2014 (12) TMI 83 - HC - Service Tax

Waiver of pre-deposit - disallowance of Cenvat credit - various input services for construction of the airport and the passenger terminal building - Held that - Contention of the petitioner that the demand made by the 2nd respondent by the Order-in-Original, dated 29-1-2010 is barred under Section 11A of the Act is the question which requires consideration in the main appeal pending before the Appellate Tribunal and therefore no finding as such can be recorded at this stage. So far as the waiver of pre-deposit as provided under the first proviso to Section 35F of the Act is concerned, it is the discretion that has to be exercised by the Appellate Tribunal subject to such conditions as it may deem fit to impose, so as to safeguard the interests of the revenue. Satisfaction of the Appellate Tribunal that the deposit of duty demanded would cause undue hardship to the appellant is the condition precedent for exercising the discretion so conferred under the first proviso to Section 35F of the Act. Demand stands reduced to ₹ 24,40,75,164/- after appropriating and adjusting the amounts reversed by the petitioner, we consider it appropriate to modify the condition imposed in the impugned order, dated 8-7-2013 and direct the petitioner to deposit 50% of demand - Partial stay granted.

Summary

Issues:
- Disposal of Writ Petition against CESTAT Stay Order
- Allegations of irregular CENVAT credit availed
- Appeal for waiver of pre-deposit and stay of proceedings
- Condition imposed for remittance of specific amount
- Contention regarding appropriation of reversed amounts
- Bar under Section 11A of the Central Excise Act, 1944
- Imposition of conditions for safeguarding revenue interests
- Exercise of discretion by the Appellate Tribunal
- Modification of the condition imposed in the impugned order

Disposal of Writ Petition against CESTAT Stay Order:
The High Court disposed of the Writ Petition filed by GMR Hyderabad International Airport Ltd. against the CESTAT Stay Order. The petitioner was the holder of Service Tax Registration under the Finance Act, 1994, for various taxable services, including Airport Services. The respondent alleged irregular availing of CENVAT credit of excise duty and demanded recovery along with interest and penalty. The petitioner appealed before CESTAT seeking waiver of pre-deposit and stay of proceedings, which was partially granted on condition of remitting a specific sum within a specified time.

Allegations of irregular CENVAT credit availed:
The respondent issued a show cause notice alleging irregular availing of CENVAT credit of excise duty by the petitioner. After due process, the demand for recovery of ineligible CENVAT credit was confirmed, along with the imposition of a penalty. The petitioner appealed against this order, seeking waiver of pre-deposit and stay of further proceedings, which was partially granted by CESTAT.

Condition imposed for remittance of specific amount:
CESTAT granted waiver of pre-deposit and stay of proceedings on the condition that the petitioner remits a specific amount within a set timeframe. The condition was based on the analysis that the petitioner had an arguable case concerning certain input services related to the construction of the airport. Failure to comply with the remittance condition would result in dissolution of the waiver and stay granted.

Contention regarding appropriation of reversed amounts:
The petitioner contended that the amounts reversed by them were not appropriated while determining the demand for recovery. Upon clarification by the respondent, it was confirmed that the reversed amounts needed to be adjusted, leading to a reduction in the demand figure.

Bar under Section 11A of the Central Excise Act, 1944:
The petitioner argued that the claim for a specific period was barred under Section 11A of the Central Excise Act, 1944, and this aspect was not considered by CESTAT while passing the impugned order. The High Court acknowledged this contention as a significant question requiring consideration in the main appeal before the Appellate Tribunal.

Imposition of conditions for safeguarding revenue interests:
The High Court deliberated on the imposition of conditions by CESTAT to safeguard revenue interests while granting waiver of pre-deposit. It emphasized that the discretion to impose conditions rested with the Appellate Tribunal, subject to ensuring that the deposit of duty demanded would not cause undue hardship to the appellant.

Exercise of discretion by the Appellate Tribunal:
The High Court reviewed the exercise of discretion by the Appellate Tribunal in granting waiver of pre-deposit based on a holistic view of the case. It found that the Tribunal had appropriately considered the facts and circumstances, leading to the decision to grant waiver subject to specific conditions, which, in the Court's opinion, did not warrant interference.

Modification of the condition imposed in the impugned order:
Considering the reduction in the demand amount after adjusting the reversed sums, the High Court modified the condition imposed by CESTAT and directed the petitioner to deposit a percentage of the reduced demand within a specified timeframe. Failure to comply would result in the revival of the impugned order.

In conclusion, the Writ Petition was disposed of with modifications to the remittance condition, emphasizing compliance within the specified timeframe to avoid the revival of the original order.