By TIOL News Service

CHENNAI, APRIL 25, 2017: THE appellant is engaged in providing site formation servicesby levelling the ground and excavating the earth with the help of excavators.

This service is offeredby the appellant either directly to their clients or to construction companies.

A service tax demand of Rs.1,94,18,848/- was issued for the period 16.06.2005 and 31.12.2008. The demand notice also sought appropriation of the amounts paid and also the recovery of service tax allegedly collected from customers but not paid to the exchequer. Interest and penal provisions were also invoked.

The adjudicating authority confirmed the demand and the appellant filed an application before the CESTAT for waiver of pre-deposit of the tax confirmed and interest/penalty.

Incidentally, the Tribunal noted in its order that out of the total demand qua service tax, which is a sum of Rs.1,94,18,848/-, a sum of Rs.1.08Crores, had been paid by the main contractor.

Despite the aforesaid, the Tribunal came to the conclusion that a further sum of Rs.24,00,000/-, ought to be paid by the appellant, if it were to direct hearing of the appeal. This Tribunal order is dated 12.06.2012 and the appellant was granted four weeks time to pay and report compliance on 26.07.2012.

Aggrieved by this order, the appellant is before the Madras High Court.

When the appeal came up for hearing for the first time on 05.07.2012, theHigh Court stayed the order of pre-deposit.

On 18.07.2012, the appeal was admitted and questions of law were framed for consideration.

The appeal was decided recently.

The appellant submitted that the Tribunal was required to examine, as to whether or not, the appellant had a prima facie case and more particularly, whether hardship would be caused, if, it was called upon to pay, in the given circumstances, a sum of Rs.24 lakhs at this stage of the matter; that a substantial amount of money towards the demand raised had already been deposited and, therefore, the Tribunal order, in the given circumstances, would be harsh.

The High Court observed -

+ It is not in dispute that against the total demand amounting to nearly Rs.1.95Crores, the appellant has, admittedly, albeit, via, the main Contractor, deposited, approximately, even according to the Revenue, a sum of Rs.1.08Crores.Furthermore, the appellant has also paid, as alluded to above, sums in the excess of Rs.2,00,000/-.

+ The Tribunal, was in fact required to examine in terms of Section 35 F of the Central Excise Act, 1944, as to whether or not, in its opinion, deposit of the tax demanded or penalty levied, would cause undue hardship to the appellant, and thus, based on the result of enquiry to determine to what extent waiver of demand, if at all, had to be directed.

+ These aspects of the matter have not been adverted to by the Tribunal. The Tribunal's order is completely bereft of any rationale, as to why, the appellant ought to have been called upon to pay a further sum of Rs.24,00,000/-, when a substantial part of the demand stood deposited with the Revenue. The issue of hardship was not addressed at all by the Tribunal.

+ Tribunal failed to examine whether or not the Assessee had a prima facie case to seek abatement of tax to the extent of Rs.61 lakhs or, whether the Assessee could be called upon to pay service taxvis-à-vis services rendered on behalf of the main contractor, who had, as indicated above, deposited the tax.

Holding that the order cannot sustain, the same was set aside.

The Tribunal was directed to list the appeal for hearing and dispose of the same, as expeditiously as possible.

(See 2017-TIOL-789-HC-MAD-ST)