2014 (8) TMI 100 - HC - Service Tax

Waiver of pre-deposit - levy of service tax on sub-contractor - main contractor themselves admitted that they have already paid the service tax - appellant directed to to deposit a sum of ₹ 30 Lakhs by the tribunal - Held that - This Court, on a consideration of the above plea of financial hardship, deems it fit and proper to modify the order of the Tribunal so as to enable the appellant in this case to pursue the appeal without suffering on account of the liability of pre-depositing a huge amount. The substantial plea made by the appellant is that the main contractor has discharged the service tax liability and, therefore, the said liability need not be fastened on the appellant. But, this Court is of the view that the said issue that has to be considered by the Tribunal only in the appeal. However, the payment of service tax liability by the main contractor, which is a prima facie case, put forth by the appellant, enures to the benefit of the appellant. The order of the Tribunal dated 24.9.2013 is modified to the effect that the appellant shall make a pre-deposit of ₹ 15,00,000/ (Rupees Fifteen Lakhs only) - partly decided in favor of assessee.

Issues involved:
1. Whether the Tribunal was right in directing a pre-deposit of Rs. 30 Lakhs for hearing the appeal when the appellant is a sub-contractor and not liable to pay service tax directly.
2. Whether the Tribunal erred in directing pre-deposit when the main contractor admitted paying the service tax liability.
3. Whether the Tribunal considered the sub-contractor agreement stating the main contractor's liability to pay service tax.
4. Whether the Tribunal's order imposing pre-deposit violates the appellant's right of appeal and renders the statutory remedy illusory.
5. Whether the Tribunal failed to consider 'undue hardship' while ordering pre-deposit under Sec.35F of the Central Excise Act.
6. Whether the Tribunal was correct in ordering pre-deposit for a service not covered under the taxable service definition.
7. Whether the Tribunal's decision to order pre-deposit was appropriate when the issue was revenue neutral due to the service recipient's entitlement to Cenvat Credit.

Detailed Analysis:

1. The appellant, a sub-contractor, challenged an order to deposit Rs. 30 Lakhs pending an appeal against a service tax demand. The Tribunal believed the appellant was liable for tax despite the main contractor's payment. The appellant argued the main contractor discharged the tax liability, but the department disagreed, resulting in the demand and penalties.

2. The Tribunal's order for pre-deposit was based on the appellant's liability determination. The appellant cited financial difficulties, claiming undue hardship. The Court referred to Section 35-F, emphasizing undue hardship and safeguarding revenue interests. The Tribunal's discretion in imposing conditions was highlighted.

3. The Court acknowledged the Tribunal's discretion but modified the pre-deposit amount to Rs. 15 Lakhs, considering the appellant's financial hardship and the main contractor's tax payment. The Court noted that the issue of tax liability rests with the Tribunal for determination during the appeal.

4. The Court concluded that the Tribunal's initial pre-deposit order was not justified and modified it to Rs. 15 Lakhs. The balance amount, interest, and penalty were waived pending the appeal. The Court partially allowed the appeal, emphasizing the appellant's right to appeal without undue financial burden.

This detailed analysis covers the issues raised in the legal judgment, highlighting the arguments, considerations, and final decision made by the Court regarding the pre-deposit order and the appellant's tax liability dispute.

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