2008 (6) TMI 371 - HC - Service Tax

Pre-deposit of fifty per cent of the tax confirmed - adjustment of the liability against the credit the petitioner has by way of the payment of tax. The claim of the petitioner came to be brushed aside - Appellate Authority, considering the fact that the lapses have been procedural, called upon the petitioner to pay fifty per cent of the tax undue hardship Held that - respondents brought to notice that neither the petitioner had specifically pleaded financial hardship, nor was any material produced. Counsel for petitioner also produced a Verified Petition producing a petition to dispense with the payment of duty, Writ Petition rejected, petitioner directed to make pre-deposit

Summary

Issues:
Challenge to Ext. P6 order directing pre-deposit of tax amount confirmed; Refrain from coercive recovery steps.

Analysis:

Challenge to Ext. P6 Order:
The petitioner, a Television News Channel, sought to challenge Ext. P6 order directing a pre-deposit of fifty per cent of the tax confirmed within fifteen days. The petitioner claimed entitlement to tax credit of Rs. 85 Lakhs but was directed to pay Rs. 40 Lakhs as output tax, disregarding the credit adjustment request. The petitioner contended a strong prima facie case, emphasizing the lack of reasoning in Ext. P6 order. The petitioner argued for full waiver based on entitlement to credit, citing relevant case laws like Bhikhubhai Vithalabhai Patel and Others v. State of Gujarat. However, the court noted the need for specific plea of financial hardship, which was not adequately presented before the Appellate Authority. The court upheld the Ext. P6 order but granted six weeks for the pre-deposit to be made, emphasizing the importance of considering undue hardship and safeguarding revenue interests.

Coercive Recovery Steps:
The petitioner also sought a direction to refrain from coercive recovery steps for the tax amount confirmed against them. The court's decision on the Ext. P6 challenge indirectly addressed this issue by allowing time for the pre-deposit to be made. The court highlighted the importance of presenting materials on financial hardship to the Authority, as seen in the Verified Petition submitted by the petitioner. The lack of specific pleading on economic constraints hindered the petitioner's case for full waiver. Ultimately, the court rejected the Writ Petition but provided a reasonable timeframe for compliance with the pre-deposit requirement, thereby indirectly addressing the concern regarding coercive recovery steps.

In conclusion, the judgment by KERALA HIGH COURT underlines the significance of establishing a strong case supported by evidence, specifically on financial hardship, when challenging tax-related orders. The court balanced the need to safeguard revenue interests with considerations of undue hardship, emphasizing the importance of presenting relevant materials to support claims. The decision offers insights into the legal principles governing challenges to tax orders and the necessity of fulfilling procedural requirements while seeking relief under Article 226 of the Constitution of India.