Appellant's appeal rejected for pre-deposit made through DRC-03 under CGST regime lacking proper provision under Section 35F

CESTAT New Delhi rejected appellant's application for admission of appeal based on pre-deposit made through DRC-03 under CGST regime. The tribunal held that following Bombay HC's decision in Sodexo India Services case, there is no proper provision under Section 35F of Central Excise Act, 1944 to accept pre-deposit payment through DRC-03. The tribunal distinguished its earlier decision in Saphire Cables Services case, noting that while Bombay HC granted relief in writ jurisdiction, CESTAT lacks such discretionary powers. Appellant was permitted to refile appeal after making pre-deposit through permissible means.

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Issues Involved:
1. Demand of Service Tax under 'Construction of Complex Service'.
2. Admissibility of pre-deposit using DRC-03 under Section 35F of the Central Excise Act, 1944.

Summary:

1. Demand of Service Tax under 'Construction of Complex Service':
M/s Army Welfare Housing Organization, a welfare society registered under the Societies Registration Act, 1860, aimed at providing residential houses to Army personnel and their widows on a 'No profit No Loss' basis, was issued a show cause notice demanding service tax under the category of 'Construction of Complex Service' for constructing 'Residential complex'. The Commissioner adjudicated the matter, dropping a demand of Rs. 240,55,21,470/- for amounts received from project members related to "Project yet to commence" and "Ongoing Projects Receipts" but confirmed a demand of Rs. 84,95,49,572/- for amounts where construction had commenced. Aggrieved, M/s Army Welfare Housing Organization filed appeals.

2. Admissibility of Pre-deposit using DRC-03 under Section 35F:
The defect notice issued to M/s Army Welfare Housing Organization highlighted the failure to submit evidence of pre-deposit. The organization claimed to have made the pre-deposit using input tax credit available in their DRC-03 under the CGST regime. However, the Revenue contended that pre-deposit cannot be made using DRC-03. The Tribunal noted substantial litigation on this issue, referencing the Bombay High Court's decision in Sodexo India Services Private Limited vs. Union of India and Ors., which observed the absence of a proper provision for accepting pre-deposit through DRC-03 under Section 35F of the Central Excise Act, 1944.

The CBIC Circular dated 28.10.2022 clarified that DRC-03 is not a valid mode for pre-deposit under Section 35F, and the Tribunal's Principal Bench in multiple cases upheld this view. Conversely, the Tribunal in M/s Saphire Cables & Services Pvt. Ltd. & Ors. vs. Commissioner of CGST & CE, Belapur allowed pre-deposit using DRC-03, citing the beneficial nature of the Circular. However, the Tribunal in this case concluded that it cannot grant relief based on equity as the High Court did, and thus, applications seeking admission on the strength of pre-deposit through DRC-03 were rejected. M/s Army Welfare Housing Organization was granted liberty to file an appeal after making pre-deposit in a permissible manner.

(Pronounced in the open court 13.03.2024)

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