2013 (9) TMI 668 - HC - Service Tax

Noncompliance of the Order of Pre-deposit Held that - The appellant could not comply with the order passed by the Commissioner Appeals as well as the order passed by the Tribunal of predeposit due to financial crunch - The financial difficulty/financial position of the appellant was evident from the balance sheet of the appellant, which was placed on the record - It appeared that in the meantime, a substantial amount towards tax liability was already recovered by the Department - The appellant was ready and willing to deposit balance amount towards tax liability to show its bona fides - The appellant was also ready and willing to pay reasonable cost for remanding the matter to the first appellate authority - Further deposit as balance tax liability and deposit towards cost if the impugned orders were quashed and the matter was remanded to the appellate authority to consider the appeal of the appellant on merits, it will meet with the ends of justice. The amount already recovered by the Department from the appellant be treated as recovery of service tax from the appellant, payable under the order in original - On deposit of the aforesaid amount, the appellant to submit an appropriate application before the original authority to defreeze the bank accounts and the appropriate authority was directed to defreeze the bank accounts which were already ordered to be freezed.

Summary

Issues:
1. Challenge to impugned judgment and order dated 2nd April 2013 passed by CESTAT and Order in Appeal No. 184/2009 passed by the Commissioner [Appeals].
2. Noncompliance with the order of predeposit leading to dismissal of the appeal.
3. Financial difficulty faced by the appellant in complying with the predeposit orders.
4. Request for remand of the matter to the first appellate authority for consideration on merits.

Analysis:
1. The appellant challenged the judgment and order passed by CESTAT and the Commissioner [Appeals] for dismissing the appeal due to noncompliance with the order of predeposit. The appellant had been directed to deposit the entire amount of service tax and interest under section 35F of the Central Excise Act, 1944, but failed to do so within the stipulated time granted by the authorities.

2. The financial condition of the appellant was a crucial factor in the noncompliance with the predeposit orders. The appellant submitted various applications for modification and extension of time for depositing the required amounts, citing financial constraints. Despite efforts to comply, the appellant could not fulfill the predeposit conditions, leading to the dismissal of the appeal by the Commissioner [Appeals] and subsequent challenges before CESTAT.

3. The appellant, through its advocate, highlighted the genuine financial difficulties faced, as evidenced by the balance sheet, which prevented compliance with the predeposit orders. The appellant expressed willingness to deposit the balance amount of service tax liability and pay reasonable costs to demonstrate good faith. The respondent argued that sufficient time had been granted for compliance and emphasized the need for the appellant to fulfill its tax liability obligations.

4. Considering the circumstances, the High Court directed the appellant to deposit the balance tax liability and costs within a specified period to quash the impugned orders and remand the matter to the first appellate authority for a merit-based consideration. The Court acknowledged the financial challenges faced by the appellant and aimed to balance the interests of both parties while ensuring compliance with tax obligations.

In conclusion, the judgment addressed the issues of noncompliance with predeposit orders due to financial constraints, balancing the interests of the appellant and tax obligations, and the need for a merit-based consideration of the appeal by the first appellate authority. The Court's decision aimed to achieve justice by allowing the appellant an opportunity to present its case while ensuring compliance with tax liabilities.