2014 (1) TMI 1204 - HC - Service Tax

Pre deposit of duty - intermediary services - Appellant was providing services to connect the user of service with the provider to fulfil the object of each other consuming the service provided - the appellant was remunerated satisfying the need of the destination based consumption tax - Tribunal order deposit in five equal monthly installments - Held that - appellant had developed certain data which was utilised with the telecom companies on revenue sharing basis, i.e., as a joint venture and it was incorrect to hold that the appellant had rendered service to the telecom companies. It is submitted that the ultimate consumer, i.e., the mobile phone users had availed the services and had paid service tax and second or double taxation for the same service should not be permitted and was unacceptable. - Stay granted on this issue. Regarding demand of service tax on Software or development and maintenance of websites service - Held that - Software or development and maintenance of websites service were exempt from service tax in terms of Circular No. 70 dated 17th December, 2003 till 1st June, 2007. It is pointed out that the demand in question relates to the period 2004-05 to 31st March, 2006 - appellant themselves had started paying service tax on the aforesaid service, with effect from 1st April, 2006 under the head online information The appellant should pay and deposit ₹ 1 crore as a pre-condition for hearing of the appeal. - Amount to be deposited in two installments. - Decided against the assessee.

Summary

Issues: Whether the Customs, Excise and Service Tax Appellate Tribunal was justified in directing the appellant to deposit Rs.1.5 crores as a pre-condition of hearing the appeal on merits?

Analysis:
1. The appellant, a company providing internet and mobile digital data services, was directed to pay significant amounts towards service tax, penalty, and interest by an order-in-original.
2. The appellant appealed the order and was directed to deposit Rs.1.5 crores in five monthly equal instalments by the Tribunal as a pre-condition for hearing the appeal on merits.
3. The appellant argued financial hardship and submitted a revised balance sheet showing positive income for the year ending 31st March, 2013, with bank balances exceeding Rs.5 crores.
4. The Tribunal's demand was on two accounts: "Business Auxiliary Service" and "Management, Maintenance, and Repair Services" (MMR Services).
5. Regarding the first account, the appellant contended that double taxation should not be permitted as mobile service subscribers had already paid service tax, and the matter required detailed examination by the Tribunal.
6. On the second issue, the appellant claimed exemption from service tax for website development services until June 2007, while the respondent relied on Circular No.81/2/2005-ST and a Supreme Court judgment.
7. Considering the facts and legal provisions, the High Court directed the appellant to deposit Rs.1 crore in two equal instalments as a pre-condition for hearing the appeal, taking into account relevant circulars and statutory definitions.
8. The High Court disposed of the appeal, answering the substantial question of law, with no order as to costs, clarifying that the opinion expressed would not bind the Tribunal, which would examine the contentions on merits independently.

By summarizing the judgment, it is evident that the High Court analyzed the issues of financial hardship, service tax demands, exemptions, and pre-deposit requirements thoroughly, providing a reasoned decision based on legal principles and factual submissions presented during the proceedings.