Pre-deposit waiver and substantial question of law limits High Court interference with a service tax deposit direction.

Section 35F of the Central Excise Act permits waiver of pre-deposit only on a showing of undue hardship, while Section 35G confines High Court interference to substantial questions of law. On the facts, the authorities had found a prima facie tax liability for renting of immovable property, the claimed bifurcation of rent was not supported by the record, and waiver had already been granted for interest and penalties with deposit directed only for the service tax component. In that setting, no substantial question of law arose from the pre-deposit order, and the discretionary direction did not warrant interference.

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Issues: Whether, in an appeal arising from an order directing pre-deposit, the High Court should interfere and whether any substantial question of law arose for consideration.

Analysis: The statutory scheme under Section 35F of the Central Excise Act, 1944 permits waiver of pre-deposit only where undue hardship is shown, while the appellate jurisdiction under Section 35G is confined to substantial questions of law. On the facts, the authorities had found a prima facie case of tax liability in respect of renting of immovable property, the alleged bifurcation of rent did not appear supported by the record, and the Commissioner (Appeals) had already granted waiver of interest and penalties while requiring deposit only of the service tax component. In these circumstances, no substantial question of law arose from the pre-deposit order and the discretionary decision of the authorities did not call for interference.

Conclusion: The challenge to the pre-deposit direction failed and the appeal was not liable to be entertained on merits at this stage.

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