2015 (2) TMI 840 - AT - Service Tax

CESTAT Chennai Upholds Tax Demand for Cotton Garment Manufacturer, Sets Predeposit Requirement

Sri Renga Apparels (India) Pvt. Ltd. Versus Commissioner of Central Excise & ST

The Appellate Tribunal CESTAT CHENNAI upheld a tax demand of Rs.23,37,970 against an applicant engaged in manufacturing cotton garments for export under ... Commission paid to the foreign agent for procuring the orders - exemption under Notification No.30/04-ST dt. 9.7.2004 - Held that:- Court has perused the case law relied upon by learned advocate, wherein the assessee paid 50% of tax. However, considering the observation of the Hon'ble High Court [2013 (12) TMI 499 - MADRAS HIGH COURT] in para-6 of the said decision, we direct the applicant to predeposit a sum of ₹ 5,00,000/- (Rupees five lakhs only) as offered by learned advocate within a period of 8 weeks. Upon deposit of the said amount, predeposit of balance amount of tax along with interest and penalty would be waived and recovery thereof is stayed till disposal of the appeal - Partial stay granted. Issues: Tax demand under 'Business Auxiliary Service', eligibility for exemption under Notification No.30/04-ST, predeposit requirement, claim of exemption benefit.Analysis:The judgment by the Appellate Tribunal CESTAT CHENNAI involved a case where the applicants, engaged in manufacturing cotton garments and fabrics for export, paid commission to a foreign agent for securing orders. The adjudicating authority upheld a tax demand of Rs.23,37,970 under the category of 'Business Auxiliary Service'.The applicant contended eligibility for exemption under Notification No.30/04-ST dated 9.7.2004. The advocate highlighted a precedent where the Hon'ble Madras High Court set aside a predeposit requirement as directed by the Tribunal in a similar case involving Loomtex Exports.On the other hand, the Revenue representative argued that in the Loomtex Exports case, the assessee had paid 50% of the tax, and the Tribunal ordered a further deposit of Rs. 9 lakhs, which was subsequently overturned by the High Court. The Revenue emphasized that the present applicant had not made any payment and had not claimed the exemption benefit before the lower authorities.After considering both parties' submissions and the case law cited, the Tribunal directed the applicant to predeposit Rs. 5,00,000 within 8 weeks, as proposed by the advocate. Upon this deposit, the predeposit of the remaining tax amount, interest, and penalty would be waived, and recovery stayed pending appeal resolution. The compliance deadline was set for 6.1.2015.