2014 (8) TMI 101 - HC - Service Tax

Waiver of pre-deposit - Commercial Training and Coaching Services - training provided in writing codes using languages like UNIX or Oracle or Java - appellant directed to make a pre-deposit of ₹ 35,00,000/- by the tribunal - Held that - It is true 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 legs to stand on, 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 manner unmindful of the consequences flowing from the order requiring the assessee to deposit full or part of the demand. Taking note of the fact that the appellant had already paid a sum of ₹ 7,95,612/- towards tax, the appellant shall make a pre-deposit of ₹ 15,00,000/- (Rupees Fifteen Lakhs only) - the order of the Tribunal dated 14.5.2013 dismissing the appeal for non-compliance of the stay order set aside and the appeal restored to the file of the Tribunal - Decided partly in favor of assessee.

Summary

Issues Involved:

1. Justification of the Tribunal's order for pre-deposit of Rs. 35,00,000/-.
2. Eligibility for exemption from service tax under Notification No. 24/2004-ST.
3. Financial hardship and undue hardship in making the pre-deposit.

Detailed Analysis:

1. Justification of the Tribunal's order for pre-deposit of Rs. 35,00,000/-:

The appellant challenged the Tribunal's directive to make a pre-deposit of Rs. 35,00,000/- for entertaining the appeal in terms of Section 35-F of the Central Excise Act, 1944. The Tribunal had initially required this pre-deposit, stating that the training provided by the appellant was more related to the usage of software rather than the contents of the software, necessitating a detailed examination in the final hearing. The High Court, however, found that the Tribunal's reasoning required reconsideration, especially given the appellant's financial hardship and the prima facie case presented.

2. Eligibility for exemption from service tax under Notification No. 24/2004-ST:

The appellant, engaged in post-production services and offering a diploma course in Digital and Animation Effects, claimed exemption from service tax under Notification No. 24/2004-ST. The Department argued that the appellant's courses were akin to computer training, thus not eligible for the exemption post the amendment dated 16.06.2005. The High Court noted that the appellant's courses aimed to impart skills enabling trainees to seek employment or self-employment directly after training, which prima facie aligned with the definition of a vocational training institute under the original notification. This interpretation favored the appellant, suggesting that the Tribunal's detailed examination premise supported the appellant's claim for exemption.

3. Financial hardship and undue hardship in making the pre-deposit:

The appellant argued financial hardship, having already paid Rs. 7,95,612/- against the service tax demand of Rs. 47,91,191/-. The High Court referenced the Supreme Court's decision in Benara Valves Ltd. v. CCE, emphasizing that undue hardship and safeguarding the interests of the Revenue must be balanced. The Court found merit in the appellant's plea, recognizing the financial difficulty and the substantial payment already made. Consequently, the High Court modified the Tribunal's order, reducing the pre-deposit requirement to Rs. 15,00,000/-, to be paid within eight weeks, with the balance amount's collection stayed during the appeal's pendency.

Conclusion:

The High Court concluded that the Tribunal was not justified in its original pre-deposit order. It modified the order, reducing the pre-deposit to Rs. 15,00,000/-, and restored the appeal to the Tribunal's file, acknowledging the appellant's financial hardship and prima facie case. The appeal was ordered accordingly, with no costs, and the related miscellaneous petition was closed.