Court exempts petitioner from 7.5% pre-deposit for appeal, upholds right to appeal under amended law

The court ruled in favor of the petitioner, holding that they are not required to make a pre-deposit of 7.5% for filing an appeal under the amended Section 35(F) of the Finance Act, 2014. The court emphasized that the right to appeal is determined by the law in effect at the initiation of proceedings. The petitioner was directed to file an appeal before the CESTAT along with a stay application without making the pre-deposit within two weeks. The writ petition was disposed of without costs, allowing the petitioner to proceed with the appeal under the pre-amendment provisions.

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Issues Involved:
1. Liability of service tax on receipt of Letter of Credit Margin/Trade margin in convertible foreign exchange under "Business Auxiliary Services".
2. Jurisdiction and validity of the Order-in-Original.
3. Requirement of pre-deposit for filing an appeal as per amended Section 35(F) of the Finance Act, 2014.

Issue-wise Detailed Analysis:

1. Liability of Service Tax:
The petitioner, engaged in sourcing Indian garments for foreign buyers, registered under "Business Auxiliary Service," received orders from overseas buyers and placed orders with Indian vendors. The petitioner retained a margin from the Letter of Credit (LC) and received payments in convertible foreign currency. The issue was whether the receipt of LC Margin/Trade margin in convertible foreign exchange for services rendered to overseas buyers is liable to service tax under Section 65(19) of the Finance Act. The petitioner argued against the service tax demand of Rs. 1,74,04,550/- for the period October 2011 to September 2012, citing a detailed reply and personal hearing before the impugned Order-in-Original was passed.

2. Jurisdiction and Validity of Order-in-Original:
The petitioner contended that the Order-in-Original was non-speaking and beyond the jurisdiction as it exceeded the scope of the show cause notice. Despite merits in their case, the petitioner expressed willingness to approach the appellate authority but highlighted the need for clarity on pre-deposit requirements due to amendments in Section 35(F) of the Act.

3. Requirement of Pre-deposit:
The petitioner referenced judgments from the Kerala and Andhra Pradesh High Courts, which concluded that appellants are not required to make a pre-deposit of 7.5% pursuant to the 2014 Amendment when the lis commenced before the amendment. The respondent opposed, arguing that the second proviso to Section 35(F) mandates pre-deposit for appeals filed after the amendment. The court examined Section 35(F), noting that the second proviso exempts appeals and stay applications pending before the amendment's commencement.

Judgment:
The court, aligning with the Kerala and Andhra Pradesh High Courts, held that the petitioner, whose proceedings began before the 2014 amendment, is not required to make a pre-deposit of 7.5% for filing an appeal. The court cited several precedents, including *Muthoot Finance Ltd. vs. Union of India* and *Secretary to Government, Department of Agriculture, Government of Kerala vs. Union of India*, which supported the petitioner's stance. The court emphasized that the right to appeal is governed by the law at the initiation of proceedings, not by subsequent amendments.

Conclusion:
The court directed the petitioner to file an appeal before the CESTAT along with a stay application without making the pre-deposit of 7.5% of the confirmed tax amount within two weeks from the order's receipt. The writ petition was disposed of, and no costs were awarded. The court's decision ensured that the petitioner could pursue their appeal under the provisions existing before the 2014 amendment, maintaining the legal principle that amendments are prospective unless explicitly stated otherwise.

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