2014 (5) TMI 68 - HC - Service Tax

Appellant's Pre-Deposit Challenge Modified: Central Excise & Finance Acts

The appellant challenged the Tribunal's order on pre-deposit under the Central Excise Act and Finance Act, seeking dispensation due to financial hardship. ... Waiver of pre-deposit of the service tax - Reversal of CENVAT Credit availed - applicant are now providing renting of immovable property service, management and maintenance or repair service, availed the credit of tax paid in respect of services used for construction of Mall - Held that:- The Tribunal in the matter of Galaxy Mercantile (2013 (10) TMI 820 - CESTAT NEW DELHI - LB) was dealing with the situation similar to that in the present case. In that case also a mall had been constructed by a contractor. The Service Tax on the construction of the mall was paid at concessional rate under Works Contract (Composition Scheme for Payment of Service Tax) Rules, 2007 on the condition that the contractor would not avail credit of duty paid on inputs used by him in the construction. The Tribunal in the case of Galaxy Mercantile (supra) took a view that reversal of credit/pre-deposit to the extent of 35% of the credit involved on inputs and capital goods would be sufficient for the purpose of entertaining the appeal on merits. At the prima facie stage we are of the view that the decision of the Tribunal in Galaxy Mercantile (supra) is applicable to the facts of this case - Time to make pre deposit is extended - Decided partly in favour of assessee. Issues:Challenge to Tribunal's order on pre-deposit under Section 35G of Central Excise Act and Section 83 of Finance Act, 1994.Analysis:The appellant challenged the Tribunal's order directing pre-deposit of Rs. 5.44 crores, interest, and penalty. The Tribunal required the appellant to reverse 35% of Cenvat credit on capital goods and Rs. 1.37 crores Cenvat credit on inputs to entertain the appeal. The appellant had constructed a shopping mall and utilized Cenvat credit for Excise duty paid on capital goods, inputs, and services. The order-in-original confirmed a demand of Rs. 5.46 crores for the period from April 2007 to March 2011, imposing penalties and interest.The appellant filed an appeal to the Tribunal against the order dated 24 September 2012, seeking dispensation of pre-deposit. The Tribunal directed a deposit of 35% of the credit availed on capital goods and Rs. 1.37 crores reversed on inputs. The appellant contended financial hardship, citing accumulated losses of Rs. 18.59 crores, which the Tribunal did not consider. The revenue argued that the appellant's case differed from Galaxy Mercantile's case due to engaging a contractor benefiting from a concessional Service Tax rate.The Court noted similarities between the present case and Galaxy Mercantile's case where a mall was constructed by a contractor under similar conditions. The Tribunal's decision in Galaxy Mercantile was deemed applicable, requiring a 35% reversal of credit for entertaining the appeal. Financial hardship was considered, leading to a modification of the impugned order to align with Galaxy Mercantile's decision. The appellant was directed to deposit the required amount by a specified date for the appeal to proceed.The Court extended the time for deposit and directed the Tribunal to proceed with final disposal upon satisfaction of the deposit. The appeal was disposed of accordingly, with no costs imposed.