2013 (5) TMI 54 - HC - Service Tax

Predeposit non payment of service tax The original authority has passed an order for payment of tax with interest and penalty, as against which, the petitioner has gone on appeal before the respondent-Commissioner of Central Excise (Appeals) along with stay petition. After considering the petitioner s grievances, financial burden and other difficulties, the respondent ultimately came to the conclusion and ordered pre-deposit to be paid in cash on u/s 35-F. It was also observed in the order that if the pre-deposit is not paid as ordered, the subject appeal would stand dismissed automatically. Held that - 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. With regard to the undue hardship and other difficulties expressed by the petitioner, much less what is now claimed, the respondent himself has come to a conclusion while ordering the pre-deposit amount with a lenient approach. Therefore, in my considered opinion, there is no merit in this writ petition. Thus, the petitioner shall pay the pre-deposit amount as ordered by the respondent within 2 weeks from the date of receipt of a copy of this order, and on such payment, the respondent shall dispose of the appeal itself, on merits and in accordance with law.

Summary

Issues involved:
Challenge to pre-deposit-cum-appeal order under Central Excise Act and Finance Act.

Analysis:
The petitioner, a company providing graphics and animation services, challenged a pre-deposit-cum-appeal order issued by the respondent under the Central Excise Act and Finance Act. The petitioner entered into an Extended Warranty Agreement with a foreign company for technical support over phone and email based on log file analysis conducted abroad. The dispute arose when service tax demands were issued for services provided through phone and email. The original authority confirmed the demands, leading to the petitioner filing an appeal with a stay petition. The respondent ordered a pre-deposit of Rs.10 lakhs, which the petitioner contested as causing severe hardship. The respondent argued that pre-deposit is mandatory upon appeal and that leniency was shown in this case.

The High Court noted that the respondent initiated action against the petitioner for non-payment of service tax, leading to the appeal and pre-deposit order. The respondent considered the petitioner's grievances, including the financial burden, and ordered the pre-deposit of Rs.10 lakhs to be paid. The Court emphasized the need to consider the capacity to pay the pre-deposit amount and the undue hardship faced by the party. It referenced a previous decision highlighting the factors of undue hardship, prima facie case, balance of convenience, financial burden, and other difficulties in determining waiver of pre-deposit.

The Court found that the respondent had taken a lenient approach in ordering the pre-deposit amount. While the petitioner requested more time for payment, the Court directed the petitioner to pay the pre-deposit amount within two weeks and instructed the respondent to dispose of the appeal within four weeks after payment. The Court disposed of the writ petition with these directions, emphasizing the importance of considering financial hardship and other difficulties in pre-deposit matters.