G Mahesh Babu vs Commissioner Of Customs, Central Excise And Service Tax (Appeals II And VI)

Leave granted.

This appeal arises from the dismissal of an appeal initially by the Commissioner (Appeals) for non-deposit of an amount of Rs 16.50 lakhs by way of pre-deposit. Following the non-deposit, the appeal was dismissed. The appeal filed before the Customs, Excise and Service Tax Appellate Tribunal ["CESTAT"] was dismissed on account of a delay of 812 days. The High Court was of the view that in the circumstances of the case, no case for interference was made out.

The dispute in the present case pertains to the period 1 April 2007 and 31 March 2008. On a verification of the records, including the Ledger Accounts and ST-3 returns, it was noticed that the appellant - assessee had received an amount of Rs 1.50 crores as "appearance money" on which the liability to service tax had not been discharged. It appears that the assessee claimed that this income had been earned towards inauguration by him of certain shops, as gift income. On this basis, the assessee claimed that it was not exigible to service tax.

A notice to show cause was issued to the appellant on 8 September 2010 by the Commissioner of Customs, Central Excise and Service Tax demanding service tax outstandings of Rs 18,54,000. The appellant filed a reply dated 4 October 2010. On 18 October 2012, the Commissioner of Customs, Central Excise and Service Tax confirmed the demand and a penalty of an equivalent amount, together with interest.

Aggrieved by the order of the Commissioner, the appellant filed an appeal on 7 December 2012 before the Commissioner (Appeals), together with an application for waiver of pre-deposit. On 28 January 2013, the Commissioner (Appeals) declined to accede to the prayer for a waiver of pre-deposit. Upon the failure of the appellant to effect the deposit, the Commissioner (Appeals) dismissed the appeal on 25 February 2013. The appellant then moved the CESTAT, Bangalore, which by an order dated 28 September 2013 remanded the matter back to the file of the Commissioner (Appeals) for fresh adjudication. The Commissioner (Appeals), by an order dated 28 November 2013, directed the appellant to pay a sum of Rs 16,50,053 as a condition for stay.

According to the appellant, an appeal was filed before the CESTAT on 17 December 2013 against the order of the Commissioner (Appeals) dated 28 November 2013. This is disputed by the Revenue. Be that as it may, the Commissioner (Appeals) dismissed the appeal on 23 December 2013. The appellant then filed the appeal before the CESTAT, at its regional Bench, at Bangalore against the dismissal of the appeal. The appeal was filed on 6 July 2016 with a delay of 812 days. The CESTAT dismissed the appeal on 6 June 2018. The High Court has dismissed the further appeal by its impugned order dated 14 March 2019.

During the course of the pendency of the proceedings, the counter affidavit filed on behalf of the Union of India indicates that the entire amount due by way of service tax, penalty and interest has been recovered. In paragraph 12 of the counter affidavit, it has been stated that following the dismissal of the appeal by the CESTAT, notices were issued to the bankers directing them to deduct an amount of Rs 73,44,634 [Rs 18.54 lakhs towards service tax, Rs 18.54 lakhs towards penalty and Rs 36,36,634 towards interest). It appears that a demand draft of Rs 41,96,648 was remitted by Axis Bank while another demand draft of Rs 31,47,994 was remitted by ICICI Bank. Mr Vikramjit Banerjee, learned Additional Solicitor General states that the entire amount has since been recovered.

The facts, as they emerged before the Court, indicate that the appeal filed by the assessee has been dismissed only on the ground of delay and failure of pre-deposit. The entire amount of tax, penalty and interest has been recovered. The submission of the assessee is that though it had preferred an appeal against the order dated 28 November 2013, on the application for waiver of pre-deposit passed by the Commissioner (Appeals), the appeal was dismissed on merits on 23 December 2013. The assessee submits that he was under the bona fide belief that the appeal filed against the order on the stay petition would be listed and, hence, there was a delay in filing the appeal before the CESTAT against the order dated 23 December 2013.

The learned Additional Solicitor General doubted whether an appeal had been filed. The learned counsel appearing on behalf of the appellant states that an appeal had, in fact, been filed and that the proof of the filing of the appeal is available with the appellant. Accordingly, we are of the view that, having regard to the above circumstances and since the entire amount by way of tax, penalty and interest has been recovered, the interests of justice would warrant that an opportunity be granted to the assessee to contest the appeal on merits. Learned counsel appearing on behalf of the assessee has also fairly stated before the Court that the appeal before the Commissioner (Appeals) shall now be canvassed only on merits.

For the above reasons and in the facts and circumstances of this case, we allow the appeal and set aside the impugned judgment and order of the High Court dated 14 March 2019. We accordingly restore Appeal No 118/2013 (H-II) ST to the file of the Commissioner of Customs, Central Excise and Service Tax (Appeals - II & IV), Hyderabad for disposal on merits. However, having regard to the delay on the part of the appellant, we direct the appellant to pay costs to the respondent quantified at Rs. 50,000 which shall be a condition precedent to the hearing of the appeal. The costs shall be deposited by the appellant within a period of three weeks from the receipt of a certified copy of this order, failing which the appellant shall lose the benefit of this order and, in consequence, the dismissal of the appeal shall stand.