2020 (9) TMI 988 - HC - Service Tax

Maintainability of appeal - requirement of mandatory pre-deposit - prayer for revival of appeal accepting 7.5% pre-deposit and dispose of the appeal on merits - banking and other financial services - HELD THAT - The petitioner is a Co-operative Society. The legal argument advanced by the petitioner is that their activities are arrangements between the members of the Society and it would not amount to 'banking and other financial services' as defined in the Finance Act, 1994. This is a question of law. By Ext.P4 order by which the appeal was rejected for non compliance of pre-deposit requirements, the petitioner has lost opportunity to urge the aforesaid legal contention. In the circumstances, this Court is of the opinion that the petitioner shall be permitted to argue the appeal on merits. The writ petition is disposed of permitting the petitioner to make the requisite pre-deposit on Ext.P3 appeal within a period of ten days from the date of receipt of a copy of this judgment. If the petitioner remits the pre-deposit, the third respondent shall consider Ext.P3 appeal on merits after giving further opportunity of hearing to the petitioner. The third respondent shall pass orders on Ext.P3 appeal on merits within a period of two months.

Summary

Issues:
1. Validity of Ext.P2 order demanding service tax.
2. Rejection of Ext.P3 appeal due to non-compliance with pre-deposit requirements.
3. Interpretation of mandatory pre-deposit for appeals filed after a specific date.

Analysis:
1. The petitioner, a Co-operative Bank, challenged the validity of Ext.P2 order demanding service tax and other related charges. The petitioner argued that the services provided by them do not fall under 'banking and other financial services' as defined in the Finance Act, 1994. The High Court acknowledged this as a legal question and held that the petitioner should be allowed to argue the appeal on merits, setting aside the Ext.P2 order.

2. The petitioner filed Ext.P3 appeal against Ext.P2 order to the Commissioner of Central Excise Customs and Service Tax. However, the appeal was rejected due to non-compliance with the mandatory pre-deposit requirement. The Court noted that the rejection of the appeal solely based on the failure to make the pre-deposit put the petitioner at a disadvantageous position. The Court directed the petitioner to make the required pre-deposit within ten days to revive the appeal.

3. The Court considered the argument presented by the standing counsel for the respondents, citing the judgment of the Apex Court in Anjani Technoplast Ltd. v. Commissioner. The judgment stated that mandatory pre-deposit is applicable to all appeals filed after a specific date, regardless of the date of the show cause notice. However, the High Court allowed the petitioner to proceed with the appeal on merits after making the pre-deposit, emphasizing the importance of considering legal contentions.

In conclusion, the High Court disposed of the writ petition by permitting the petitioner to make the necessary pre-deposit for Ext.P3 appeal within ten days. Upon compliance, the Commissioner was directed to review the appeal on merits and pass orders within two months, setting aside the previous order rejecting the appeal. This judgment highlights the importance of allowing parties to present legal arguments and ensuring a fair opportunity to contest their case on merits.