2015 (9) TMI 935 - HC - Service Tax

Waiver of pre deposit - Imposition of interest and penalty - 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 for the pre-deposit of the penalty also. According to us, the pre-deposit of the penalty amount would be required only when the order of the penalty alone is under challenge. But when there is composite order namely assessment order of the tax component along with interest and also penalty as in the present case, direction for pre-deposit of any portion of the penalty amount would result in injustice as well as hardship. Under these circumstances, we are of the view that the direction for pre-deposit of the penalty component of the order has to be deleted and the same is accordingly deleted and the rest of the order would remain. - Decided in favour of assessee.

Summary

Issues: Impugning the order of the Customs, Excise and Service Tax Appellate Tribunal regarding pre-deposit of liability; Interpretation of proviso to Section 35F of the Central Excise Act, 1944 regarding dispensation of pre-deposit; Clarification on pre-deposit of penalty amount when assessment order includes tax, interest, and penalty components; Directions for expeditious appeal hearing and deposit of tax and interest components.

Analysis:

The judgment involves an appeal challenging the Customs, Excise and Service Tax Appellate Tribunal's order directing pre-deposit of liability assessed within a specified timeframe. The Court considered the proviso to Section 35F of the Central Excise Act, 1944, which allows dispensation of pre-deposit if it would cause undue hardship. The Court emphasized that penalty pre-deposit is not required when the assessment order is under scrutiny, stating that the Tribunal cannot ask for pre-deposit of the penalty amount when there is a composite order involving tax, interest, and penalty components.

The Court held that directing pre-deposit of any portion of the penalty amount in a composite order would result in injustice and hardship. Therefore, the Court deleted the direction for pre-deposit of the penalty component while upholding the rest of the order. Additionally, the Court directed the Tribunal to expedite the appeal process, ideally within eight weeks from the date of pre-deposit. An extension of four weeks was granted to deposit the tax and interest components, with the consequence of appropriate orders by the Tribunal in case of non-compliance within the stipulated time.

In conclusion, the appeals were disposed of, and any pending miscellaneous applications were closed without any order as to costs. The judgment clarified the interpretation of the proviso to Section 35F, ensuring fairness and avoiding undue hardship in pre-deposit requirements related to tax, interest, and penalty components in assessment orders.