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The crisis at Kingfisher Airlines escalated further with the Service Tax department here freezing as many as 40 bank accounts of the already crippled airline for non-payment of dues to the tune of Rs 40 crore.

“Over Thursday and Friday, we froze 40 bank accounts of Kingfisher Airlines. They failed to meet the February 29 deadline to make the payments. The airline owes Rs 40 crore to the department,” Service Tax Commissioner S.K. Solanki told PTI on Saturday.

This is the fourth time in the past four months that the service tax depart has frozen its bank accounts. Late last month, the income tax department had also frozen the bank accounts for not depositing the TDS.

Asked if the airline had communicated with the department, he said, “Not yet as today being a Saturday. We hope to hear from them on Monday.”

The move follows as the airline failed to make Rs 20 crore payment by February 29, as promised. However, Kingfisher spokesperson could not be immediately reached for comments.

The airline was given time till February 29 to clear part payment and March 31 to pay off all the arrears to the tune of Rs 70 crore.

Since the account was frozen first time in early November last, the airline had paid only a little over Rs 30 crore, Mr. Solanki said.

It had paid Rs 10 crore in December, after its accounts were frozen in the early that month; Rs 20 crore in January and they had promised to pay Rs 20 crore in February.

Chairman of the Central Board of Excise and Customs, under which the service tax department falls, S.K. Goel had on February 22 said the airline had to clear this indirect tax dues of Rs 70 crore before March 31.

“Kingfisher has an outstanding service tax dues of Rs 70 crore and the company had promised to pay in instalments,” Mr. Goel had said in New Delhi.

The beleaguered airline has been in a financial mess and is unable to meet its obligations, including paying salaries to its employees, for months on end now.

Following continuous non-payment of salaries, late last week a section of its engineers went on a ‘tools-down’ protest for a day. This came even as airline chairman Vijay Mallya in an internal communication towards the middle of last week had promised to clear all the salary arrears at the earliest saying he had made arrangements for that.

As crisis deepened and salaries did not come by, its employees left the crippled organisation en-masse, especially the most critical pilots. Over 60 pilots have left so far in the past few months alone.

As pilots left and the cash flow turned dry, the airline massively reduced its flights beginning mid-October. From 400 flights a day, it is operating only 170 flights now, using just 28 of its 64 fleet.

The airline, which never made a profit since its inception in May 2005, reported a net loss of Rs 444.26 crore in the December quarter, due to high fuel costs and weaker rupee, up from Rs 253.69 crore a year ago.

The airline suffered a loss of Rs 1,027 crore in 2010-11 and has a debt of Rs 7,057.08 crore in its books apart from over Rs 4,000 crore of accumulated losses and a restructured long-term loan of around Rs 7,000 crore.

The cash trapped airline has not been able to get fresh funding from banks, as a 19-member bank consortium is adamant that the promoters bring in at least 50 per cent of its fund requirement in fresh equity as a pre-condition for any new funds.

The airline urgently needs at least Rs 2,000 crore working capital to remain afloat.