2014 (5) TMI 135 - HC - Service Tax

Waiver of pre deposit - service tax demand - works contract service - tribunal directed the petitioner to deposit a sum of ₹ 25 lacs only as pre deposit - Held that - On merely establishing a prima facie case, interim order of protection should not be passed. But if on a cursory glance it appears that the demand raised has no leg to stand, it would be undesirable to require the assessee to pay full or substantive part of the demand. Petitions for stay should not be disposed of in a routine matter unmindful of the consequence flowing from the order requiring the assessee to deposit full or part of the demand. There can be no rule of universal application in such matters and the order has to be passed keeping in view the factual scenario involved. Merely because this Court has indicated the principles that does not give a license to the forum/authority to pass an order which cannot be sustained on the touchstone of fairness, legality and public interest. Where denial of interim relief may lead to public mischief, grave irreparable private injury or shake a citizens faith in the impartiality of public administration, interim relief can be given. Two significant expressions used in the provisions are undue hardship to such person and safeguard the interest of revenue Therefore, while dealing with the application twin requirements of considerations i.e. consideration of undue hardship aspect and imposition of conditions to safeguard the interest of Revenue have to be kept in view - For a hardship to be undue it must be shown that the particular burden to have to observe or perform the requirement is out of proportion to the nature of the requirement itself, and the benefit which the applicant would derive from compliance with it - The word undue adds something more than just hardship. It means an excessive hardship or a hardship greater than the circumstances warrant - Decided against assessee.

Summary

Issues Involved:
1. Legitimacy of the service tax demand.
2. Consideration of prima facie case for waiver of pre-deposit.
3. Evaluation of undue hardship and financial hardship for waiver of pre-deposit.

Detailed Analysis:

1. Legitimacy of the Service Tax Demand:
The petitioner was issued a show-cause notice demanding service tax of Rs. 2,89,82,752 under the category of works contract service. The Commissioner confirmed this demand along with interest and penalty. The petitioner argued that the construction was for Gujarat State Police Housing Corporation Ltd. and Surat Municipal Corporation, and as per guidelines by the Ministry of Urban Development, only Urban Local Bodies could levy and recover user charges. Thus, they claimed they were not liable to pay service tax. They also referenced a stay order in a similar case involving M/s. Khurana Engineering Ltd.

2. Consideration of Prima Facie Case for Waiver of Pre-Deposit:
The petitioner appealed to CESTAT, seeking a waiver of the pre-deposit. CESTAT partially waived the service tax demand for Rs. 53,06,046 but directed the petitioner to deposit Rs. 25 lakh as a pre-deposit. The petitioner contended that the CESTAT did not consider the prima facie merits of their case adequately. The court noted that CESTAT had considered the Order in Original and concluded that detailed arguments would be addressed during the final hearing. Thus, the court found no error in CESTAT's directive for a pre-deposit of Rs. 25 lakh against the total demand.

3. Evaluation of Undue Hardship and Financial Hardship for Waiver of Pre-Deposit:
The petitioner did not plead any financial hardship before CESTAT or the High Court. The court emphasized that under Section 35F of the Central Excise Act, 1944, undue financial hardship and safeguarding the interest of revenue are critical considerations. The principles set out by the Supreme Court in cases like Benara Valves Ltd. and Mehsana Dist. Co-op. Milk P.U. Ltd. were referenced, highlighting that undue hardship must be established by the applicant, and a mere assertion is insufficient. The court found that CESTAT had judiciously considered these principles and the prima facie case, concluding that a complete waiver was not justified.

Conclusion:
The court dismissed the petition, finding no substance in the arguments against the CESTAT's order. The petitioner was granted an extension to deposit the Rs. 25 lakh pre-deposit until 02.01.2014, with the condition that the appeal would be considered on merits if the deposit was made within the stipulated time. Failure to deposit would result in the appeal not being heard on merits.