Appeal Reinstated After Non-Deposit; Petitioner Given Four Weeks for Mandatory Pre-Deposit Under RBI Instruction

The HC set aside the order dismissing the appeal due to non-deposit of the mandatory pre-deposit, allowing the petitioner to make the deposit within four weeks. The case was remanded to the Appellate Authority for a hearing on merits post-compliance. The court noted the petitioner's lack of intent to evade the pre-deposit and acknowledged the RBI Instruction's provision for unregistered dealers, emphasizing procedural compliance without addressing the merits of the original tax liability and penalty. The writ petition was allowed to ensure the appeal's consideration on its merits.

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Issues:
1. Quashing of order imposing service tax liability and penalty
2. Setting aside order rejecting appeal due to non-deposit of mandatory pre-deposit
3. Remitting the matter for hearing on merit after pre-deposit

Analysis:
1. The petitioner, engaged in electrical repair and maintenance work, believed to be exempt from service tax under a specific notification. However, faced with a show-cause notice demanding Rs. 7,66,636 for non-payment of service tax during 2015-16 and 2016-17. The Deputy Commissioner imposed the tax liability and penalty. The appeal before the Commissioner was dismissed for not depositing 7.5% of the duty and penalty as mandated.

2. The petitioner, through counsel, expressed unawareness of the online payment facility via RBI Portal, seeking permission to make the pre-deposit to enable a merit-based appeal hearing. The petitioner's lack of intention to evade the pre-deposit was highlighted, attributing the non-payment to unfamiliarity with the RBI Instruction. The counsel did not pursue other grounds challenging the original order's merits.

3. The Respondent's counsel opposed the plea regarding the pre-deposit non-payment, arguing that the dismissal of the appeal was lawful. However, the Respondent's counsel presented FAQs from the CBIC clarifying the registration process for making payments, emphasizing the need for a valid registration number for payment. The court considered the submissions and relevant facts, noting the petitioner's unregistered status and lack of intent to avoid the pre-deposit. Acknowledging the RBI Instruction's provision for unregistered dealers, the court decided to remand the matter to the Appellate Authority, directing the petitioner to make the pre-deposit within four weeks.

4. Consequently, the impugned order dismissing the appeal was set aside, subject to the petitioner's compliance with the pre-deposit requirement within the stipulated timeframe. The court clarified that the decision did not delve into the case's merits, focusing solely on the procedural aspect. The writ petition was allowed in the specified manner, ensuring the appeal's consideration on its merits post the pre-deposit compliance.

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