Predeposit in service tax appeals must reflect admitted payments and claimed statutory compliance, not impose a disproportionate deposit burden.

In an appeal under the service tax regime, the court considered whether a tribunal's predeposit direction should be adjusted where the assessee had already made substantial tax payments and claimed compliance with the statutory settlement provision allowing payment of tax, interest and penalty within the prescribed time. The admitted payments and the balance said to remain payable were relevant in assessing the deposit requirement, and the original direction was viewed as disproportionate. The predeposit was therefore modified and reduced, reflecting the principle that interim deposit conditions should account for admitted compliance and the actual extent of outstanding liability.

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Issues: Whether the predeposit directed by the Tribunal under the service tax regime required modification having regard to the assessee's admitted tax payment and claimed compliance with section 73(1A).

Analysis: The dispute concerned an application for waiver of predeposit in an appeal under section 83 of the Finance Act, 1994 read with section 35F of the Central Excise Act, 1944. The assessee had already paid a substantial part of the service tax demand before and after the show cause notice and claimed the benefit of section 73(1A), which permits payment of tax, interest and 25% penalty within the stipulated period. The exact extent of compliance with section 73(1A) was left for determination in the pending appeal, but the admitted payments and the balance stated to be payable were relevant factors in fixing the amount of predeposit. In that background, the Tribunal's direction to deposit Rs. 50 lakhs was found to be excessive.

Conclusion: The direction for predeposit was modified and reduced to Rs. 25 lakhs, in place of Rs. 50 lakhs.

Ratio Decidendi: In fixing predeposit pending appeal, the authority must take into account the assessee's admitted payment of tax and any substantial compliance claimed under the statutory settlement provision, and may modify the deposit requirement where the original direction is disproportionate.

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