2008 (10) TMI 48 - HC - Service Tax

Section 35F, Proviso-1 makes it very clear that the Commissioner (Appeals) or the Appellate Tribunal before passing any interim order, shall consider whether the direction for deposit as pre-deposit condition would cause undue hardship to the person against whom such direction is issued. Such a finding is not available in the impugned order of the respondent, nor did the respondent decide the prima facie issue impugned order is modified

Summary

Issues:
Challenge to the order of the Commissioner of Central Excise (Appeals) regarding pre-deposit for admitting an appeal against the original authority's decision.

Analysis:

Issue 1: Pre-deposit Requirement
The writ petition challenges the order of the Commissioner of Central Excise (Appeals) directing the petitioner to make a pre-deposit for admitting the appeal against the original authority's decision. The appellate authority invoked Proviso-1 to section 35F of the Central Excise Act, 1944, requiring the petitioner to deposit the entire service tax amount along with penalties imposed under various sections of the Finance Act, 1994. The petitioner contended that the appellate authority did not consider the financial hardship aspect adequately. The respondent argued that without a plea of undue hardship, the authority was not required to consider it. The court found that the appellate authority did not fully appreciate the issue involved and failed to assess the undue hardship aspect as mandated by the law.

Issue 2: Prima Facie Assessment
The court noted that the appellate authority's decision was based solely on the construction of Dykes being deemed as a construction service liable for service tax. However, the authority did not comprehensively decide on other construction works. The court emphasized that a holistic consideration of the entire case is necessary to ascertain undue hardship. The court highlighted the requirement under Proviso-1 of section 35F to consider whether the deposit would cause undue hardship, which was not adequately addressed in the impugned order.

Issue 3: Final Adjudication
While acknowledging the correctness of deeming Dykes construction as a service attracting tax, the court directed the appellate authority to dispose of the appeal promptly with reasonable conditions. The court emphasized the need for a thorough examination of all contract works for service tax liability during the final adjudication to ensure justice and safeguard revenue interests. The court modified the impugned order, requiring the petitioner to deposit a specified amount within a set timeframe for the appeal to proceed, with provisions for non-compliance consequences.

In conclusion, the judgment delves into the procedural and substantive aspects of the pre-deposit requirement for admitting an appeal in a tax dispute, emphasizing the need for a comprehensive assessment of undue hardship and a thorough consideration of all relevant factors during the appellate process to uphold justice and revenue protection.