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of <h1>Stay and pre-deposit waiver for time-barred service-tax demand sent back for fresh consideration of tests and hardship</h1> <h3>COMMR. OF C. EX., GUNTUR Versus SRI CHAITANYA EDUCATIONAL COMMITTEE</h3> HC allowed the appeal, set aside the CESTAT order that had granted stay and dispensed with the pre-deposit in a service-tax demand for commercial coaching ... Waiver of pre-deposit - Application for stay - commercial training or coaching service - demand of service tax is barred by limitation - undue hardship - requirement of pre-deposit under Section 35F - HELD THAT:- The adjudicating authority followed the procedure contemplated under the law and issued the show cause notice. The respondent sought time twice or thrice to submit their explanation/objections. They did not do so. Of course they sought for personal hearing. After hearing the respondent personally, the Commissioner passed an elaborate order. When an application for stay and waiver of pre-deposit was made by the respondent, the CESTAT passed the following order granting relief. The learned CESTAT failed to focus its consideration on prima facie case, balance of convenience and irreparable loss. It did not consider the aspect of undue hardship which must exist for exercising power under Section 35F of the Central Excise Act. Even assuming that there is hardship, the Tribunal ought not to have granted the order of stay or dispensation of pre-deposit without imposing conditions. For these reasons, we are not able to sustain the impugned order inspite of the offer of the respondent (made through their Counsel) to deposit Rs. 5.00 Crores (Rupees five Crores only) as a precondition for continuing stay. We allow the appeal, set aside the impugned order of the CESTAT and remit the matter to enable them to consider the matter afresh in the light of the above summed up principles laid down by the Supreme Court. Issues Involved:1. Waiver of pre-deposit and stay of recovery of service tax.2. Consideration of undue hardship and safeguarding the interests of revenue.3. Applicability of limitation period for service tax demand.4. Interpretation and application of Section 35F of the Central Excise Act.Detailed Analysis:1. Waiver of Pre-deposit and Stay of Recovery of Service Tax:The appeal was filed by the Revenue against the CESTAT's order that waived the pre-deposit requirement for the respondent and stayed the recovery of service tax. The respondent, running coaching centers, was charged with a service tax liability for the period from 2003-04 to 2006-07. Despite obtaining centralized service tax registration in 2006 and paying some dues, the respondent did not pay the tax for the earlier period nor submitted returns. The adjudicating authority issued a show cause notice and subsequently passed an order levying service tax, cess, and penalties. The respondent appealed to the CESTAT, which granted a stay on the ground of limitation without imposing any conditions.2. Consideration of Undue Hardship and Safeguarding the Interests of Revenue:The court emphasized that Section 35F of the Central Excise Act requires the consideration of undue hardship and the imposition of conditions to safeguard the interests of revenue. The CESTAT's decision to grant a stay without considering these aspects was found to be contrary to the principles laid down by the Supreme Court. The court cited several cases, including *Benara Valves Ltd. v. CCE* and *Asst. Collector, Central Excise v. Dunlop India Ltd.*, highlighting that undue hardship must be demonstrated by the applicant and that interim orders should not be granted merely on a prima facie case.3. Applicability of Limitation Period for Service Tax Demand:The respondent contended that the service tax demand was barred by limitation. The CESTAT agreed, noting that the show cause notice was issued in 2008 for the period 2003-2007 and that the retrospective amendment to the definition of 'Commercial Coaching and Training Centre' did not address the limitation issue. The court, however, found that the CESTAT failed to properly consider the balance of convenience and irreparable loss, as well as the undue hardship aspect, which are critical under Section 35F.4. Interpretation and Application of Section 35F of the Central Excise Act:The court reiterated that Section 35F mandates pre-deposit for appealing against a decision or order, with the possibility of waiver only if undue hardship is proven and conditions are imposed to safeguard revenue interests. The CESTAT's order was criticized for not adhering to these statutory requirements and judicial precedents. The court underscored that the power to dispense with pre-deposit should not be exercised routinely and must be based on a thorough consideration of the relevant factors.Conclusion:The court set aside the CESTAT's order and remitted the matter for reconsideration in light of the principles outlined. It directed the CESTAT to complete this exercise within six weeks, emphasizing the need for a balanced approach that safeguards revenue interests while addressing any undue hardship faced by the respondent.
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