Pre-deposit reduction in service tax appeal where merits required detailed examination; matter restored for decision on merits.

In a service tax dispute arising from a best judgment assessment under Section 72 of the Finance Act, the Delhi HC found that the assessee had raised substantial merits-based objections and that whether complete particulars had been furnished needed detailed examination. On that basis, it held the Appellate Tribunal's pre-deposit requirement to be harsh and excessive, and reduced the deposit condition to meet the ends of justice. The appeal was restored to the Tribunal for disposal on merits, subject to deposit of the reduced amount within the stipulated time.

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Issues: Whether the pre-deposit directed by the Appellate Tribunal was excessive and liable to be reduced, and whether the appeal should be restored for consideration on merits.

Analysis: The demand arose from a best judgment assessment under Section 72 of the Finance Act in relation to service tax liability. The Court found that the assessee had raised substantial objections on merits and that the question whether complete particulars had been furnished required detailed examination. Taking note of the assessee's turnover and the surrounding circumstances, the Court held that the pre-deposit of Rs. 78 lakhs was harsh and that a reduced pre-deposit would meet the ends of justice.

Conclusion: The pre-deposit was reduced to Rs. 25 lakhs and the matter was restored to the Tribunal for disposal on merits, subject to deposit of the reduced amount within the stipulated time.

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