2014 (9) TMI 487 - HC - Service Tax

Waiver of pre-deposit - Tribunal has directed the appellant to make pre-deposit of the basic tax component as well as 50% of the penalty under Sec. 78 and discrepancy of ₹ 12.00 lakhs between the petitioner s own assessment of tax liability and the adjudicating authority s determination. - Held that - when the appeal is admitted for hearing and the order of the assessment is under scrutiny, unless the order of assessment reaches its finality, the question of initiation of penalty proceedings does not and cannot arise. - in view of insertion of the word or the Tribunal cannot ask to make pre-deposit in both at a time. The pre-deposit of the penalty amount will be required when the order of the penalty alone is under challenge. But if there is a composite order namely assessment order, tax component and also penalty order like here, direction for pre-deposit of any portion of the penalty amount would result in injustice as well as hardship. Under this circumstance, we are of the view that the direction for pre-deposit of penalty component of the order has to be deleted and is deleted and the rest portion of the order would remain. - Decided in favor of assessee.

Summary

Issues: Impugning order of Central Excise and Service Tax Tribunal regarding pre-deposit of tax and penalty, discrepancy in tax liability assessment.

The High Court analyzed the impugned order of the Central Excise and Service Tax Tribunal, which directed the petitioner to make a pre-deposit of the basic tax component, 50% of the penalty under Sec. 78, and a discrepancy of Rs. 12.00 lakhs in tax liability assessment. The Court delved into the power of dispensation of pre-deposit under proviso to Sec. 35F of the Central Excise Act, emphasizing that penalty proceedings cannot be initiated until the assessment order attains finality. The Court highlighted that the Tribunal cannot ask for pre-deposit in both tax and penalty simultaneously. It was noted that if there is a composite order involving assessment, tax component, and penalty, directing pre-deposit of any portion of the penalty would result in injustice and hardship. Consequently, the Court held that the direction for pre-deposit of the penalty component should be deleted, while the rest of the order would stand.

Furthermore, the High Court directed the Tribunal to expedite the appeal process, ideally concluding within three weeks from the date of communication of the Court's order. The Court specified that if the writ petitioner complies with the Tribunal's order along with the Court's directive within two weeks, the Court's order will be upheld; otherwise, the Tribunal will be required to issue appropriate orders. Ultimately, the writ petition was disposed of with no costs awarded. As a result of the writ petition's disposal, all pending interim applications were also deemed disposed of.