2016 (2) TMI 808 - HC - Service Tax

Waiver of pre-deposit - According to the Assessee the service component was between 25% and 44% of the turnover during the period in question. It is stated that in real terms the highest service tax demand worked out ₹ 26.8 lakhs whereas the CESTAT had asked the Assessee to deposit ₹ 17.5 lakhs (along with proportionate interest) which was about 65% of the highest possible service tax demand. - taxabiltiy of works contract including civil work primarily for the Airports Authority of India (AAI). - Held that - the Court modifies the impugned order of the CESTAT and directs that subject to the Appellant depositing a sum of ₹ 5 lakhs before the CESTAT - stay order modified partially.

Summary

Issues:
1. Whether the Customs Excise Service Tax Appellate Tribunal was justified in requiring a deposit as a precondition to considering the appeal under Section 35F of the Central Excise Act, 1944.
2. Whether the contracts undertaken by the Assessee for the Airports Authority of India are liable for service tax.
3. Whether the amount demanded by the CESTAT for deposit was reasonable.
4. Whether the Appellant's plea of hardship justifies a modification of the deposit amount.

Analysis:
1. The main issue in this case was whether the CESTAT was justified in demanding a deposit of Rs. 17.5 lakhs along with interest as a precondition for considering the appeal under relevant laws. The Appellant, a contractor engaged in civil work for the Airports Authority of India, argued that the service tax liability should not apply to certain contracts as they were part of national infrastructure development.

2. The Adjudicating Authority had confirmed the service tax demand on the Assessee for contracts categorized as "management, maintenance or repair service." The Assessee contended that the service tax liability was incorrectly computed by including the cost of materials supplied, resulting in a higher demand than the actual service component. The CESTAT required a deposit that was significantly higher than the highest possible service tax demand, leading to a plea of hardship by the Appellant.

3. Considering the submissions and the demand raised, the Court modified the CESTAT's order, directing the Appellant to deposit Rs. 5 lakhs before a specified date for the appeal and pending applications to be considered on merits. This modification was made based on the Appellant's plea of hardship and the actual service tax liability amount, which was lower than initially calculated.

4. The Court's decision balanced the interests of both parties by acknowledging the Appellant's financial constraints while ensuring compliance with the legal requirements for appeal consideration. By reducing the deposit amount to a more reasonable figure, the Court addressed the issue of hardship raised by the Appellant without compromising the integrity of the legal process. The appeal and pending applications were disposed of based on the modified deposit requirement, providing a fair resolution to the dispute.