Anand Cine Service vs CESTAT

M. Sathyanarayanan, J.—The appellant herein is engaged in the business of supplying equipment for cinematography on hire basis to various agencies and those agencies pay hire charges to the appellant. When the new entry 65(105)(zzzzj) of the Finance Act, 1994, for taxing ''supply of tangible goods'' was brought into force, the appellant herein also got itself registered for payment of service tax and according to him, they are paying service tax regularly. The Service Tax Authorities felt that for the period prior to 16-5-2008 also, the service provided by the appellant was covered by the definition of Photographic Service and consequently taxable under the entries 65(105)(zb) read with 65(78) and 65(79) and based on the same, two show cause notices for the period from 1-10-2003 to 31-12-2007 and for the period from 1-1-2008 to 31-12-2008 were issued and after adjudication, demands for tax amounting to Rs. 4,93,97,689/- and Rs. 2,02,83,714/- respectively have been confirmed against the appellant along with interest and penalties by means of a common adjudication order. Aggrieved by the same, the appellant had filed an appeal before the CESTAT and arguments were advanced on the merits of the case. The Tribunal after considering the submissions made by the learned counsel for the appellant and the Department Representative appearing for the Revenue felt that the issue requires a detailed examination at the time of final hearing and taking into consideration of the factual and legal position, directed the appellant to make a pre-deposit of Rs. 70.00 lakhs for admission of appeal within a period of eight weeks from the date of pronouncement of the order, namely, 26-8-2013 and upon such deposit, the Tribunal waived the balance amount arising from the impugned order for admission of appeal and also granted stay on collection of dues during the pendency of the appeal and directed the matter to be listed on 17-11-2013 for reporting compliance.

The appellant, aggrieved by the order passed by the Tribunal, dated 26-8-2013, has filed C.M.A. No. 520 of 2014 and this Court, while entertaining the appeal on 21-2-2014, has formulated the following substantial questions of law:

"1. Once a transaction is admitted to be squarely covered under Sales Tax/VAT, whether the very same transaction can be charged to service tax again?

In determining an issue relating to classification of taxable service, whether specific entry is to be preferred over general entry?

Whether a non-speaking order could be passed for ordering pre-deposit of Rs. 70 laths?"

The appellant has also filed a petition for stay and Mr. V. Sundareswaran, learned Senior Panel Counsel, takes notice for respondents 2 and 3 and seeks time to get instructions.

The Tribunal has listed the matter for reporting compliance of its earlier order dated 26-8-2013 on 21-3-2014 and when the matter was called on 21-3-2014, the appellant has filed a memorandum before the Tribunal stating among other things that C.M.A. No. 520 of 2014 preferred against the earlier order dated 26-8-2013 has been entertained by this Court on 21-2-2014 and the learned Standing Counsel appearing for the Revenue also took notice and sought time to get instructions and the appeal was directed to be listed on 4-3-2014 and therefore prayed for extension of time by four weeks for reporting compliance.

The Tribunal took up the case for hearing on 21-3-2014 and made an enquiry to the learned counsel for the appellant and thereafter recorded the fact that the appellant neither produced any stay order from the higher forum nor complied with the earlier order of pre-deposit dated 26-8-2013 and hence dismissed the appeal for non-compliance of the stay order under Section 35F of the Central Excise Act, 1944.

Aggrieved by the said order of dismissal of appeal by the Tribunal, the appellant has filed C.M.A. No. 1684 of 2014 and in the grounds of appeal, the appellant has raised the following substantial questions of law:

"1. Whether an appeal could be dismissed by first respondent Tribunal for non-compliance of pre-deposit, when Civil Miscellaneous Appeal filed under Section 35G of the Central Excise Act, 1944 read with Section 83 of the Finance Act, 1994 against the Misc. Order directing pre-deposit was pending before High Court?

Whether the first respondent Tribunal committed a serious error in overlooking the fact that the delay in ''Reporting Compliance'' was caused wholly because of delay in filing counter affidavit by the department and consequently whether the first respondent Tribunal committed a serious error in not extending the time for ''Reporting Compliance'' instead of dismissing the appeal?"

The learned counsel for the appellant would vehemently contend that the appellant has a great chance of success in the appeal in event of the same is being decided on merits; that the Tribunal committed an error in directing the appellant to make pre-deposit of Rs. 70.00 lakhs without assigning any reason; that in spite of the appellant having filed a memorandum on 20-3-2014 stating about the entertaining of C.M.A. No. 520 of 2014 by this Court against the order of pre-deposit passed by the Tribunal dated 26-8-2013 and in view of the fact that it was brought to the notice of the Tribunal that the learned counsel appearing for the Revenue took notice in the stay application and sought for time to file counter affidavit and though the appellant prayed for extension of time for compliance of the pre-deposit, the Tribunal dismissed the appeal on the ground of non-compliance of the conditional order and hence prays for interference of this Court.

Per contra, Mr. V. Sundareswaran, learned Senior Panel Counsel appearing for the Revenue, has invited attention of this Court to the counter affidavit dated 24-3-2014 filed by the third respondent in C.M.A. No. 520 of 2014 and the same was received by this Court on 26-3-2014 and would submit that the substantial questions of law raised in C.M.A. No. 520 of 2014 were already answered in favour of the Revenue by the Hon''ble Supreme Court in Association of Leasing and Financial Service Companies Vs. Union of India (UOI) and Others, and also by two Division Benches of this Court in Tata Sky v. State of Tamil Nadu and Another ( 62 VST 63) and M/s. AGS Entertainment Private Limited and Vs. Union of India, The Central Board of Excise and Customs and The Commissioner of Service Tax and Others, and therefore, the appeal itself lacks merit. He further submitted that though the total demand is Rs. 6,96,81,403/-, only 10% of the same was directed to be deposited by way of pre-deposit and there is no undue hardship as pleaded by the appellant and the order passed by the Tribunal is sustainable in law. Hence, he prays for dismissal of these appeals.

In response to the said submission, the learned counsel for the appellant on instructions would submit that without prejudice to the rights and contentions of the appellant, the appellant is ready and willing to make a pre-deposit of Rs. 30.00 lakhs as against Rs. 70.00 lakhs and would further submit that since the appellant is having a great chance of success in the appeal, which was dismissed for non-compliance of conditional order of pre-deposit dated 26-8-2013 by the Tribunal, the Tribunal may be directed to restore the appeal on its file and dispose of the same on merits. On the said submission, this Court heard the submission of the learned counsel for the Revenue also. In the light of the arguments of the learned counsel for the appellant and the learned Panel Counsel for the Revenue and other attended facts and circumstances, this Court proposes to pass the following order:

"(i) The conditional order dated 26-8-2013, made in Miscellaneous Order No. 42003 of 2013, which is the subject matter in C.M.A. No. 520 of 2014, stands modified to the effect that the appellant shall deposit a sum of Rs. 30.00 lakhs instead of Rs. 70.00 lakhs, as ordered by the Tribunal, by way of pre-deposit on or before 27-6-2014. The appeal is disposed of with the above direction. No costs. Consequently, M.P. No. 1 of 2014 is closed.

(ii) The Final Order No. 40196/2014, dated 21-3-2014, made in Appeal No. 3T/213/2012-DB, which is the subject matter in C.M.A. No. 1684 of 2014, is set aside subject to the condition that if the appellant makes the deposit as aforesaid and on such deposit, the Tribunal shall restore the appeal on its file and thereafter, give a disposal on merits and in accordance with law as expeditiously as possible. C.M.A. No. 1684 of 2014 is also disposed of. No costs. Consequently, M.P. Nos. 1 and 2 of 2014 are closed.

(iii) If the appellant fails to make deposit within the time stipulated by this Court, the original order of dismissal of the appeal for want of compliance, which is the subject matter in C.M.A. No. 1684 of 2014, stands restored.

(iv) It is represented by the learned counsel for the appellant that after dismissal of the appeal, the bank accounts of the appellant have been attached. In the light of the order passed by this Court in these appeals, it is open to the appellant to move the Tribunal for unfreezing bank accounts, after compliance of the modified conditional order of pre-deposit, by filing necessary application and if such application is filed, the Tribunal shall take up the same and dispose of the same as expeditiously as possible.

(v) Post these appeals on 27-6-2014 for reporting compliance."