Pre-deposit of penalty set aside where service tax and interest were already paid, and appeal remanded for merits hearing.

Where service tax and interest had already been paid and the challenge to the demand and penalties had not been properly examined, insisting on pre-deposit of the penalty amounts was unwarranted. The pre-deposit direction was set aside, and the appeal was to be heard on merits without requiring any further deposit. The matter was remanded to the Commissioner (Appeals) for disposal in accordance with law.

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Issues: Whether the appeal against the pre-deposit direction should be entertained without insisting on pre-deposit of the penalty amounts, and whether the matter should be remanded for disposal on merits.

Analysis: The appellants had already paid the service tax and interest, and the challenge to the demand and penalties had not been properly examined at the earlier stage. In such circumstances, insistence on pre-deposit of the penalties was unwarranted, and the appeal ought to be heard on merits. The lower appellate authority was therefore required to decide the appeal without insisting on any further pre-deposit.

Conclusion: The pre-deposit direction was set aside and the matter was remanded to the Commissioner (Appeals) for disposal on merits without insisting on pre-deposit.

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