D.P. Singh Chadha vs Commissioner of Central Excise

Ajay Kumar Mittal, J.—This appeal has been preferred by the assessee u/s 35G of the Central Excise Act, 1944 (in short "the Act") against the order dated 27.1.2014 (Annexure A-6) passed by the Customs, Excise and Service Tax Appellate Tribunal, New Delhi (hereinafter referred to as "the Tribunal"), claiming the following substantial questions of law:--

(i) Whether the impugned order is contrary to findings recorded by Ld. Tribunal?

(ii) Whether Ld. Tribunal is justified to order to deposit whole amount of tax and interest?

(iii) Whether order of deposit of whole amount of tax and interest is justified when the Appellant has strong prima facie case?

The facts, in brief, necessary for adjudication of the present appeal as narrated therein are that the assessee is a Government contractor and engaged in the construction of residential/commercial complexes on contract basis for various Government Departments/civil authorities. The appellant entered into two composite contracts for construction of residential flats at Ludhiana with Ludhiana Improvement Trust during the period 2005-06 to 2009-10 and as such he completed the same and handed over to the Improvement Trust. The Government vide letter dated 16.6.2005 levied service tax on construction of complex and also levied service tax on works contract services vide letter dated 1.6.2007. The respondent issued two show cause notices to the assessee raising demand of Rs. 14.92 lacs and Rs. 12.62 lacs, respectively. The adjudicating authority vide orders dated 24.2.2011 (Annexure A-1) and dated 17.3.2011 (Annexure A-2) confirmed the demand and also imposed penalty of an equal amount. Feeling aggrieved, the appellant filed two appeals before the Commissioner (Appeals). The Commissioner (Appeals) vide orders dated 26.12.2012 (Annexure A-3) and dated 7.12.2012 (Annexure A-4) upheld the orders of the adjudicating authority and dismissed the appeals. Still dissatisfied, the assessee filed appeals along with stay applications before the Tribunal. The Tribunal vide order dated 27.1.2014 (Annexure A-6) directed the assessee to deposit a sum of Rs. 9.5 lacs along with proportionate interest on the amount of Rs. 27.54 lacs (excluding the component of penalties) as a condition precedent for hearing of the appeal. Hence, the present appeal.

Learned counsel for the appellant submitted that the Tribunal had directed the assessee to pre-deposit a sum of Rs. 9.5 lacs along with the proportionate interest on the amount of Rs. 27.54 lacs (excluding the component of penalties) as a condition precedent for hearing of the appeal which was unreasonable and unjustified.

After hearing learned counsel for the appellant, we do not find any merit in the appeal. In the present case, the Tribunal while directing the appellant to deposit Rs. 9.5 lacs along with proportionate interest on the amount of Rs. 27.54 lacs (excluding the component of penalties) as a pre-deposit for hearing of the appeal has noticed as under:--

We notice that the total service tax liability confirmed by the primary authority as well as in appeal to further appellate authority is of the order of about Rs. 27.54 lakhs. While we prima facie find no justification for the authorities classifying the composite services provided by the petitioner as commercial or industrial construction services after 1.6.2007, by which date works contract was a distinct and separate taxable service, we find no justification for the petitioner''s claim to the benefits of 2007 rules because they neither filed ST-3 Returns nor remitted service tax liability after availing the benefits of the Composition Scheme 2007 Rules or exhibit the overt conduct which would amount to exemption of an option under Rule 2007. Whether in the totality of the circumstances, penalty should be levied is an issue, we consider it appropriate to be dealt at the time of final hearing. 4. On the above prima facie analysis, we find a prima facie case and balance of convenience to grant waiver of pre-deposit and stay all further proceedings of the adjudicated liability as confirmed by the primary authority and the lower appellate authority respectively on condition that the petitioner remits Rs. 9.5 lakhs plus the proportionate interest on the amount of Rs. 27.54 lakhs (excluding the component of penalties in total) within the period of 8 weeks from today. In default, the stay shall stand dissolved and the appeals stand rejected for failure of pre-deposit. The stay applications are accordingly disposed of.

In the present case, the appellant has been required to pre-deposit Rs. 9.5 lacs plus the proportionate interest on Rs. 27.54 lacs excluding the component of penalties out of demand of duty of Rs. 27.54 lacs and equal amount of penalty which is reasonable and justified.

In such a situation, no substantial question of law arises in this appeal. In view of the above, finding no merit in the instant appeal, the same is hereby dismissed. A prayer was made by the learned counsel for the appellant to extend the time for pre-deposit. However, in the interest of justice, we extend the time to deposit the amount as directed by the Tribunal up to 30.4.2014. It is directed that if the appellant in the present case deposits the amount as directed by the Tribunal by 30.4.2014, the appeal shall be heard on merits in terms of order dated 27.1.2014 passed by the Tribunal.