2014 (7) TMI 586 - HC - Service Tax

Waiver of pre deposit - Online Information and Database Access or Retrieval Service - Tribunal held that there was no prima facie case in favour of assessee hence demand ₹ 147 crore out of total demand of ₹ 187 crores - while ordering pre-deposit tribunal distinguished the decision in the case of United Telecom (2008 (8) TMI 191 - CESTAT, BANGALORE) wherein tribunal observed that ownership of data is relevant - Held that - The Tribunal found that out of total service tax demand of ₹ 187 crores an amount of ₹ 147 crores is within the normal period of limitation. However, we are of the opinion that the Tribunal having noted the financial hardship should have considered the claim of the Appellants that they are suffering huge losses. The Appellants pointed out that for the quarter ending on 30.09.2013 the net loss incurred is ₹ 1246.39 crores. However, the Tribunal was informed that the current assets show an amount of ₹ 4438.85 crores as on 30.09.2013. In view of huge assets available the Appellants should be put to terms. The Tribunal s direction to deposit a sum of ₹ 147 crores out of total demand of ₹ 187 crores and when the point was imminently arguable, visits the Appellants with serious consequences. - Decision in the case of Sri Srinivasa Theatre and others v/s Government of Tamil Nadu and others 1992 (3) TMI 308 - SUPREME COURT OF INDIA followed. Tribunal could have properly balanced the rights and equities that to a limited extent a case for interference in the impugned order and direction is made out. Though not treating this order as a precedent, but confining and restricting it to the facts and circumstances of the Appellant s case that we entertain this Appeal. We entertain it only on a limited point that when the Tribunal is exercising its discretion it ought to be present its mind that if there are conflicting opinions and rendered by its different Benches, then, the Assessee should not be visited with such consequences as would amount to denying the right of appeal or completely prejudicing the case on merits. Though the provision of law in this case makes no reference to ownership, but there was an order passed making it a relevant test, then, such condition as is imposed in the present case cannot be said to be justified - order modified and Tribunal is directed to this extent that in the event the Appellants furnish a bank guarantee of a nationalized bank in the sum of ₹ 50 crores within a period of Eight weeks from the date of receipt of a copy of this order, there will be waiver of condition of predeposit and stay of recovery pending the hearing and final disposal of the Appeal before the Tribunal. It would be open for the Appellant to deposit part of the amount in cash and the balance could be secured by a bank guarantee as above - stay order modified - Decided partly favour of assessee.

Summary

Issues Involved:
1. Justification of predeposit condition imposed by CESTAT.
2. Financial hardship of the appellant.
3. Consistency in interim orders.
4. Classification of services under "Online Information and Database Access or Retrieval Service."
5. Relevance of ownership of data for service tax liability.
6. Tribunal's discretion in granting interim relief.

Detailed Analysis:

1. Justification of Predeposit Condition Imposed by CESTAT:
The appellant challenged the CESTAT's order directing a predeposit of Rs. 147 crores for a stay against recovery. The appellant argued that there was a strong prima facie case, making the predeposit condition unjustified. The CESTAT had previously held that ownership of data was essential for classification under the taxing entry in question, but in this case, it concluded that the point was still open, thus requiring reconsideration.

2. Financial Hardship of the Appellant:
The appellant submitted evidence of financial hardship, showing significant debt and losses. The CESTAT, however, focused on the current assets, ignoring liabilities. The appellant argued that the financial condition warranted a complete waiver of the predeposit condition.

3. Consistency in Interim Orders:
The appellant cited several decisions where similar facts led to different interim orders, arguing for consistency. The appellant emphasized that identical facts should not lead to different interim orders, reinforcing the rule of consistency.

4. Classification of Services under "Online Information and Database Access or Retrieval Service":
The appellant contended that the services provided by CRS companies did not fall under the taxing entry of "Online Information and Database Access or Retrieval Service." The appellant detailed the arrangement with CRS companies, explaining that the information was hosted on servers outside India and accessed by travel agents.

5. Relevance of Ownership of Data for Service Tax Liability:
The appellant relied on CESTAT judgments, such as United Telecom Ltd. v. Commissioner of Service Tax, Bangalore, which held that ownership of data was relevant for classification under the taxing entry. The Tribunal distinguished the facts of the appellant's case from United Telecom, concluding that the appellant's case involved providing access to data, not ownership.

6. Tribunal's Discretion in Granting Interim Relief:
The Tribunal's discretion in granting interim relief was scrutinized. The Tribunal found that the facts of the appellant's case were distinguishable from other cases cited. The Tribunal's prima facie conclusion was that the appellant had not established a strong case for a complete waiver of predeposit. The Tribunal's approach was supported by the Supreme Court's judgment in Empire Industries Ltd. v. Union of India, which emphasized the need for a balanced approach in fiscal matters.

Conclusion:
The High Court modified the CESTAT's order, directing the appellant to furnish a bank guarantee of Rs. 50 crores within eight weeks for a waiver of predeposit and stay of recovery. The Tribunal was instructed to hear the appeal on its merits without being influenced by its interim observations. The appeal was allowed with no order as to costs.