2013 (10) TMI 589 - HC - Service Tax

Waiver of pre deposit - Business Auxiliary Services - it is contended that payment made to DTC was the appellant s share in the actual marketing expenses incurred by DTC. Thus DTC did not provide any service of promoting or marketing of goods having the brand name of Nakshatra being sold by the appellant - Held that - When the question for consideration before the Tribunal is an arguable one, particularly the interpretation of the agreements, there is no justification for directing the appellant assessee to deposit the penalty amount. The case of the appellant is that no service was received by them from DTC and the payment made under the agreement is in the nature of reimbursement of expenses of advertisement incurred by DTC. This submission would require a detailed examination at the time of final hearing. However, the case of the appellant being eminently arguable, deposit of interest and penalty was not called for, so as to entertain the appeal on merits. Interest of justice would be served if the appellant is directed to make the predeposit of the entire amount of service tax which is quantified by the adjudicating authority at Rs.1, 13,13,784 /- including cesses while the interest thereon and penalty is dispensed with - Decided partly in favour of assessee.

Issues:
1. Whether the appellant should make a predeposit of service tax for hearing the appeal.
2. Interpretation of agreements regarding services received from a foreign party.
3. Justification for directing the appellant to deposit the penalty amount.
4. Consideration of interest and penalty in the case.
5. Time limit for making the predeposit of service tax.

Analysis:
1. The appeal was against the Customs Excise & Service Tax Appellate Tribunal's order requiring the appellant to predeposit service tax, interest, and penalty for the hearing. The appellant argued that they did not receive any services from the foreign party but shared marketing expenses. The liability was on a reverse charge basis. The Tribunal should have granted a complete waiver of predeposit based on the agreements.

2. The appellant contended that the payment made to the foreign party was for the appellant's share in actual marketing expenses, not for promoting or marketing goods with the Nakshatra brand. The Tribunal's order was challenged as unjust, but the appellant's case was deemed arguable, particularly regarding the interpretation of agreements. The appellant's submission required detailed examination during the final hearing, and depositing interest and penalty was considered unnecessary to entertain the appeal on merits.

3. The revenue's counsel argued in favor of the impugned order, stating that no interference was necessary. However, the High Court found the appellant's case to be eminently arguable, leading to the modification of the Tribunal's order. The appellant was directed to make a predeposit of the entire service tax amount but was relieved from paying interest and penalty.

4. The High Court partly allowed the appeal by modifying the Tribunal's order, deleting the direction for predeposit of interest and penalty. The direction for pre-depositing the service tax amount, including cesses, stood. The time limit for making the predeposit was extended until 15 November 2013, with a stay against the recovery of interest and penalty until the appeal's disposal by the Tribunal.

5. In conclusion, the appeal was disposed of with no order as to costs, providing detailed reasoning for the decision on predeposit, interest, and penalty, ensuring a fair consideration of the appellant's arguments and the interpretation of agreements involved in the case.

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