2015 (9) TMI 588 - HC - Service Tax

Waiver of pre deposit - Reimbursement of railway freight - Business Auxiliary Services and Goods Transport Agency Services - Held that - The taxable service and rendered in taxable territory, which is provided or to be provided, that is brought within the purview of this enactment. The Tribunal ought to have indicated at least prima facie as to how in this case the Railway Freight and which is charged by Railway for transportation of coal from the mines to the destination, namely Karnataka Power Corporation Limited could be brought to tax even if the expenses by way of freight and incurred by the Appellant on behalf of the Karnataka Power Corporation Limited are reimbursed by the said Corporation. The taxable service is prima facie of supply of coal and the mode chosen for supply is by Railway - Tribunal should have indicated as to how this demand by the adjudicating authority in the order impugned before it is prima facie sustainable, particularly when the argument of the Appellant was that the demand of ₹ 18,45,17,212/- is confirmed after including the freight paid to the Railway in respect of transportation of coal. Unless and until the Tribunal could have sustained this part in the adjudication order with reference to a specific legal provision, it was not justified in imposing a condition of 25% of the above sum to be deposited. There is a prima facie case and arguable point made out by the Appellant/Applicant to this extent. It is open to the Tribunal to hold that even if the argument has some substance and prima facie, yet, this is not a case for complete waiver of the condition of pre-deposit. However, while granting partial waiver in the facts and circumstances, the Tribunal was obliged to take into account and consideration the plea of the Appellant/Applicant - this part of the order passed by the Tribunal cannot be sustained. It will have to be quashed and set aside. - Decided partly in favour of assessee.

Summary

Issues:
Interim order on application for stay and waiver of pre-deposit condition in a Service Tax Appeal.

Analysis:
The judgment concerns an Appeal challenging an interim order passed by the Tribunal regarding a Service Tax demand of Rs. 27,17,23,700/- along with interest and penalty. The Appeal was made on the grounds that the Appellant feared the Revenue would insist on depositing the amount before hearing the Appeal on merits. The Court clarified that their order on the interim application should not be construed as a final opinion on the Appeal's merits. The adjudicating authority confirmed various demands, leading to the Appeal raising substantial questions of law, specifically regarding the deposit of 25% of the amount relating to railway freight and the classification of the Appellant's activity under taxable services.

The Court analyzed the Tribunal's order and the definition of taxable services under the Finance Act. They noted that the Tribunal failed to explain how the Railway Freight, reimbursed by the Karnataka Power Corporation Limited, could be taxed as a service provided by the Appellant. The Court found a prima facie case in the Appellant's argument that the reimbursed freight should not be considered as part of the Service Tax. They concluded that the Tribunal's decision to impose a 25% deposit condition was not justified without specific legal provisions supporting it. The Court highlighted the lack of consideration for the agreement terms between the Appellant and the Corporation in the Tribunal's order.

Consequently, the Court partially allowed the Appeal, maintaining a direction to deposit a specific amount while quashing the requirement to deposit 25% of the railway freight sum. The Appellant was directed to pay the specified amount within six weeks. The Court emphasized that while some deposit might be necessary, the Tribunal failed to adequately consider the Appellant's arguments and the agreement terms, leading to the quashing of the deposit condition.