2017 (4) TMI 1168 - HC - Service Tax

Pre-deposit - a sum in excess of ₹ 2,00,000/- has already been paid by the appellant/ Assessee; a fact, which also finds mention in the SCN - the appellant says that the order is erroneous in law, as none of the parameters, which had to be applied, while passing an order on an application seeking waiver of pre-deposit were brought into play by the Tribunal - Held that - The Tribunal, was in fact required to examine in terms of Section 35 F of the Central Excise Act, 1944, (in short the Act ) as to whether or not, in its opinion, deposit of the tax demanded or penalty levied, would cause undue hardship to the appellant, and thus, based on the result of enquiry to determine to what extent waiver of demand, if at all, had to be directed - the Tribunal failed to examine whether or not the Assessee had a prima facie case to seek abatement of tax to the extent of ₹ 61 lakhs or, whether the Assessee could be called upon to pay service tax, vis-a-vis, services rendered on behalf of the main contractor, who had, as indicated above, deposited the tax - appeal allowed - decided in favor of assessee.

Summary

Issues involved:
Appeal against order of Customs, Excise and Service Tax Appellate Tribunal for pre-deposit of duty, interest, and penalty. Questions of law framed for consideration: failure to consider Section 35-F of Central Excise Act, time-barred demand, subcontractor's liability for Service Tax.

Analysis:

1. Pre-deposit Order by Tribunal:
The appellant appealed against the order directing a pre-deposit of ?24,00,000 for duty, interest, and penalty. The High Court stayed the deposit requirement and admitted the appeal. The Tribunal's order lacked rationale on why additional payment was needed when a significant part of the demand was already deposited, failing to consider undue hardship to the appellant.

2. Background and Service Tax Demand:
The appellant, engaged in site formation services, faced a service tax demand of ?1,94,18,848 for the period 2005-2008. The demand included unpaid service tax collected from customers, interest, and penalties. Despite depositing over ?1 crore through the main contractor, the Tribunal still demanded a further ?24,00,000 pre-deposit without assessing the appellant's prima facie case or hardship.

3. Legal Considerations and Tribunal's Oversight:
The Tribunal failed to apply Section 35-F of the Central Excise Act, which requires examining undue hardship to the appellant before directing a pre-deposit. The order did not address the appellant's claim for abatement or whether the appellant, as a subcontractor, should pay service tax when the main contractor had already paid. These critical aspects were overlooked, leading to the High Court setting aside the Tribunal's order.

4. Judgment and Disposition:
The High Court ruled in favor of the appellant on questions related to the Tribunal's order, highlighting the lack of reasoning and consideration of hardship. The Court directed the Tribunal to expedite the appeal hearing without costs. The judgment emphasized the necessity for a thorough assessment of legal provisions and the appellant's circumstances before imposing pre-deposit requirements.

This detailed analysis of the legal judgment highlights the key issues, legal considerations, oversights by the Tribunal, and the High Court's decision, ensuring a comprehensive understanding of the case.