2014 (3) TMI 382 - HC - Service Tax

Undue hardship - waiver of pre-deposit - Whether the learned Tribunal is correct in law in holding that financial difficulty is not a primary criteria for deciding the issue of undue hardship as mentioned 35F of the Central Excise Act, 1944, which has been adopted by the appropriate Finance Act - Held that - The word undue adds something more than just hardship. It means an excessive hardship or a hardship greater than the circumstances warrant. - The other aspect relates to imposition of condition to safeguard the interest of revenue. It is clear that prima facie case is not only criteria, but the financial hardship has also to be considered side by side. Here the learned Tribunal has taken note of the case of financial hardship, but did not feel to decide or consider the same as the prima facie case was assessed. We are therefore of the view that the impugned judgment and order is completely contrary to the provisions of law as well as the principle laid down by the Supreme Court in the aforesaid case. - matter remanded back for fresh decision - Decided in favour of assessee.

Summary

Issues:
1. Interpretation of financial difficulty as a criteria for deciding undue hardship under Section 35F of the Central Excise Act, 1944.

Analysis:
The High Court of Andhra Pradesh heard an appeal against the judgment of the Customs, Excise and Service Tax Appellate Tribunal regarding the waiver of pre-deposit in a tax dispute. The primary question was whether financial difficulty is a primary criteria for deciding undue hardship under Section 35F of the Central Excise Act, 1944. The appellant argued that the Tribunal's view on financial hardship was incorrect, citing a Supreme Court judgment. The respondent contended that the deposit amount was permissible under the law. The High Court observed that the Tribunal erred in considering only the prima facie case for waiver of pre-deposit and neglected the aspect of financial undue hardship. Section 35F of the Act was analyzed to understand the provision regarding deposit pending appeal of duty demanded or penalty levied, highlighting the discretion provided to the Commissioner or Tribunal to dispense with the deposit in cases of undue hardship.

The Court emphasized that undue hardship includes financial hardship, but the interests of revenue must also be safeguarded. Referring to the Supreme Court's guidance in the case of Benara Valves Limited, the Court outlined the importance of balancing the considerations of undue hardship and revenue protection while granting waivers. The Court quoted relevant paragraphs from the Supreme Court judgment to explain the terms "undue hardship" and "safeguarding the interests of revenue." It clarified that undue hardship must be more than just hardship, indicating an excessive or disproportionate burden. The Tribunal was instructed to consider the audited balance sheets of the appellant and follow the Supreme Court guidelines in assessing financial hardship.

In conclusion, the High Court set aside the Tribunal's judgment and directed a reconsideration of the financial hardship issue within 15 days. The Court stressed that a prima facie case is not the sole criterion, and financial hardship must be duly considered alongside other factors. The appeal was allowed with no costs imposed, emphasizing the need for a comprehensive evaluation of financial hardship in such cases.