PRE DEPOSIT BEFORE FILING APPEAL FOR SERVICE TAX MATTERS

[Mr. M. GOVINDARAJAN]

     In my earlier article entitled 'Dispensation of Pre Deposit of Service Tax, interest and penalty appeal before Appellate Tribunal' the requirement of depositing with the adjudicating authority the tax demanded or the penalty levied under Sec. 35F of the Central Excise Act was discussed and cited many a case law in which the tribunal waived the pre deposit of service tax demanded, interest and penalty levied.    In this articles case laws are given in which the tribunals refused for cent per cent waiver of pre deposit and directed to pre deposit according to the circumstances of the cases. 

1.       Shaji Thomas V. Commissioner of Central Excise, Trivandrum - 2008 -TMI - 31070 - CESTAT BANGLORE

The appellant is required to pre deposit the service tax of Rs.84,56,289/- and education cess Rs.1,17,402 and a huge penalty of Rs.1,71,47,382/-  The appellant is a proprietary concern.   He has been engaged in providing services to clients in respect of supply of IMFL to CSD canteen.  His services are exempt under Notification No.14/2004-ST and for that purpose he had not taken the registration under the service tax.   The Commissioner has given detailed findings with regard to the activity carried out by the appellant and the same coming with the ambit of business auxiliary service.   The appellant contended that he was facing with severe financial hardship and is not in a position to pre deposit the entire amount.   He prepared to raise an amount of Rs.40 lakhs for pre deposit for the purpose of hearing the appeal.   The tribunal held that the appellant shall pre deposit an amount of Rs.45 lakhs.

2.      Enchanted Woods Club Ltd., V. Union of India - 2008 -TMI - 31432 - CESTAT NEW DELHI

The applicant filed this petition against the order of the Tribunal partly allowing the stay petition to the extent of Rs.15 lakhs.   In view of admitted fact that the petitioner club became operation with effect from 4.9.2006 and starting providing services from that date, it was observed that prima facie, the service of the petitioner club is liable to service tax with effect from 16.6.2005, therefore, the instant case is not a fit case for total waiver of pre deposit of amount of service tax and penalties.  The High Court further held that at the time of consideration of application for waiver of pre deposit the tribunal is not required to embark upon a detailed inquiry to find out whether the appellant has a strong case or not.

3.       Devi Construction V. Commissioner of Central Excise (Appeals), Salem - 2008 -TMI - 31830 - HIGH COURT MADRAS

Commissioner (Appeals) directed to pre deposit of entire service tax and 50% of penalties even while holding construction of dykes covered under construction service and other activities is not discussed.   Prima facie issue is not properly considered in impugned order.   Finding on undue hardship is absent in impugned order.   Petitioner is directed to pre deposit 50% of balance service tax.   On payment the Commissioner shall take up the main appeal on merits and in accordance with the law by giving an opportunity to the parties.

4.       Midas Cake Pharmaceuticals Pvt. Ltd., V. Union of India - 2008 -TMI - 31745 - HIGH COURT BOMBAY

The tribunal rejected the claim of dispensing with the entire amount of pre deposit, has found that for the purpose of levying service tax, cost of raw materials, over heads and profit of the company, should not have been taken into consideration.   Prima facie it appears that in view of judgments of the Supreme Court in 'BSNL V. Union of India - 2006(2) STR 161 (SC) the petitioner may not be liable to pay service tax.   The appellant has agreed to give bank guarantee of the amount of Rs.50 lakhs.  The court held that the impugned order is modified to the extent on submission of the bank guarantee of Rs.50 lakhs of a nationalized bank to the satisfaction of Commissioner (Appeals) shall hear the appeal on merits and dispose it of, in accordance with law.

5.      Rubicon Formulations Private Ltd., V. Union of India - 2008 -TMI - 31746 - HIGH COURT BOMBAY

Impugned tribunal order refused to dispense with the pre deposit but holding several items as not includible in taxable value. The petitioner agreed to give bank guarantee of Rs.25 lakhs.   The High Court directed the Tribunal to dispose the appeal on submission of the bank guarantee of Rs.25 lakhs.

6.      YRG Services V. Commissioner of Central Excise, Jaipur - 2008 -TMI - 31419 - CESTAT NEW DELHI

The contention of the appellants is that they are not providing any service to the bank or financial institutions rather they are providing service to customers as they customers to the banks and the banks charging processing fee from the customers seeking loans and part of the processing fee, has been received by the applicant as commission.   The tribunal held that this issue is already settled by the tribunal in the case of 'Malpani Finance V. Commissioner of Central Excise, Bhopal - 2008 (10) STR 300 (Tri. Del) the tribunal held that in similar situation the assessee is providing business auxiliary services to the banks for consideration, therefore, is liable to pay service tax as provider of business auxiliary service.   In view of this it is not a fit case of waiver of amount of service tax.   Appellants are directed to deposit the whole of the amount of service tax.

7.      Hira Industries Limited V. Commissioner of Central Excise, Rajpur - 2008 -TMI - 31423 - CESTAT NEW DELHI

In this case the applicant entered into contract for providing business auxiliary service but they are not paying in respect of loading or unloading and transportation charges on the ground that these services provided by sub contractors.   We find that in view of the terms and conditions of the agreement entered into by the applicant with the service recipient, which is a composite contract hence it is not a fit case for total waiver of demand of service tax.   The applicants are directed to deposit an amount of Rs.10 lakhs in addition to the amount already deposited.

8.      M.P. Power Transmission Co., Ltd., V. Commissioner of Central Excise, Bhopal - 2008 -TMI - 4449 - CESTAT, Delhi

The appeal is against the confirmation of demand of Rs.67,28,58,038 under Sec. 73 of the Finance Act, 1994 with interest on the said amount and to waive the pre deposit of the said amount.   Appellants are providing service by arranging transmission of electric energy in the manner that transmission losses are minimal and energy of suitable voltage reaches distribution points owned by DISCOMS and they are sold to various customers.   The tribunal held that unlike other goods, electricity cannot be stored and therefore, has to be instantly transmitted to various points to facilitate distribution.   Services provided by appellant have a very close nexus with activities of TRANSCO and DISCOMS, without support of the appellant the business of generation and sale of electricity cannot be completed.   Appellant, thus, is providing support service, hence, liable to pay service tax.   Pre deposit of Rs.5 crores is ordered by the tribunal.

9.      Jai Mata Dee Sherewali Cable Net Work V. Commissioner of Central Excise, Kanpur - 2008 -TMI - 31456 - CESTAT NEW DELHI

This application is for waiver of pre deposit of service tax of Rs.11,72,309/-  The applicant is a Multi System Operator and is receiving service from broadcaster.   The applicant is further providing the service to various cable operators.   The cable operators are paying service tax in respect of service provided to various customers.   The applicant availed the credit in respect of service tax paid by the cable operators as input service.   The tribunal held that the credit availed by the applicant is not permissible.   Therefore the applicant is directed to deposit the amount in disputes.

10.  Triveni Engineering & Industrial Limited V. Commissioner of Central Excise, Meerut - 2008 -TMI - 31450 - CESTAT NEW DELHI

Applicants availed credit in respect of service tax paid on insurance charges in respect of vehicles such as school bus, cash transaction and buildings.   The tribunal found that school bus cannot be said to be used in or in relation to the manufacture of goods.   School bus and building are not covered under the scope of inputs or capital goods.   In these circumstances, prima facie, is not a fit case for total waiver of pre deposit of duty and penalty.

The case laws discussed are some examples in which waiver of pre deposit is rejected.  Each case is having its merits as well as demerits.   It is to establish that there is a prima facie case for the applicant for the waiver of pre deposit otherwise the tribunals are constrained to reject the waiver of pre deposit in toto or direct to pay the amount as decided by the tribunal.