2010 (7) TMI 412 - HC - Service Tax

Waiver of pre-deposit modification of stay order - Single Judge passed an interim order directing the respondents not to include, supply of free material to the petitioner without imposing any condition - litigation where the provision of exemption has been challenged as violative of Article 14 of the Constitution of India, there is no scope of staying the operation of the exemption or granting exemption on a modified term in the field of collection of revenue - benefit of extension of time for depositing the amount on the basis of the prayer made by his own counsel, should not be permitted to dispute the correctness of the order of modification - appellant not permitted to challenge the order

Summary

Issues:
Challenge to notification on service tax exemption; Modification of interim order; Maintainability of appeal against order; Scope of exemption in revenue collection; Consideration of balance of convenience in revenue matters; Validity of previous interim orders in similar cases.

Analysis:

1. Challenge to Notification on Service Tax Exemption:
The appellant challenged the explanation in two notifications regarding the inclusion of goods and materials supplied by customers in the gross amount for service tax, alleging violation of Article 14 of the Constitution. The relief sought was to restrain the respondents from imposing service tax on the value of freely supplied goods and materials.

2. Modification of Interim Order:
The initial interim order directed the appellant to deposit a specific amount within a set timeframe to continue adjudication proceedings without including the value of free materials in taxable service. The appellant sought a modification, which was partially granted by extending the deposit deadline and including an interest clause.

3. Maintainability of Appeal Against Order:
The respondents argued against the appeal's maintainability, highlighting that the appellant had requested an extension for depositing the amount and benefited from the modification order. The court considered this aspect in determining the appeal's validity.

4. Scope of Exemption in Revenue Collection:
The court emphasized that challenging an exemption provision as violative of Article 14 does not warrant a stay on revenue collection. Any revenue collected based on an unconstitutional provision should be refunded, and appropriate orders can be passed to compensate the payer.

5. Consideration of Balance of Convenience in Revenue Matters:
The court stressed the importance of balancing convenience and avoiding irreparable harm in revenue-related injunctions. Granting unconditional injunctions against revenue collection without due consideration could harm national interests.

6. Validity of Previous Interim Orders in Similar Cases:
The court rejected the argument that previous interim orders in similar cases should dictate the outcome of the present matter. The Revenue was not bound by past decisions, and each case required individual assessment.

In conclusion, the High Court dismissed the appeal, finding it lacking in substance. The court upheld the direction for the appellant to deposit the admitted amount pending the writ-application's outcome. The judgment highlighted the importance of balancing legal principles, revenue collection, and individual case merits in such matters.