2013 (3) TMI 293 - HC - Service Tax

Pre-condition for depositing the entire amount towards service tax, with interest, penalty, etc. to hear the appeal - Service tax demanded under Survey and exploration of mineral services - Held that - It is to be noted that when once appeal is filed by the aggrieved person against the original order, it is mandatory requirement under Section 35-F of the Act to pay the entire amount ordered by the original authority, as a condition precedent for taking up the appeal. Law is well settled that the capacity of a party to pay the pre-deposit amount had to be noticed and the financial burden and undue hardship for the party to resort to claim waiver of the pre-deposit have also to be considered. As decided in Trendy Moods Vs. Customs, Excise and Gold (Control) Appellate Tribunal, Chennai (2008 (12) TMI 215 - HIGH COURT OF JUDICATURE AT MADRAS) the capacity of the appellant therein to pay the amount having been noticed and in the absence of any financial burden, it cannot be construed that there is an undue hardship for the appellant therein to resort to claim waiver of pre-deposit. In this case, a sum of ₹ 47,93,469/- as service tax, with interest, etc., were levied by the original authority, and thereafter, in the appeal stage, the first respondent passed the impugned order, reducing the amount to ₹ 4 lakhs as pre-deposit amount, and the prima-facie case, balance of convenience, undue hardship, financial burden, etc., which were focussed by the petitioner, had been duly considered by the first respondent in accordance with law, while reducing the amount of pre-deposit to ₹ 4 lakhs, and therefore, such a lenient approach made by the first respondent, cannot be called in question in this Writ Petition by the petitioner, particularly, when there is no substantial hardship made out by the petitioner. Such an approach made by the petitioner to file this Writ Petition challenging the order of pre-deposit, is no way called for interference by this Court, and therefore, the Writ Petition deserves no merit consideration, which is liable to be dismissed.

Summary

Issues:
1. Reduction of pre-deposit amount by the first respondent-appellate authority.
2. Classification and taxability of services provided by the petitioner.
3. Compliance with the requirement of pre-deposit for filing an appeal.
4. Consideration of undue hardship, financial burden, and prima-facie case in reducing the pre-deposit amount.
5. Challenge to the order of pre-deposit through a Writ Petition.

Analysis:

1. The petitioner challenged the order passed by the first respondent-appellate authority, which reduced the pre-deposit amount required for filing an appeal from Rs. 47,93,469 to Rs. 4 lakhs. The petitioner contended that the order was unlawful, arbitrary, and not sustainable in law. The main argument put forth was that the pre-deposit amount would create undue hardship as it was not reimbursable by the main contractor as per the agreement.

2. The petitioner, a company engaging laborers for drilling services, contested the classification and taxability of its services under the category of "survey and exploration of mineral services." The petitioner claimed to be a sub-contractor and argued that the main contractors were responsible for remitting service tax. Various trade notices and clarifications were relied upon to support this position.

3. The requirement of pre-deposit for filing an appeal was highlighted as a mandatory provision under Section 35-F of the Act. The petitioner had filed an appeal against the order confirming the levy of service tax, interest, etc., and the first respondent's order on pre-deposit was challenged through a Writ Petition.

4. The court emphasized the need to consider the capacity of a party to pay the pre-deposit amount, along with factors like financial burden and undue hardship. Reference was made to a previous decision where the court concluded that in the absence of financial burden, it could not be construed as undue hardship for the appellant to seek a waiver of pre-deposit.

5. The court reiterated that the waiver of pre-deposit should be based on factors like undue hardship, prima-facie case, balance of convenience, and financial burden expressed by the party. In this case, the first respondent's decision to reduce the pre-deposit amount to Rs. 4 lakhs was considered lenient but not unsustainable, as the petitioner failed to demonstrate substantial hardship.

6. The court dismissed the Writ Petition, stating that the challenge to the order of pre-deposit was unwarranted. It directed the petitioner to pay the pre-deposit amount and allowed the petitioner to raise all contentions before the first respondent-appellate authority during the appeal process, which was to be concluded within six weeks from the date of payment.

7. The liability of the petitioner to pay service tax as a sub-contractor, despite the main contractor's responsibility, was deemed a matter to be decided by the first respondent-appellate authority during the appeal proceedings. The court provided directions for the timely disposal of the appeal with consideration of all contentions raised.