2015 (4) TMI 969 - HC - Service Tax

Petitioner's Appeal Dismissed in Service Tax Case

The writ petition challenging Ext.P6 order confirming service tax and penalty was dismissed. The petitioner, engaged in manufacturing and trading, ... Pre-deposit for filing appeal - preservation of existing right of appeal - waiver of pre-deposit and stay of recovery - alternate remedy before the Customs, Excise and Service Tax Appellate Tribunal - temporal operation of statutory amendmentPre-deposit for filing appeal - temporal operation of statutory amendment - Whether the petitioner is required to deposit 7.5% of the tax confirmed by Ext.P6 as a condition for preferring an appeal to the Appellate Tribunal - HELD THAT: - The Court held that the petitioner's lis commenced in 2013 and therefore the right of appeal vested at that time must be governed by the law prevailing on institution of the proceeding, not by the amendment introduced with effect from 16.08.2014. Applying the settled principle that the institution of proceedings preserves the then existing rights of appeal, the Court concluded that the amended pre-deposit requirement (7.5% introduced in 2014) does not apply to the petitioner. The petitioner may therefore prefer an appeal before the Customs, Excise and Service Tax Appellate Tribunal without making the 7.5% pre-deposit required by the later amendment, and the appeal will be governed by the statutory provisions as they stood prior to 16.08.2014. [Paras 4]Petitioner need not deposit 7.5% as a pre-condition for filing the appeal; the appeal is to be governed by the pre-amendment law prevailing at the time the lis commenced.Alternate remedy before the Customs, Excise and Service Tax Appellate Tribunal - waiver of pre-deposit and stay of recovery - Whether the writ petition should be entertained or the petitioner should be relegated to the alternate appellate remedy and the manner in which the Tribunal should deal with applications for waiver of pre-deposit and stay - HELD THAT: - The Court found that Ext.P6 is an order against which an efficacious alternate remedy exists in the form of an appeal to the Appellate Tribunal. Without adjudicating the merits of Ext.P6, the Court declined to exercise writ jurisdiction and relegated the petitioner to file the statutory appeal. It directed that on such appeal being filed under the provisions as they stood prior to 16.08.2014, the Tribunal shall number the appeal and determine the petitioner's application for waiver of pre-deposit and stay of recovery on merits, and thereafter proceed to hear the appeal in due course. The Court made clear that no pre-deposit will be required as a pre-condition for the Tribunal to consider the waiver application. [Paras 4]Writ petition dismissed without deciding merits; petitioner relegated to appeal before the Appellate Tribunal which shall consider waiver of pre-deposit and stay on merits under the pre-16.08.2014 regime.Final Conclusion: Writ petition dismissed; petitioner relegated to file an appeal against Ext.P6 before the Customs, Excise and Service Tax Appellate Tribunal under the law as it stood prior to 16.08.2014, without any obligation to make the 7.5% pre-deposit imposed by the 2014 amendment, and with the Tribunal directed to consider any application for waiver of pre-deposit and stay of recovery on merits. Issues:Challenge against Ext.P6 order-in-original confirming service tax and penalty.Analysis:The writ petition challenges Ext.P6 order passed by the 2nd respondent confirming a demand of service tax and penalty on the petitioner. The petitioner, engaged in manufacturing and trading of electronic goods under a BIFR sanctioned scheme, mistakenly availed ineligible credit on input services totaling &8377; 2.8 lakhs. Upon realizing the error, the petitioner promptly reversed the credit. However, the 2nd respondent demanded &8377; 14 crores along with a penalty, citing the petitioner's failure to maintain separate books of accounts for the credit availed. The impugned Ext.P6 order is the subject of challenge in the writ petition.The learned Standing counsel for the respondents highlighted that the petitioner has an alternative remedy against the Ext.P6 order by appealing before the Customs, Excise and Service Tax Appellate Tribunal. Following an amendment to the Finance Act, 1994, effective from 16.08.2014, the petitioner is required to deposit only 7.5% of the confirmed tax amount to appeal before the Tribunal. The primary issue for consideration is whether the petitioner must deposit this amount as a condition for pursuing the appellate remedy.Considering the submissions, it was noted that the petitioner's right of appeal under the erstwhile provisions of law may not be affected by the 2014 amendment to the Finance Act, especially if the legal proceedings commenced before the introduction of the amendment. Citing legal precedents, it was established that the right of appeal vested at the time of institution of legal proceedings is governed by the law prevailing then, not at the date of the decision or appeal filing. Consequently, the petitioner, whose legal proceedings began in 2013, is not obligated to deposit the 7.5% amount as per the 2014 amendment. The petitioner is directed to pursue the alternate remedy of filing an appeal before the Tribunal, with an application for waiver of pre-deposit and stay of recovery of the amounts confirmed in Ext.P6 order.The judgment dismisses the writ petition challenging Ext.P6 order without delving into the case's merits. It clarifies that if the petitioner files a valid appeal under the pre-2014 provisions of the Finance Act, the Appellate Tribunal must number the appeal, consider the waiver application, and proceed with the appeal hearing accordingly. The petitioner is advised to approach the Tribunal for further proceedings in compliance with the statutory provisions predating the 2014 amendment.In conclusion, the writ petition is disposed of as outlined, emphasizing the petitioner's recourse to the alternate remedy provided under the Finance Act, 1994, before the Appellate Tribunal.