2025 (7) TMI 1340 - HC - Service Tax

Non-payment of service tax - services provided under construction of complex services and commercial or industrial construction services - amount is to be taken as a whole or the same has to be considered in a pre-SCN and a post-SCN situation - HELD THAT - The total demand in this case is to the tune of approximately Rs. 13.66 Crore. The Petitioner has already deposited either through self-assessment or through other means Rs.5.36 Crore which is a substantial part of the entire demand itself. Under such circumstances the question as to whether the Petitioner is entitled to exemption from payment of service tax is yet to be determined by the CESTAT. Moreover the appeal filed by the Petitioner is likely to be rejected on the ground of non-payment of pre-deposit - The total pre-deposit that is now demanded from the Petitioner is approximately to the tune of Rs. 17 lakh which is a small sum compared to what the Petitioner has already deposited i.e. Rs. 5.36 Crore. Moreover a Coordinate bench of this Court in decision of Mohammed Akmam Uddin Ahmed Ors. v. Commissioner Appeals Customs And Central Excise Ors. 2023 (5) TMI 23 - DELHI HIGH COURT while discussing a number of decisions held that the Court has the power to exercise discretion to waive requirement of pre-deposit of penalty in rare and deserving cases. Accordingly the Petitioner is granted waiver of a sum of Rs. 17, 21, 477/-. The appeal of the Petitioner before CESTAT shall now be adjudicated on merits and shall not be dismissed on the technical ground of non-deposit of the balance pre-deposit amount - The appeal of the Petitioner be listed before the CESTAT on 26th August 2025. Petition disposed off.

Summary

ISSUES:

Whether services provided under composite works contracts, specifically construction of complex services and commercial or industrial construction services, are liable to service tax.Whether pre-deposit under Section 35F of the Central Excise Act, 1944 should consider amounts already deposited prior to issuance of Show Cause Notices (SCNs) or only the short-paid amounts specified in the SCNs.Whether the Court has the discretion to waive the requirement of pre-deposit of service tax demands or penalties in rare and deserving cases.

RULINGS / HOLDINGS:

On the question of liability, the Court refrained from deciding whether the composite works contract services are liable to service tax, noting that this issue is to be adjudicated by the appellate authority on merits.The Court held that the pre-deposit requirement under Section 35F must be assessed in light of the amounts short-paid as per the SCNs and not the total tax demand, but also recognized that the Petitioner had already deposited a substantial portion (approximately 39.28%) of the gross tax demand.The Court exercised its discretion to grant waiver of the pre-deposit amount of Rs. 17,21,477/- demanded by the CESTAT, relying on established principles that pre-deposit can be waived in "rare and deserving cases" where clear justification exists.The appeal before the CESTAT shall be heard on merits and shall not be dismissed on the ground of non-payment of the balance pre-deposit amount.

RATIONALE:

The Court applied the statutory framework under Section 35F of the Central Excise Act, 1944, which mandates pre-deposit for filing appeals before the CESTAT.It relied on precedent from a Coordinate Bench which recognized judicial discretion to waive pre-deposit requirements in "rare and deserving cases," citing decisions where waiver was granted due to lack of reasons in penalty imposition, potential paralysis of business, or limited financial means.The Court distinguished between amounts already deposited pursuant to self-assessment and the short-paid amounts identified in the SCNs, emphasizing that pre-deposit should focus on the latter but also considering the substantial prior deposits in the overall assessment of waiver.The Court declined to enter into the substantive question of service tax liability at this interlocutory stage, reserving it for the appellate authority's determination on merits.