2011 (10) TMI 392 - HC - Service Tax

Waiver of predeposit - A notice to show cause was issued to the Appellants on 24 October 2008 demanding service tax dues in the amount of Rs . 5.85 crores ; interest therein and to explain as to why penalty should not be imposed - Learned Counsel submitted that the Appellants paid almost 99% of the service tax dues besides 25% of the penalty and interest as required in law - From the record before the Court, it appears from the order of the Tribunal that the Appellants had by their stay application sought a waiver of a predeposit of an amount of Rs . 14,61,843/being the balance amount payable towards service tax and of the penalty - Appellant is directed to deposit an amount of Rs . 25 lakhs within a period of four weeks from today instead and in substitution of the direction issued by the Tribunal

Summary

Issues:
1. Interpretation of Sections 83 and 35F of the Finance Act, 1994 and the Central Excise Act, 1944 regarding the imposition of penalty.
2. Application of Section 80 of the Finance Act, 1994 in cases of delay in payment of service tax.
3. Compliance with Section 73(1A) of the Finance Act, 1994 for waiver of predeposit.

Analysis:
1. The appeal before the Bombay High Court stemmed from an order by the Customs, Excise & Service Tax Appellate Tribunal concerning the waiver of predeposit under Section 83 of the Finance Act, 1994 read with Section 35F of the Central Excise Act, 1944. The substantial questions of law raised included the justification for directing the appellant to deposit a sum towards penalty and the necessity of further deposit despite a significant portion of the service tax demand being paid by the appellant.

2. The appellant, engaged in storage, warehousing, and other services, received a notice demanding service tax dues, with a significant amount already paid by them. The Commissioner confirmed the demand, appropriated the paid amount, and imposed a penalty. The appellant sought the benefit of Section 73(1A) by paying the remaining dues, penalty, and interest, citing delays due to external factors like a city-wide emergency.

3. The Tribunal, however, directed the appellant to pay an additional sum towards penalty despite the substantial payment made. The appellant argued compliance with Section 73(1A) and fulfillment of statutory requirements, seeking a waiver from the additional deposit. The respondents supported the Tribunal's decision, emphasizing no grounds for waiver existed.

4. The High Court analyzed the appellant's compliance with Section 73(1A) and the Tribunal's order, modifying the deposit amount to balance the paid dues and the penalty. Considering the admitted liability and payments made, the Court directed the appellant to deposit a reduced sum within a specified timeframe. Failure to comply would lead to legal consequences.

5. Ultimately, the Court disposed of the appeal, answering the legal questions based on the modified deposit directive. No costs were awarded in the judgment, concluding the legal proceedings related to the waiver of predeposit in the context of service tax liabilities and penalties under the relevant statutes.