2013 (9) TMI 867 - HC - Service Tax

Waiver of Pre-deposit service of auction of property - Earlier CBEC has clarified that no Service Tax would be leviable when sovereign /public authorities in performing statutory functions / activities provide service and collect the fee in respect thereof. - However, the Government of India, Ministry of Finance, by order dated 14.08.2008 informed that the Circular dated 18.12.2006 would not be applicable to the petitioner. - Held that - The specific plea of the petitioner was that in view of the uncertainty prevailing prior to the Government of India s order it could not collect the Service Tax from the growers and buyers - That apart, the question whether the petitioner was liable to pay the Service Tax or not was the subject matter of the writ petitions pending before this Court - It was also relevant to note that the petitioner had already remitted substantial part of the demand - It was pleaded that the short payment as mentioned by the Commissioner in the order was incorrect and appropriate steps were being taken for rectification. The deposit of tax demanded together with the interest and penalty would cause undue hardship to the petitioner - the interest of justice would be met if the pre-deposit of at least the penalty and interest was waived. - petitioner directed to deposit the entire tax component.

Issues:
1. Liability to pay Service Tax for auctioneer's services and renting of immovable property.
2. Applicability of Circular dated 18.12.2006 regarding Service Tax exemption for sovereign/public authorities.
3. Barred by limitation defense for the demand of Service Tax.
4. Request for waiver of pre-deposit under Section 35F of the Central Excise Act, 1944.
5. Hardship due to the deposit of tax demanded, interest, and penalty.

Liability to pay Service Tax for auctioneer's services and renting of immovable property:
The petitioner, a body corporate under the Tobacco Board Act, 1975, was held liable to pay Service Tax for services provided, including auctioneer's services and renting of immovable property. The demand was made for the period from May 2006 to September 2010. The petitioner appealed the order before the Central Excise & Service Tax Appellate Tribunal (CESTAT), seeking to dispense with the pre-deposit and stay the order, which was dismissed. The High Court considered the petitioner's contention regarding the uncertainty before a specific government order and the pending writ petitions challenging the liability to pay Service Tax.

Applicability of Circular dated 18.12.2006 regarding Service Tax exemption:
The petitioner initially relied on a Circular dated 18.12.2006, which exempted sovereign/public authorities from Service Tax when performing statutory functions. However, the Government of India clarified that this exemption would not apply to the petitioner. The petitioner highlighted the pending writ petitions challenging this clarification. The High Court acknowledged the petitioner's argument regarding the impact of the government order on their ability to collect Service Tax from growers and buyers.

Barred by limitation defense for the demand of Service Tax:
The petitioner contended that the demand for Service Tax made in 2012 for the period from 2006 to 2010 was barred by limitation. They also mentioned having already remitted a significant amount of the total demand, leaving a balance to be collected from buyers. The High Court considered the petitioner's plea regarding the limitation and the amount already remitted, finding merit in their argument for waiver of the pre-deposit.

Request for waiver of pre-deposit under Section 35F:
The petitioner sought a waiver of the pre-deposit under Section 35F of the Central Excise Act, 1944, arguing that the deposit of the tax demanded, interest, and penalty would cause undue hardship. The High Court agreed that requiring the full deposit would cause hardship to the petitioner and directed the petitioner to deposit the tax component within a specified timeframe for the appeal to be entertained and decided on merits.

Hardship due to the deposit of tax demanded, interest, and penalty:
Considering the facts and circumstances, the High Court found that the deposit of the tax demanded, interest, and penalty would cause undue hardship to the petitioner. Therefore, the Court set aside the impugned order and directed the petitioner to deposit the tax component within a specified timeframe, with a waiver of at least the penalty and interest. Failure to comply with the deposit timeline would result in the revival of the impugned order. The High Court disposed of the writ petition accordingly, emphasizing the deposit requirement for further proceedings.

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