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of <h1>Appeal Against Conditional Pre-Deposit Fails; Limited Waiver Under Sections 35-F and 35-G Upheld, Time Extended</h1> The HC dismissed the assessee's appeal challenging CESTAT's order of conditional waiver of pre-deposit under Section 35-F. It held that, although CESTAT ... Waiver of pre-deposit - Application for stay - essential requirement of Section 35-F - primary contention is that the CESTAT, while granting conditional waiver of pre-deposit, did not take into consideration the financial hardship of the Appellant. - HELD THAT:- While Section 35-G of the Act requires the CESTAT to consider, and form an opinion, whether deposit of duty demanded or penalty levied would cause undue hardship to the Appellant, it does not mandate the CESTAT to waive pre-deposit in every case of undue hardship. As the CESTAT has also to consider protecting the interest of revenue, discretion exercised by CESTAT in granting partial waiver of deposit, and directing the Appellant to deposit less than 15 per cent of the total tax and penalty, would not justify interference by this Court. It is only if the exercise of discretion by CESTAT, substantially waiving the requirement of pre-deposit in the present case, is patently illegal would interfere by this Court, under Section 35-G of the Act, be justified. The order, requiring the Appellant to deposit, which is less than 15 per cent of the tax and penalty demanded, cannot be said to be a patently illegal exercise of discretion by the CESTAT. We are satisfied that the order of the CESTAT does not necessitate interference in an appeal filed by the Appellant herein under Section 35-G of the Act. The only relief which the Appellant is entitled to is for extension of time to deposit the said amount. In case the Appellant deposits the said amount within three weeks from today, the CESTAT may entertain their appeal, and adjudicate thereupon in accordance with law. Except to this limited extent, the appeal fails and is, accordingly, dismissed. Issues Involved:1. Demand of service tax.2. Financial hardship and waiver of pre-deposit.3. Legal principles for granting stay and pre-deposit waiver.Detailed Analysis:1. Demand of Service Tax:The Appellant, a public limited company engaged in software development and IT services, was issued a Show Cause Notice on 23rd October 2008, demanding Rs. 6,91,96,898 as service tax for various services rendered from 15th September 2003 to 31st December 2007. This included Rs. 5,39,13,757 for 'Business Auxiliary Services', Rs. 1,13,64,536 for 'manpower supply services', Rs. 16,42,899 for 'maintenance or repair services', and Rs. 22,75,707 for 'management consultancy services'. The service tax was related to a project for the Madhya Pradesh State Agricultural Marketing Board. The Appellant contended that they did not collect service tax from their clients, but the Respondent confirmed the demand and imposed a penalty equal to the tax amount, along with interest under Section 75 of the Finance Act, 1994.2. Financial Hardship and Waiver of Pre-deposit:The Appellant sought a waiver of the pre-deposit of the entire demanded service tax, interest, and penalty, citing severe financial difficulties. They reported net losses of Rs. 28.11 Crores for 2008-09, Rs. 20.17 Crores for 2009-10, and an accumulated loss of Rs. 61.16 Crores as of 31st March 2010. The CESTAT, however, directed the Appellant to pre-deposit Rs. 2.00 Crores within eight weeks, as they did not make out a prima facie case for a complete waiver. The Appellant requested additional time and partial credit for amounts already paid, which the CESTAT partially granted, extending the deadline by eight weeks.3. Legal Principles for Granting Stay and Pre-deposit Waiver:The High Court emphasized that the law presumes public authorities function properly and bona fide, with due regard to public interest. Interim orders should not be granted merely because a prima facie case is shown; other factors such as balance of convenience, irreparable injury, and public interest must also be considered. Citing precedents like Benara Valves Ltd. v. Commissioner of Central Excise and CCE v. Dunlop India Ltd., the court highlighted that the CESTAT must exercise its discretion judicially, ensuring fairness, legality, and public interest. The court reiterated that the twin considerations under Section 35-F of the Act are 'undue hardship' and 'safeguarding the interests of revenue'. 'Undue hardship' implies excessive hardship disproportionate to the circumstances and must be established by the applicant.The court noted that while the CESTAT's order did not explicitly reflect consideration of the Appellant's financial hardship, the requirement to protect revenue interests was also crucial. The CESTAT's direction to deposit Rs. 2.00 Crores, less than 15% of the total demand, was deemed reasonable and not patently illegal. The High Court thus upheld the CESTAT's order, granting the Appellant an extension of three weeks to make the deposit, after which the CESTAT would entertain and adjudicate the appeal in accordance with the law. The appeal was dismissed except for the limited relief of extended time for deposit.
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