2015 (3) TMI 347 - HC - Service Tax

Waiver of pre-deposit - Undue hardship - Whether the Tribunal was right in ordering the pre-deposit for entertaining the appeal of the appellant even after admitting that the whole demand was made by the Revenue based only on the Profit and Loss Account without discharging the onus case on the Revenue that the appellant had rendered the taxable service and obtained the value thereof and that too by overlooking the very same financial statement showing the value on which the tax was demanded as a Sundry Debt, meaning amounts yet to be realized? Held that - he decision of the Supreme Court relied on by the learned counsel appearing for the assessee in the case of Benara Valves Ltd. Vs. CEX 2006 (11) TMI 6 - SUPREME COURT OF INDIA does not, in any way, help the case of the assessee. If the assessee has produced any material to substantiate the plea of undue hardship, as stated in the decision of the Supreme Court stated supra, we would have certainly considered the plea for modification of the pre-deposit. In the absence of any material, we are unable to modify the order of the Tribunal on mere ipse dixit. - Order of tribunal upheld - Decided against the assessee.

Summary

Issues Involved:
1. Legality of the pre-deposit order by the Tribunal.
2. Onus of proving service rendering and receipt of payment.
3. Applicability of Section 68 of the Finance Act and Section 6 of the Service Tax Rules.
4. Consideration of Auditor's Certificate by the Tribunal.
5. Distinction of the Supreme Court judgment in Benara Valves Ltd. Vs. CEX.

Issue-wise Detailed Analysis:

1. Legality of the Pre-deposit Order by the Tribunal:
The Tribunal directed the appellant to make a pre-deposit of Rs. 20 lakhs out of a total demand of Rs. 1.41 crores. The appellant argued that the Tribunal erred in ordering the pre-deposit despite acknowledging that the demand was based solely on the Profit and Loss Account without the Revenue discharging the onus of proving that the appellant had rendered taxable services and obtained the value thereof. The Tribunal held that the appellant failed to provide evidence to support their claim of not rendering services or receiving payment, thus justifying the pre-deposit order.

2. Onus of Proving Service Rendering and Receipt of Payment:
The appellant contended that the Tribunal incorrectly recorded that they had not placed any evidence to prove non-existence of services or non-receipt of payment. The Adjudicating Authority concluded that the profit and loss account, a statutory document, showed income from operations, thus indicating receipt of amounts for services rendered. The appellant's claim that no services were rendered and no money was received was not substantiated with evidence, leading to the confirmation of the demand by the Adjudicating Authority.

3. Applicability of Section 68 of the Finance Act and Section 6 of the Service Tax Rules:
The appellant argued that the Tribunal overlooked the provisions of Section 68 of the Finance Act read with Section 6 of the Service Tax Rules, which mandate the liability to pay service tax only upon realization of the value. The Tribunal, however, focused on the absence of evidence from the appellant to substantiate their claim of non-receipt of money, thereby upholding the demand.

4. Consideration of Auditor's Certificate by the Tribunal:
The appellant submitted an Auditor's Certificate stating that the amounts shown as sundry debtors were due to the cancellation of projects and non-receipt of money. The Tribunal accepted the certificate for prima facie view regarding non-liability under "Commercial Training or Coaching Service" but ignored it concerning the demand under "Management Consultancy Service." The Tribunal's decision was based on the appellant's failure to provide evidence from the service recipients or reverse accounting entries.

5. Distinction of the Supreme Court Judgment in Benara Valves Ltd. Vs. CEX:
The appellant relied on the Supreme Court judgment in Benara Valves Ltd. Vs. CEX, arguing that the Tribunal should have considered financial hardship and the prima facie case for waiver of pre-deposit. The Tribunal distinguished the Supreme Court judgment, stating that the direction to pre-deposit Rs. 20 lakhs out of a demand of Rs. 1.41 crores was neither full nor substantive part of the demand. The Tribunal found no merit in the appellant's plea for modification of the pre-deposit order.

Conclusion:
The High Court upheld the Tribunal's order directing the appellant to make a pre-deposit of Rs. 20 lakhs. The Court noted that the appellant failed to provide material evidence to substantiate their claims of non-receipt of money and financial hardship. The decision of the Supreme Court in Benara Valves Ltd. did not apply as the appellant did not produce evidence to support their plea of undue hardship. The appellant was granted an extension till 31.3.2015 to make the pre-deposit. Consequently, the Civil Miscellaneous Appeal was dismissed, and no costs were awarded.