2008 (10) TMI 46 - HC - Service Tax

High Court modifies order requiring bank guarantee for appeal

The High Court of Bombay modified the order, mandating the petitioner to provide a bank guarantee of Rs.25 lakhs for the appeal to proceed before the ... Bank guarantee in lieu of pre-deposit - interim relief pending appeal - direction to adjudicatory forum to decide appeal on merits within a time-bound period - prima facie application of precedent in assessing liabilityBank guarantee in lieu of pre-deposit - interim relief pending appeal - Modification of impugned order to permit substitution of the pre-deposit by a bank guarantee and grant of interim relief allowing continuation of appeal proceedings. - HELD THAT: - The High Court found that the Tribunal had declined to dispense with the entire pre-deposit but recorded a view that certain components (cost of raw materials, packing materials, overheads and profit) should not have been included for levy of service tax. Taking that prima facie view into account and on the petitioner's offer, the Court modified the impugned order to permit the petitioner to furnish a bank guarantee of Rs.25 lakhs from a nationalised bank to the satisfaction of the Commissioner in lieu of making the pre-deposit. The Court treated this substitution as appropriate interim relief pending adjudication of the appeal on merits. [Paras 2, 3]Order modified to permit the petitioner to furnish a bank guarantee of Rs.25 lakhs in lieu of the pre-deposit as interim relief.Direction to adjudicatory forum to decide appeal on merits within a time-bound period - prima facie application of precedent in assessing liability - Mandate to the Tribunal to hear and decide the appeal on merits expeditiously and within six months, and to make appropriate orders regarding the bank guarantee. - HELD THAT: - Observing a prima facie view that the petitioner may not be liable to pay service tax in light of the decision in Bharat Sanchar Nigam Ltd. , the High Court directed that upon receipt of the bank guarantee, the Tribunal must hear the petitioner's appeal on merits and dispose of it in accordance with law as expeditiously as possible and, in any event, within six months from service of the writ on the Tribunal. The Tribunal was further directed to make appropriate orders concerning the furnished bank guarantee when disposing of the appeal. These directions require the Tribunal to undertake fresh adjudication on merits within the stipulated time-frame. [Paras 2, 3]Tribunal directed to hear and decide the appeal on merits within six months and to make appropriate orders in relation to the bank guarantee.Final Conclusion: Writ petition allowed by modifying the impugned order: petitioner permitted to furnish a bank guarantee of Rs.25 lakhs in lieu of pre-deposit; the Tribunal directed to hear and decide the appeal on merits within six months and to make appropriate orders regarding the bank guarantee; rule made absolute and no order as to costs. The High Court of Bombay modified the order to require the petitioner to submit a bank guarantee of Rs.25 lakhs for the appeal to be heard on merit by the Tribunal within six months. The Tribunal will make an appropriate order regarding the bank guarantee. The petitioner may not be liable to pay service tax based on the judgment of the Supreme Court in the case of 'Bharat Sanchar Nigam Ltd. Vs. Union of India, 2006 (2) S.T.R. 161(S.C.)'.