CESTAT decision partially upheld with Rs. 25 lakh pre-deposit requirement. Petitioner's arguments on service tax demand and hardship considered.

The court upheld CESTAT's decision partially waiving the service tax demand but requiring a pre-deposit of Rs. 25 lakh. The petitioner's arguments regarding the legitimacy of the service tax demand and financial hardship were considered, with the court emphasizing the need to establish undue hardship. The court found CESTAT's decision reasonable, dismissing the petition and granting an extension for the pre-deposit with conditions for appeal consideration.

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Issues Involved:
1. Legitimacy of the service tax demand.
2. Consideration of prima facie case for waiver of pre-deposit.
3. Evaluation of undue hardship and financial hardship for waiver of pre-deposit.

Detailed Analysis:

1. Legitimacy of the Service Tax Demand:
The petitioner was issued a show-cause notice demanding service tax of Rs. 2,89,82,752 under the category of works contract service. The Commissioner confirmed this demand along with interest and penalty. The petitioner argued that the construction was for Gujarat State Police Housing Corporation Ltd. and Surat Municipal Corporation, and as per guidelines by the Ministry of Urban Development, only Urban Local Bodies could levy and recover user charges. Thus, they claimed they were not liable to pay service tax. They also referenced a stay order in a similar case involving M/s. Khurana Engineering Ltd.

2. Consideration of Prima Facie Case for Waiver of Pre-Deposit:
The petitioner appealed to CESTAT, seeking a waiver of the pre-deposit. CESTAT partially waived the service tax demand for Rs. 53,06,046 but directed the petitioner to deposit Rs. 25 lakh as a pre-deposit. The petitioner contended that the CESTAT did not consider the prima facie merits of their case adequately. The court noted that CESTAT had considered the Order in Original and concluded that detailed arguments would be addressed during the final hearing. Thus, the court found no error in CESTAT's directive for a pre-deposit of Rs. 25 lakh against the total demand.

3. Evaluation of Undue Hardship and Financial Hardship for Waiver of Pre-Deposit:
The petitioner did not plead any financial hardship before CESTAT or the High Court. The court emphasized that under Section 35F of the Central Excise Act, 1944, undue financial hardship and safeguarding the interest of revenue are critical considerations. The principles set out by the Supreme Court in cases like Benara Valves Ltd. and Mehsana Dist. Co-op. Milk P.U. Ltd. were referenced, highlighting that undue hardship must be established by the applicant, and a mere assertion is insufficient. The court found that CESTAT had judiciously considered these principles and the prima facie case, concluding that a complete waiver was not justified.

Conclusion:
The court dismissed the petition, finding no substance in the arguments against the CESTAT's order. The petitioner was granted an extension to deposit the Rs. 25 lakh pre-deposit until 02.01.2014, with the condition that the appeal would be considered on merits if the deposit was made within the stipulated time. Failure to deposit would result in the appeal not being heard on merits.

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