2016 (9) TMI 1179 - HC - Service Tax

Failure to comply with condition of pre-deposit - Computation of service tax liability - includability/excludability - cost of freight charged from the clients and paid out to the transporters - Held that - prima facie, there appears to be some substance in the petitioner s assertion that the cost of freight which is charged from the clients by the petitioner and paid out to the transporters should be excluded in assessing the service tax. Therefore, to calculate the amount actually payable by the petitioner on account of service tax, the order impugned dated March 19, 2015 passed by the Commissioner of Service Tax (II) is set aside and the Commissioner is requested to look into such aspect of the matter on the basis of the papers that may be presented by the petitioner to pass a fresh order. Statutory pre-deposit - Section 35F of the Central Excise Act, 1944 - failure to pay - petitioner says that the appellate remedy is not efficacious since the petitioner has to deposit in excess of ₹ 2 crores under Section 35F of the said Act of 1944 - Held that - in the event the fresh order finds the petitioner liable to any sum in excess of ₹ 20 crores, the petitioner will be liable to pay costs assessed at ₹ 50,000/- to the department. If the final amount found to be due from the petitioner is less, such costs need not be paid. - Petition disposed of

Summary

Issues: Challenge to order-in-original for non-payment of statutory pre-deposit under Section 35F of Central Excise Act, 1944; Inclusion of freight component in service tax computation; Efficacy of appellate remedy due to high deposit amount.

Analysis:

1. Challenge to Order-in-Original: The petitioner contested the order-in-original of March 19, 2015, issued by the Customs, Excise and Service Tax Appellate Tribunal, Eastern Zonal Bench, which rejected the appeal due to the petitioner's failure to pay the statutory pre-deposit under Section 35F of the Central Excise Act, 1944. The petitioner questioned the propriety of this order, leading to the current legal challenge.

2. Inclusion of Freight Component in Service Tax: The petitioner, engaged in multi-modal transport operations, argued that the price charged to clients included a cost component comprising freight charges. The petitioner contended that the freight component should not be considered in computing the service tax payable. The petitioner faced a demand exceeding ?27 crores, with an appellate remedy requiring a deposit exceeding ?2 crores under Section 35F of the Act. The court acknowledged the merit in the petitioner's claim that the cost of freight paid to transporters should be excluded from service tax assessment, a factor overlooked during the initial assessment.

3. Judgment and Directions: The court set aside the impugned order of March 19, 2015, and directed the Commissioner of Service Tax to reexamine the matter based on the petitioner's submissions. The Commissioner was instructed to issue a fresh order within six weeks, considering the exclusion of freight charges from service tax calculation. If the revised assessment found the petitioner liable for over ?20 crores, the petitioner would bear costs of ?50,000 to the department. However, if the final amount due was lower, no such costs would apply. The case, W.P. No. 103 of 2016, was disposed of based on these directions.

4. Certified Copies and Conclusion: The court directed the provision of urgent certified website copies of the order to the parties upon application. The judgment aimed to address the petitioner's concerns regarding the inclusion of freight charges in service tax computation, ensuring a fair reassessment of the tax liability within a specified timeframe and cost implications based on the final determination.