2013 (3) TMI 294 - HC - Service Tax

Court Upholds Pre-Deposit Reduction in Service Tax Appeal, Emphasizes Undue Hardship Consideration

M/s. Aluminium and Glazing Versus Commissioner of Central Excise

The court upheld the reduction of the pre-deposit amount for the appeal in the service tax case, emphasizing the importance of considering undue hardship ... Benefit of abatement of 67% denied - Service tax demanded under the category of 'commercial or industrial construction services and construction of residential complex services' - condition for taking up the appeal is that there must be a pre-deposit of the amount in full - Held that:- It is to be noted that when once appeal is filed by the aggrieved person against the original order, it is mandatory requirement under Section 35-F of the Act to pay the entire amount ordered by the original authority, as a condition precedent for taking up the appeal. Law is well settled that the capacity of a party to pay the pre-deposit amount had to be noticed and the financial burden and undue hardship for the party to resort to claim waiver of the pre-deposit have also to be considered. As decided in Trendy Moods Vs. Customs, Excise and Gold (Control) Appellate Tribunal, Chennai (2008 (12) TMI 215 - HIGH COURT OF JUDICATURE AT MADRAS the capacity of the appellant therein to pay the amount having been noticed and in the absence of any financial burden, it cannot be construed that there is an undue hardship for the appellant therein to resort to claim waiver of pre-deposit. In this case, a sum of ₹ 38,99,288/- as service tax, with interest, penalty, etc., were levied by the original authority, and thereafter, in the appeal stage, the petitioner was called for personal hearing on 18.1.2013, on which date, the petitioner did not send their official, and therefore, the first respondent passed the impugned order, reducing the amount to ₹ 19,50,000/- as pre-deposit amount, and the prima-facie case, balance of convenience, undue hardship and financial burden, which were focussed by the petitioner, had been duly considered by the first respondent in accordance with law, while reducing the amount of pre-deposit to ₹ 19,50,000/-, which is approximately 50% of the total amount due, and therefore, such a lenient approach made by the first respondent, cannot be called in question in this Writ Petition by the petitioner, particularly, when there is no substantial hardship made out by the petitioner. Such an approach made by the petitioner to file this Writ Petition challenging the order of pre-deposit, is no way called for interference by this Court, and therefore, the Writ Petition deserves no merit consideration, which is liable to be dismissed. Issues:1. Reduction of pre-deposit amount for appeal in a service tax case.2. Consideration of undue hardship and financial burden in pre-deposit waiver.3. Compliance with mandatory pre-deposit requirements under Section 35-F of the Act.4. Challenge of lenient approach in reducing pre-deposit amount.5. Request for time-bound disposal of appeal.Issue 1: Reduction of Pre-Deposit Amount for AppealThe petitioner challenged the order of the first respondent-appellate authority that reduced the pre-deposit amount required for taking up an appeal in a service tax matter. The original authority had levied a service tax amount of Rs. 38,99,288/-, but the appellate authority reduced the pre-deposit to Rs. 19,50,000/-, with the balance waived. The petitioner argued that the reduction was arbitrary and illegal, emphasizing their inability to pay any amount, even the reduced sum. The court noted the petitioner's contention but upheld the appellate authority's decision, stating that the reduction was reasonable and within the authority's discretion.Issue 2: Consideration of Undue Hardship and Financial BurdenThe court highlighted the importance of considering the capacity of a party to pay the pre-deposit amount and evaluating any financial burden or undue hardship before granting a waiver. It referenced a previous case where the capacity to pay was a crucial factor in deciding on a pre-deposit waiver. In the present case, the court found that the first respondent had duly considered the prima facie case, balance of convenience, undue hardship, and financial burden of the petitioner before reducing the pre-deposit amount to Rs. 19,50,000/-. The court concluded that the lenient approach taken by the first respondent was justified, as no substantial hardship was demonstrated by the petitioner.Issue 3: Compliance with Mandatory Pre-Deposit RequirementsThe court reiterated that under Section 35-F of the Act, it is mandatory for an aggrieved party to pay the entire amount ordered by the original authority as a pre-condition for appealing. In this case, the petitioner was required to make a pre-deposit to proceed with the appeal, and the first respondent's decision to reduce the amount was deemed appropriate given the circumstances.Issue 4: Challenge of Lenient Approach in Reducing Pre-Deposit AmountThe petitioner contested the lenient approach of the first respondent in reducing the pre-deposit amount, arguing that the petitioner was unable to pay any sum. However, the court found that the first respondent had considered all relevant factors and circumstances before making the decision. The court upheld the reduction in the pre-deposit amount, stating that the petitioner's challenge lacked merit and did not warrant interference.Issue 5: Request for Time-Bound Disposal of AppealThe petitioner requested a time frame for the disposal of the appeal pending before the first respondent-appellate authority. The court directed the petitioner to pay the pre-deposit amount as ordered and instructed the first respondent to dispose of the appeal within four weeks of receiving the payment. The court dismissed the writ petition, emphasizing the petitioner's obligation to comply with the pre-deposit requirement for the appeal to proceed.In conclusion, the court upheld the reduction of the pre-deposit amount for the appeal in the service tax case, emphasizing the importance of considering undue hardship and financial burden before granting a waiver. The court reiterated the mandatory nature of pre-deposit requirements under the Act and rejected the petitioner's challenge to the lenient approach taken by the first respondent. The court also directed the timely disposal of the appeal upon payment of the pre-deposit amount.