2014 (12) TMI 84 - HC - Service Tax

Waiver of pre deposit - Banking and Financial Service and Business Auxiliary Service - Dishonour of cheque - Penalty u/s 76 & 78 - Interest u/s 75 - Tribunal asked for pre deposit of 1 crore - Financial hardship - Held that - As regards the financial hardship pleaded by the assessee, the affidavit filed before the Tribunal, really points out that the assessee had a huge loss of nearly ₹ 200 crores. In the circumstances, placing reliance on the balance sheet entries, the assessee sought for total dispensation of the pre-deposit. As far as this aspect is concerned, the Tribunal has exercised its discretion on this and considered the financial hardship. We do not find any justifiable ground to substitute our view on this. However, on the reference to Rule 5 before the Delhi High Court is concerned, which the Tribunal will consider in the dispute raised by the assessee, as against the order directing the assessee to deposit a sum of ₹ 1 crore, interest of justice would be met by directing the assessee to deposit a sum of ₹ 50 lakhs within a period of six weeks from today. We make it clear that the reference to the Delhi High Court 2012 (12) TMI 150 - DELHI HIGH COURT would not stand in the way of the Tribunal considering the case of the assessee on merits. - Decided partly in favour of assessee.

Summary

Issues:
1. Whether the charges collected for dishonored cheques by the assessee constitute service tax liability?
2. Whether the assessee is entitled to total waiver of pre-deposit based on financial hardship and legal grounds?

Analysis:

1. The issue of service tax liability arose when the Revenue alleged that the assessee had not paid service tax on charges collected for dishonored cheques. The assessee argued that these charges were penal in nature and were netted off against bank charges in their books, thus not constituting income. The Revenue demanded payment for the period in question, and the Tribunal upheld the demand, reducing the penalty if paid within 30 days. The Tribunal found that the charges formed part of taxable income and rejected the assessee's plea on limitation grounds. The Tribunal directed a pre-deposit of Rs. 1 crore, leading to the present appeal.

2. The assessee sought total waiver of pre-deposit citing financial difficulties and legal arguments. The Tribunal, however, found no prima facie case for total dispensation based on the assessee's irregularities in taking Cenvat Credit and the inapplicability of Rule 5 of the Service Tax Rules. The assessee referenced a Delhi High Court decision and financial losses to support their plea. The Tribunal, considering financial hardship, directed a pre-deposit of Rs. 1 crore. The High Court modified the order, directing a reduced pre-deposit of Rs. 50 lakhs within six weeks, acknowledging the financial hardship but not fully waiving the pre-deposit. The High Court clarified that the Delhi High Court reference would not hinder the Tribunal from considering the case on merits.

In conclusion, the High Court partly allowed the appeal, modifying the Tribunal's order for a reduced pre-deposit amount within a specified timeframe. The decision balanced the financial hardship of the assessee with the legal considerations, ensuring justice while upholding the tax liability based on the facts presented.