2015 (4) TMI 463 - HC - Service Tax

Waiver of pre deposit - option to pay 7.5% or 10% of demand under the new substituted provisions of Section 35F - since orders were passed before the amendment was made effective - levy of service tax on the lease rent and development charges - renting of immovable property service - Held that - In Paramount Security through its Proprietor Vs. Union of India & Ors. a Division Bench of this Court considering the effect of new substituted provisions of Section 35F with effect from 06.08.2014 recorded an opinion that the effect of the amendment cannot be restricted only for those appeals which are filed after 06.08.2014. Such a restriction will be violative of Article 14 of the Constitution of India. The amended provisions thus will apply to even those orders which have been passed before the amendment was made effective. While issuing notices of the writ and the stay petition the Division Bench had directed that in the meantime the appeal shall not be dismissed by the Tribunal provided the petitioner complies with the condition of pre-deposit in terms of amending Section 35F introduced with effect from 06.08.2014 within a period of four weeks. - No good ground to take a different view at the stage of passing of an interim order. - Decided conditionally in favour of assessee.

Summary

Issues:
1. Pre-deposit requirement under Section 35F for filing Central Excise Appeals.
2. Leviability of service tax on lease rent and development charges.
3. Applicability of amended provisions of Section 35F with effect from 06.08.2014.
4. Effect of the amendment on appeals filed before 06.08.2014.

Analysis:

1. Pre-deposit Requirement under Section 35F:
In the Central Excise Appeals filed by the Rajasthan State Industrial Development & Investment Corporation Limited, the Customs, Excise & Service Tax Appellate Tribunal directed a pre-deposit of 50% of the adjudicated service tax liability along with proportionate interest. The issue revolved around the leviability of service tax on lease rent and development charges under the category of renting of immovable property service. The Tribunal found that the appellants failed to establish a strong prima facie case and hence, the pre-deposit was ordered.

2. Leviability of Service Tax:
The Tribunal examined the lease agreements and determined that the appellants, who acquired land on a 99-year lease, could not claim to have sold the plots to various individuals. Consequently, the Tribunal classified the transactions under the service classifiable under Section 65(105)(zzzz) of the Finance Act, 1994. This classification led to the direction for a 50% pre-deposit based on the adjudicated service tax liability.

3. Applicability of Amended Section 35F (06.08.2014):
The appellant's counsel highlighted an amendment to Section 35F effective from 06.08.2014, requiring depositing 7.5% or 10% of the duty for first and subsequent appeals respectively. The amended provisions aimed at regulating the pre-deposit amounts for filing appeals under different scenarios, ensuring compliance with the statutory requirements.

4. Effect of Amendment on Appeals Filed Before 06.08.2014:
In a related case, a Division Bench of the High Court opined that the amended provisions of Section 35F should not be limited to appeals filed after 06.08.2014. Applying the principles of Article 14 of the Constitution of India, the amended provisions were deemed applicable even to orders passed before the effective date of the amendment. Consequently, the Court directed compliance with the amended pre-deposit conditions for pending appeals, emphasizing uniform application of the law.

In conclusion, the High Court upheld the pre-deposit requirement under Section 35F for Central Excise Appeals, emphasizing compliance with the amended provisions introduced in 2014. The judgment clarified the application of the law to ensure consistency and fairness in dealing with appeals involving duty and penalty disputes.