By TIOL News Service

ERNAKULAM, MAR 16, 2015: RECENTLY, TIOL reported a judgement by the High Court of Telangana and Andhra Pradesh - 2015-TIOL-511-HC-AP-CX, wherein the High Court took a prima facie view that the requirement of mandatory pre-deposit does is not applicable to the disputes before the amendment made in 2014 and allowed the appellant to seek waiver of pre-deposit before the Tribunal.

In yet another case, the Kerala High Court also held that the appellant is not required to comply with the mandatory pre-deposit of 7.5% of the tax as the dispute pertains to the period prior to the amendment carried in 2014.

The petitioner is engaged in the business of lending money to customers, against gold that was pledged by the said customers with the petitioner. The loan amounts were then assigned by the petitioner to reputed banks who would pay the petitioner the purchase consideration for the loan amounts assigned to them, the consideration being worked out as the total of the principal amount, interest and other charges. This was as against the book value of the receivables which was admittedly lower. The respondent authorities computed the difference between the purchase price and the book value of the receivables and treated this as consideration received by the petitioner and demanded service tax under Business Auxiliary Service.

The appellant inter alia contended that the petitioner bank has been filing returns on a regular basis, and further, the amounts received by it pursuant to business transactions were all recorded in the audited balance sheet and profit and loss accounts which were regularly filed the statutory authorities from time to time and there was no justification whatsoever for invoking the larger period of limitation under the statute, while confirming the demand of service tax against the petitioner.

It is the contention of revenue that the petitioner has an effective alternative remedy against the impugned order passed as they can prefer an appeal before the Customs, Excise and Service Tax Appellate Tribunal against the said order. By virtue of the amendment that was introduced into the Finance Act, 1994, with effect from 6.08.2014, the petitioner is required to deposit only 7.5% of the tax amount confirmed against it, as a condition for preferring an appeal before the Appellate Tribunal.

After hearing both sides, the High Court held:

The only point that arises for consideration is whether the petitioner would have to deposit the amount of 7.5% of the tax confirmed against him, as a condition for pursuing the appellate remedy before the Tribunal. Recently, a Division Bench of the High Court of Telengana & Andhra Pradesh - 2015-TIOL-511-HC-AP-CX has taken a prima facie view that, inasmuch as the lis in question had commenced prior to the introduction of the amendment to the Finance Act, 1994, with effect from August 2014, the petitioner's right of appeal as per the erstwhile provisions of law would not be affected by the provisions introduced by the amendment of 2014. Although not expressly referred to in the interim order dated 19.02.2015 passed by the High Court of Telengana & Andhra Pradesh in WP 3393/2015, the view seems to be consistent with the settled law that the institution of a suit carries with it an implication that all rights of appeal then in force are preserved to the parties thereto till the rest of the career of the suit and, further, that the right of appeal that is vested is to be governed by the law prevailing at the date of institution of the suit or proceeding, and not by the law that prevails at the date of its decision or at the date of filing of the appeal.

The petitioner, in whose case also the lis commenced in 2012, would not be required to deposit the amount of 7.5%, as required pursuant to the 2014 amendment, and in that respect, he would have an efficacious alternate remedy before the Tribunal where he can file an appeal, together with an application for waiver of pre-deposit and stay of recovery of the amounts confirmed against him by the impugned order. At the time of filing the appeal, he will not be required to make any payment as a pre-condition for the hearing of the waiver application by the Tribunal.

(See 2015-TIOL-632-HC-KERALA-ST)