2024 (2) TMI 728 - AT - Service Tax

Tribunal Reopens Case After Appellant Meets Pre-Deposit Requirement Under Central Excise Act for Fresh Adjudication.

The Tribunal set aside the order dismissing the appeal due to non-compliance with the pre-deposit requirement under Section 35F of the Central Excise Act, ... Dismissal of appeal - appeal was rejected on the ground that the same is not accompanied by a proof evidencing that the appellant had deposited 7.5% of duty demanded or penalty imposed through the new revised procedure - HELD THAT:- During the course of hearing, the learned counsel for the appellant has pointed out to the challan dated 13 May 2023 whereby he has made the pre-deposit of the complete 10% in order to avail the appeal to be filed before this Tribunal and the appeal has been filed before the Tribunal on 29.05.2023. Since the needful for payment of the pre-deposit stands complied with, there are no hesitation in remanding the matter back for proper adjudication on merits. Since neither the adjudicating authority in the absence of the documents to be placed by the appellant nor the appellate authority has considered the issue on merits, it would be just and appropriate that the matter is remanded to the adjudicating authority to consider the same on merits and decide the issue in the light of the decisions referred by the superior forums. The matter is remanded back to the adjudicating authority, to be considered de novo - Appeal allowed by way of remand. ISSUES PRESENTED AND CONSIDERED 1. Whether an appeal may be dismissed for non-compliance with the pre-deposit requirement under Section 35F of the Central Excise Act, 1944 read with CBIC instructions when the pre-deposit was made by the appellant but not in the exact mode prescribed by the circular at the time of appellate decision. 2. Whether non-payment of the prescribed pre-deposit through the revised CBIC (ICEGATE) e-payment gateway, as mandated by Circular No. 1070/3/2019-CX dated 24.06.2019 and subsequent instruction dated 28.10.2022, justifies dismissal of an appeal without adjudication on merits. 3. Whether a demand for service tax based on discrepancies between Income-tax Returns (ITR) and ST-3 returns (relying on information from the Income Tax Department) is sustainable without the adjudicating authority considering documentary/material evidence on taxability or exemptions furnished by the assessee. 4. Whether subsequent compliance with the pre-deposit requirement (full 10% paid before Tribunal filing) cures procedural defect and mandates remand for adjudication on merits. ISSUE-WISE DETAILED ANALYSIS Issue 1 - Validity of dismissal for pre-deposit non-compliance where deposit was made but not via prescribed portal Legal framework: Section 35F (as made applicable to service tax) requires pre-deposit for prosecution of an appeal; CBIC Circular No. 1070/3/2019-CX (24.06.2019) and instruction dated 28.10.2022 prescribe utilization of the revised CBIC (ICEGATE) e-payment gateway for making such deposits. Precedent treatment: The impugned appellate practice followed the strict administrative instruction requiring proof of deposit through the new portal; no superior precedent overruling the administrative prescription is cited in the text. Interpretation and reasoning: The Tribunal observed that the Commissioner rejected the appeal because the pre-deposit of Rs. 2,32,533/- was not evidenced as paid through the new CBIC e-payment gateway in accordance with the circular and instruction. However, the Tribunal noted that the appellant subsequently made the full 10% pre-deposit (challan dated 13.05.2023) prior to filing the appeal before the Tribunal. Ratio vs. Obiter: The statement that non-use of the prescribed portal justified the appellate dismissal is treated as the Commissioner's reasoning in the impugned order (operative in that order) but the Tribunal's acceptance that subsequent correct payment cures the defect is the binding ratio of the present decision as to remedying procedural non-compliance by later regularization. Conclusion: Procedural non-compliance with the prescribed payment mechanism, standing alone, should not result in final dismissal when the appellant cures the defect by making the requisite pre-deposit before lodging the appeal to the Tribunal; the matter is remanded for merits in such circumstances. Issue 2 - Whether dismissal without merit consideration is appropriate when adjudicating authority proceeded ex parte on information from Income Tax Department Legal framework: Adjudication under the proviso to sub-section (1) of Section 73 of the Finance Act, 1994 (as applied) permits recovery based on information received; however, principles of adjudication require consideration of material/evidence placed by the assessee and opportunity of hearing. Precedent treatment: The appellant relied on prior Tribunal authority (Alpa Management Consultants (P) Ltd. v. CST) that rejected levying service tax solely on figures in Income-tax returns or profit & loss accounts because ITR disclosures differ from service tax return requirements; the impugned proceedings did not engage with such precedents. Interpretation and reasoning: The adjudicating authority proceeded ex parte because the assessee neither replied to the show cause notice nor attended hearings; on the basis of data from the Income Tax Department, tax, interest and penalty were confirmed. The Tribunal noted that in the absence of a consideration of merits or of documents that the appellant could have placed on record, confirmation of demand solely on ITR-related information was not appropriate without proper adjudication. Ratio vs. Obiter: The Tribunal's direction that adjudication must be done de novo with opportunity to place evidence is ratio for the disposition of this matter; observations criticizing sole reliance on ITR data without examination of service tax specific records are operative to the decision though not a comprehensive precedent overruling departmental practice. Conclusion: A demand based on Income Tax data should not be mechanically sustained where an assessee is denied the opportunity to produce records and arguments on taxability/exemption; the adjudicating authority must consider merits afresh on remand, including relevant precedents distinguishing ITR disclosures from service tax returns. Issue 3 - Alleged exemption of work contract services provided to Government and reliance on relevant circular for exemption Legal framework: Exemption circulars (e.g., Circular No. 25/2012-ST) and statutory provisions govern when services provided to government agencies (such as Public Works Departments) are exempt from service tax; the question requires factual and legal evaluation of nature of services and applicability of exemption. Precedent treatment: Appellant relied on circular-based exemption and authorities that treat taxability on factual matrix; the adjudicating and appellate authorities did not examine these contentions on merits in the impugned orders. Interpretation and reasoning: The Tribunal observed that neither the adjudicating authority nor the Commissioner considered the appellant's contention that the work contract services rendered for construction and road safety were exempt during the relevant period. Because the merits were not adjudicated, the Tribunal could not decide on the exemption claim and directed fresh adjudication to allow the appellant to place documents and legal arguments, including reliance on Circular No. 25/2012-ST. Ratio vs. Obiter: The finding that exemption contentions require de novo examination and cannot be decided against an absent party is ratio for remand; any comment on the ultimate applicability of the exemption remains obiter until adjudicated. Conclusion: Exemption claims based on the nature of services and relevant circulars must be examined on record; failure to do so in ex parte adjudication warrants remand for consideration of those contentions. Issue 4 - Effect of subsequent full pre-deposit on remedying procedural defect and directing remand Legal framework: Procedural compliance for filing an appeal (pre-deposit) is a condition precedent; courts and tribunals have recognized that subsequent compliance, especially prior to filing before the higher forum, can cure procedural defects and enable adjudication on merits. Precedent treatment: The impugned appellate order pre-dated the subsequent full pre-deposit; the Tribunal accepted the subsequent challan evidencing the complete 10% pre-deposit and applied the principle that when the requirement is complied with, the appeal should not be dismissed on procedural grounds alone. Interpretation and reasoning: Because the appellant produced the challan showing payment of the full 10% before filing the appeal to the Tribunal, the Tribunal held that it would be just and appropriate to remand the matter to the adjudicating authority for de novo consideration on merits rather than uphold dismissal for earlier non-compliance with the revised payment mode. Ratio vs. Obiter: The Tribunal's holding that subsequent proper pre-deposit cures the procedural defect and necessitates remand is the operative ratio in disposing the appeal. Conclusion: Subsequent full compliance with the statutory pre-deposit requirement before filing the appeal in the Tribunal cures the procedural defect and requires remand for merits adjudication rather than dismissal. Disposition The impugned order dismissing the appeal for non-compliance with the pre-deposit procedure is set aside and the matter is remanded to the adjudicating authority for de novo adjudication on merits; the appellant is at liberty to raise all points and place requisite documents in support of submissions.