2016 (11) TMI 1109 - AT - Service Tax

Imposition of interest and penalty - Section 35F of the Act - pre-deposit - Held that - where the duty and penalty are under dispute 7.5% of only duty amount has to be deposited in order to file the appeal before this Tribunal. In case only penalty is under dispute then 7.5% of the penalty amount is required to be deposited, in the present case there is a dispute of interest and penalty. As per the plain reading of the Section 35F of the Act, in the present case also only 10% of the penalty is required to be deposited for filing an appeal which the applicant have already deposited. As regards the contention of the ld. AR that 7.5% of interest should also be deposited, I completely disagree with this contention for the reason that Section 35F of the Act, does not envisage for deposit of 7.5% or as the case may be 10% of interest amount. Therefore, in my considered view the applicant is not required to deposit any amount towards interest. The applicant have deposited 10% of the penalty amount therefore, the appeal is liable to be admitted. In this situation, there is no need of filing any stay application. The appeal is admitted. The stay application is dismissed as infructuous.

Summary

Issues Involved:
Stay application for interest demanded in the adjudication order; Compliance with Section 35F of the Act for appeal admission; Requirement of deposit for duty, penalty, and interest disputed in the case.

Analysis:
The applicant filed a stay application concerning the interest demanded in the adjudication order, which confirmed the Cenvat credit demand and ordered recovery of interest and penalty. The applicant reversed the Cenvat credit before the show cause notice issuance, and the same was appropriated. The appeal to the Tribunal contested only the interest and a penalty of ?5,000. The chartered accountant for the applicant argued for the appeal's admission under Section 35F, stating that the Cenvat credit and part of the penalty were paid. The respondent argued that 7.5% of the interest amount should be deposited as per Section 35F.

The Tribunal considered the submissions and Section 35F, which requires depositing duty or penalty pending appeal. The provision specifies that in cases of disputed duty and penalty, 7.5% of the duty amount needs to be deposited. In cases of disputed penalty only, 7.5% of the penalty amount is required. As the present case involved a dispute over interest and penalty, the Tribunal clarified that only 10% of the penalty amount needed to be deposited for appeal, which the applicant had already paid. The Tribunal disagreed with the argument to deposit 7.5% of the interest amount, as Section 35F does not mandate such a deposit. Consequently, the Tribunal ruled that no amount needed to be deposited for interest, and since 10% of the penalty was already paid, the appeal was admitted without the need for a stay application, which was dismissed as infructuous. The judgment was pronounced on 27-4-2016.