2013 (5) TMI 255 - HC - Service Tax

Business auxiliary service - Repair and maintenance service - service tax demand -Tribunal directed the appellant to make a pre-deposit of ₹ 8 crores - assessee contested that the ultimate beneficiaries of the services were customers located abroad - Held that - Provisions of section 66A would require interpretation is not so clear-cut and is debatable. In these circumstances, and particularly in view of the fact that the financial hardship of the appellant has already been recognised by the Tribunal in other orders dated 29.11.2011 and 12.10.2012, the entire amount of tax, penalty and interest demanded ought to have been waived as a condition for hearing the appeal. Consequently, the order of the Tribunal modified by directing that there shall be full waiver of the requirement to pre-deposit the tax, penalty and interest. The appeal of the appellant before the Tribunal shall be heard without insisting on any pre-deposit.

Summary

Issues:
1. Service tax demand confirmation against the appellant for the year 2006-07.
2. Tribunal's prima facie view on service tax demands for repair and maintenance service and business auxiliary service.
3. Tribunal's direction for pre-deposit by the appellant.
4. Appellant's request for waiver of the pre-deposit due to financial hardship.
5. Interpretation of section 66A of the Finance Act, 1994 regarding service tax liability.
6. Tribunal's recognition of financial difficulties faced by the appellant in previous orders.
7. Appellant's argument for waiver of tax, penalty, and interest demanded.

Analysis:

1. The judgment pertains to an appeal against the confirmation of a service tax demand of Rs. 65,48,52,240/- for the year 2006-07. The demand comprised alleged repair and maintenance service amounting to Rs. 49.95 crores and business auxiliary service amounting to Rs. 15.53 crores.

2. The Tribunal, in its prima facie view, found the repair and maintenance service tax demand unsustainable but considered the business auxiliary service demand of Rs. 15.53 crores to be on a strong footing. The Tribunal directed the appellant to make a pre-deposit of Rs. 8 crores within 8 weeks.

3. The appellant argued for a waiver of the entire pre-deposit amount due to financial hardship, citing previous orders where the Tribunal recognized financial difficulties faced by other entities.

4. The appellant contended that the business auxiliary service was entirely rendered and received outside India, thus not subject to service tax in India. However, the Tribunal held a prima facie view that the demand of Rs. 15.53 crores was valid.

5. After examining the issue and finding the interpretation of section 66A debatable, the Court modified the Tribunal's order. It directed a full waiver of the tax, penalty, and interest demanded, allowing the appeal to be heard without any pre-deposit requirement.

6. The Court considered the financial hardship of the appellant, previously recognized by the Tribunal in other cases, as a significant factor in granting the waiver of the pre-deposit requirement.

7. Ultimately, the Court allowed the appeal to the extent of waiving the pre-deposit requirement and directed that there shall be no recovery of tax, penalty, and interest until the appeal is disposed of by the Tribunal. No costs were awarded in the judgment.