and prosecution."

He added that several Central excise assessees kept on removing goods covertly, misusing Cenvat credit and not paying Central excise duties to the department in time.

He also said that the department was aware of the fact that many service providers were collecting service tax from their customers but not depositing the same with the department.

It may be noted here that all services are taxable starting July 1, 2012, excluding those in the negative list and exempted services.

Bose's stern warning is in steep contrast with Finance Minister P Chidambaram's August 2012 statement that the department would not hound the taxpayers.