2011 (10) TMI 355 - HC - Central Excise

Power of Tribunal for waiver of pre-deposit - Commercial training or coaching services - Revenue argued tribunal granted stay without considering undue hardship case remanded for de novo consideration - Property attached worth ₹ 27 crore further liability denied as assessee charitable institution - interest of revenue secured - Held That - Considering the interest of Revenue and the hardship, we direct that the respondent shall deposit 1/3 rd of the amount of service tax and penalty, which comes about ₹ 80.00 crores as pre-deposit under Section 35-F of the 1944.

Summary

Issues involved:
- Appeal under Section 35-G of the Central Excise Act, 1944 against the order of the Customs, Excise and Service Tax Appellate Tribunal.
- Determination of service tax liability and penalty by the Primary Authority.
- Requirement of pre-deposit for entertainment of the respondent's appeal by the Tribunal.
- Application for waiver of pre-deposit and stay of recovery of service tax.
- Consideration of undue hardship and interest of the revenue in granting waiver of pre-deposit.
- Provisional attachment of assets under Section 73-C of the Finance Act, 1994.
- Judicial review of the Tribunal's decision to grant blanket waiver of pre-deposit.
- Balancing the interests of the Revenue and the respondent in depositing the amount of service tax and penalty.
- Contentions regarding the liability of the respondent as a commercial training or coaching center.
- Direction for the respondent to deposit 1/3rd of the service tax and penalty amount as pre-deposit for the appeal.

Detailed Analysis:

The judgment involves an appeal under Section 35-G of the Central Excise Act, 1944 against the order of the Customs, Excise and Service Tax Appellate Tribunal regarding the determination of service tax liability and penalty by the Primary Authority. The respondent's appeal pertained to the liability for service tax and penalty as determined in the original order passed by the Commissioner of Customs, Central Excise and Service Tax. The Primary Authority imposed a substantial penalty in addition to the determined service tax liability, leading to the respondent's appeal to the Tribunal under Section 86 of the Service Tax Act.

The issue of pre-deposit for the respondent's appeal before the Tribunal was crucial, as it was a condition precedent for the entertainment of the appeal. The Tribunal had initially granted a waiver of pre-deposit, which was challenged by the Revenue in a separate appeal. The High Court, in its earlier judgment, ruled that the Tribunal's decision to waive pre-deposit was not in accordance with established legal principles and remanded the matter for reconsideration based on specific criteria related to undue hardship and the interest of revenue.

Upon a de novo consideration, the Tribunal again granted a blanket waiver of pre-deposit, citing reasons related to the attachment of the respondent's property by the lower authorities and the perceived hardship faced by the respondent, who operated as a charitable institution providing commercial training or coaching services. The Tribunal considered the provisional attachment of assets under Section 73-C of the Finance Act, 1994, and the impending expiration of the attachment period, in its decision to grant the waiver.

However, the High Court found the Tribunal's decision to grant blanket waiver of pre-deposit as a clear erroneous exercise of discretion, given the substantial amount of service tax and penalty involved. To balance the interests of the Revenue and the respondent, the Court directed the respondent to deposit 1/3rd of the total service tax and penalty amount as a pre-deposit for the appeal to be entertained by the Tribunal. This decision aimed to safeguard the Revenue's interests while considering the potential hardship faced by the respondent due to the significant financial liability.

Additionally, the judgment briefly addressed the contentions regarding the liability of the respondent as a commercial training or coaching center, emphasizing the legal interpretation of relevant provisions under the Finance Act, 1994. The Court allowed the appeal with the specified direction for the pre-deposit amount, without imposing any costs on either party.

Overall, the judgment meticulously analyzed the issues surrounding the pre-deposit requirement, undue hardship considerations, provisional attachment of assets, and the balancing of interests between the Revenue and the respondent in a complex case involving substantial service tax liability and penalties.