2015 (3) TMI 482 - HC - Service Tax

Waiver of pre deposit - Works contract service - Held that - CESTAT, after examining the nature of the activity done by the appellant, exercised discretion and directed pre-deposit of ₹ 40,00,000, which is less than 40 x, of the total demand. Thus, the CESTA f has considered the three parameters required to be considered viz., prima facie case, hardship and interest of the Revenue and passed the order. Thus, in the absence of any error in the discretion exercised by the CESTAT, we find no ground to interfere with such order. The time for compliance of the direction of the CESTAT viz., the payment, of pre-deposit of ₹ 40,00,000/- is extended by six weeks - Decided partly in favour of assessee.

Summary

Issues:
1. Applicability of Service Tax on construction activities.
2. Nature of the contract - works contract or service.
3. Demand for Service Tax short-paid.
4. Appeal for waiver of pre-deposit before CESTAT.

Analysis:
1. The appellant, engaged in construction activities, was found to have not paid Service Tax on three projects executed between October 2004 and September 2009. A show cause notice was issued, resulting in a demand for Service Tax of Rs. 1,15,73,087 along with interest and penalty. The appellant contended before CESTAT that the nature of the contract was a works contract, subject to Service Tax from June 1, 2007, under Section 65(105)(zzzza) of the Finance Act, 1994, and challenged the sustainability of the demand.

2. The Revenue argued that the demand was based on ledger entries and bank statements, indicating that the construction activity involved transferring undivided shares of land to buyers, taking consideration for construction, and handing over possession post-completion. The Revenue asserted that the appellant provided services to clients by constructing on land already registered in their names, citing a previous Tribunal decision supporting the levy of Service Tax in similar cases.

3. CESTAT, after considering both sides, directed the appellant to pre-deposit Rs. 40,00,000 against the demand of Rs. 1,15,73,087. The appellant appealed this order, leading to the present Civil Miscellaneous Appeal. The High Court noted a typographical error in the CESTAT order regarding the applicability of Service Tax, clarifying that the Tribunal's decision in a previous case favored levying Service Tax on such activities.

4. The High Court upheld CESTAT's order, emphasizing that the Tribunal had properly considered the nature of the appellant's activity, exercised discretion in determining the pre-deposit amount, and balanced the factors of prima facie case, hardship, and revenue interest. Finding no error in CESTAT's decision, the High Court extended the time for compliance with the pre-deposit directive by six weeks, ultimately disposing of the Civil Miscellaneous Appeal without costs.