2013 (10) TMI 1267 - AT - Service Tax

Financial difficulty in paying service tax dues - appellants are not disputing the service tax liability at all and she says that the appellants have not paid the amount on the ground that they are facing financial difficulties because M/s. Kingfisher Airlines have not paid their dues amounting to more than Rs.3 crores - Held that - the service tax collected from other clients have been utilized to tide over the financial crisis arising as a result of non-payment of service charges by one of the clients. Under these circumstances, appellants cannot be said to have made out any case whatsoever for waiver of pre-deposit. Nevertheless, having regard to the difficulties pleaded, we consider it sufficient if the appellant deposits the entire amount of service tax with interest for the purpose of hearing the appeal which is the least they should do. - stay granted in respect to penalty only.

Summary

Issues involved: Service tax liability, financial difficulties leading to non-payment of service tax, waiver of pre-deposit, stay against recovery of penalty.

Service tax liability:
The order-in-original was passed, and the appellants did not challenge the service tax demand. They admitted the liability but cited financial difficulties due to non-payment by a client as the reason for non-payment. The appellants provided vehicles to the client, and a substantial amount was due from them, causing financial strain. The appellants acknowledged that service tax was payable only when consideration was received, and they used funds from other clients to manage the financial crisis arising from non-payment by the client. The Tribunal noted that the appellants did not have a valid case for waiver of pre-deposit but directed them to deposit the entire service tax amount with interest within 12 weeks for the appeal to be heard. The penalty was waived subject to the deposit, and a stay against recovery of the penalty was granted during the appeal's pendency.

Financial difficulties leading to non-payment of service tax:
The appellants faced financial difficulties as a client, M/s. Kingfisher Airlines, did not pay dues amounting to over Rs.3 crores. This non-payment affected the appellants' ability to pay service tax, as they had to manage vehicle loans, salaries, and other expenses. The appellants did not dispute the service tax liability but explained that the financial strain caused by the non-payment from the client led to the non-payment of the service tax amount. Despite the financial challenges, the Tribunal emphasized that the appellants needed to deposit the entire service tax demanded with interest within a specified timeframe to proceed with the appeal.

Waiver of pre-deposit and stay against recovery of penalty:
The Tribunal considered the difficulties pleaded by the appellants but highlighted that they had not made a strong case for the waiver of pre-deposit. However, in light of the financial constraints faced by the appellants, the Tribunal directed them to deposit the entire service tax amount with interest within 12 weeks for the appeal to be heard. As a gesture, the payment of penalty was waived, and a stay against the recovery of the penalty was granted during the appeal's pendency. This decision aimed to balance the need for compliance with the financial challenges faced by the appellants.

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