2025 (7) TMI 1888 - HC - Service Tax

Partial waiver of required pre-deposit denied; petitioner given extended time until 31 October 2025 to pay balance

HC refused the request for a partial waiver of the required pre-deposit, holding such waiver is not tenable and noting the petitioner may approach the ... Seeking partial waiver of pre-deposit which constitutes 2.5 per cent of the penalty amount in filing the appeal before the Customs, Excise and Service Tax Appellate Tribunal - submission of the Petitioner is that 7.5 per cent of the pre-deposit has already been made and the Petitioner is not in a position to arrange the remaining 2.5 per cent - HELD THAT:- Reliance placed upon the decision of a Coordinate bench of this Court in Diamond Entertainment Technologies vs. Commissioner Central Goods and Service Tax Commissionerate Dehradun and Another, [2019 (9) TMI 1104 - DELHI HIGH COURT] to argue that no such waiver of pre-deposit can be granted, where it was held that 'the prayer for waiver of pre-deposit cannot be entertained. However, if there is any amount lying with the Government entities which the Petitioner wishes to rely upon as being part of the pre-deposit, the Petitioner is free to make such a prayer before the concerned Appellate Authority.' In view of the above, the prayer for partial waiver of the pre-deposit is not tenable. However, in the facts and circumstances of this case, the Petitioner is granted time till 31st October, 2025 to make the remaining pre-deposit - petition disposed off. ISSUES PRESENTED AND CONSIDERED 1. Whether a partial waiver of the statutory pre-deposit required under Section 107(6) (pre-deposit of admitted amount and 10% of disputed tax) for filing an appeal before the Tribunal can be granted by the Court in the facts of the petition. 2. Whether amounts already deposited or amounts lying with Government/departmental authorities can be treated as part of the pre-deposit for purposes of maintaining the appeal before the Tribunal. ISSUE-WISE DETAILED ANALYSIS Issue 1 - Waiver of pre-deposit required under Section 107(6) Legal framework: Section 107(6) mandates that no appeal shall be filed unless the appellant has paid (a) in full the amounts admitted and (b) a sum equal to ten per cent of the remaining disputed tax (subject to statutory caps). The provision sets mandatory pre-deposit requirements for prosecuting an appeal to the Tribunal. Precedent Treatment: The Court considered and followed the line of rulings that treat the pre-deposit statutory requirement as mandatory and non-discretionary. The Court relied on the reasoning in decisions which have held that earlier decisions permitting relaxation (e.g., Pioneer Corporation, Shubh Impex, Manoj Kumar Jha) are inconsistent with binding precedent and were not to be followed where they conflict with the mandatory statute and subsequent controlling authority. The Court treated the decision which enforces strict compliance with mandatory pre-deposit as binding and to be followed. Interpretation and reasoning: The Court interpreted Section 107(6) as leaving no scope for judicial or extra-statutory discretion to waive the pre-deposit requirement where the statutory condition is unambiguous. The reasons include (i) the plain language of the provision requiring payment of admitted amounts in full and a specified percentage of disputed tax, (ii) the existence of binding precedent which has reconciled conflicting earlier case law and held that earlier relaxations cannot be followed post-merger of authority, and (iii) the lack of statutory provision or recognized judicial power to grant waiver in the face of mandatory deposit language. The Court noted that while some benches previously allowed relaxation on grounds of financial stringency, such decisions are inconsistent with later binding rulings that uphold the mandatory nature of pre-deposit. Ratio vs. Obiter: Ratio - The pre-deposit requirements under Section 107(6) are mandatory and not subject to waiver by the Court where the statute and controlling precedent require compliance. Obiter - Observations regarding the financial hardships of appellants and reference to prior inconsistent decisions are explanatory and contextual but do not alter the ratio that statutory pre-deposit must be complied with. Conclusion: The prayer for partial waiver of the pre-deposit is not maintainable. The Court refused to grant a waiver of the remaining pre-deposit amount sought by the petitioner, applying the statutory mandate and controlling case law which treats pre-deposit as mandatory. Issue 2 - Treatment of amounts lying with Government/departmental authorities as part of pre-deposit Legal framework: While Section 107(6) prescribes the quantum and manner of pre-deposit, the procedural question arises whether amounts already available with Government authorities can be claimed and considered as part of the pre-deposit for maintaining an appeal. Precedent Treatment: The Court referred to prior practice and decisions allowing appellants to rely upon amounts lying with Government entities by seeking appropriate relief before the appellate authority. The Court did not purport to create new legal doctrine but recognized existing avenues by which such amounts may be treated as pre-deposit if the appellate forum permits. Interpretation and reasoning: The Court observed that if an appellant asserts that sums are already lying with Government departments and these sums can legitimately be treated as constituting pre-deposit, the proper course is to make that plea to the concerned Appellate Authority/Tribunal. The Tribunal is the appropriate forum to examine a claim that departmental balances constitute or may be adjusted towards the statutory pre-deposit. The Court emphasized procedural propriety: the petitioner's remedy is to press the claim before the appellate authority rather than seek a waiver before the Court where statutory pre-deposit is mandatory. Ratio vs. Obiter: Ratio - An appellant may seek to have amounts lying with Government/departmental authorities treated as part of the pre-deposit by making a formal claim before the appellate authority; such claims cannot substitute for statutory compliance in the first instance unless accepted by the appellate authority. Obiter - The Court's tolerance for parties making such a representation to the appellate authority is procedural guidance, not a relaxation of the statutory deposit requirement by the Court. Conclusion: The petitioner is permitted to approach the appellate authority to claim that departmental amounts (including the asserted Rs. 20 lakhs) be treated as part of the requisite pre-deposit. The Court will not itself waive the statutory pre-deposit requirement on this basis. Additional disposition and discretionary relief Interpretation and reasoning: While denying waiver, the Court exercised limited equitable discretion in granting an extended timeline for compliance with the mandatory pre-deposit, recognizing practical realities and balancing the need for statutory compliance with fairness to the appellant. Ratio vs. Obiter: Ratio - The Court's grant of time is a procedural accommodation and does not constitute a waiver of the statutory pre-deposit; it is not a precedent for waiving the statutory requirement but an exercise of judicial case management to permit compliance. Obiter - Any suggestion that time grants equate to substantive relief from pre-deposit obligations would be incorrect. Conclusion: The petitioner was granted time until a specified date to make the remaining pre-deposit. The Court disposed of the petition on that basis and directed that pending applications, if any, be disposed of accordingly.