JMC Educational Trust vs Customs, Excise and Service Tax Appellate Tribunal, South Zonal Bench and Another

S. Nagamuthu, J.—The petitioner is a trust, registered under the Indian Trust Act, 1882, and is engaged in promoting education and conducting classes to the students under the Distance Education Programme of various Universities such as Tamil Nadu Open University, Mother Theresa University and Allagappa University. For imparting education to the students, the petitioner''s trust collects prescribed fee from the students and a part of the said amount is paid to the university and the balance amount is retained by the petitioner''s trust.

While so, the Assistant Commissioner of Central Excise, Trichy-I issued a show cause notice to the petitioner by his proceedings in C. No. V/ST/30/ 10/2006-ST-Adj dated June 7, 2006 calling upon the petitioner''s trust to pay a total sum of Rs. 71,200 towards service tax of Rs. 70,953 and education cess of Rs. 247 for the period from July 2003 to March 2005. The petitioner submitted his explanation for the same stating that the service which is rendered by the petitioner''s trust does not fall within the scope of Section 65(26) of Chapter V of the Finance Act, 1994 and so the petitioner is not liable to pay any service tax. But, the Assistant Commissioner has passed final order dated November 24, 2006 thereby directing the petitioner to pay Rs. 71,200 as service tax with interest till the date of actual payment and also imposed penalty to the tune of Rs. 71,200 and Rs. 1,000 u/s 77 and Rs. 71,200 u/s 78 and Rs. 500 u/s 75A of the Finance Act, 1994.

The petitioner challenged the same by way of appeal before the Commissioner of Central Excise (Appeals), Trichy. The second respondent took up the appeal and passed final order on April 2, 2007 in Appeal No. 15 of 2007 and confirmed the order of the Assistant Commissioner. Challenging the same the petitioner has preferred an appeal to the first respondent-Tribunal. The said appeal is pending in Appeal No. 140 of 2007. Along with the said appeal, the petitioner has made an interlocutory application praying for an order of stay. The Tribunal however has passed a conditional order of stay directing the petitioner to pre-deposit the entire amount of service tax of Rs. 71,200 and waived the penalty for the purpose of stay. The said stay order of the first respondent is under challenge in this writ petition.

Heard the learned Counsel for the petitioner and the learned Assistant Solicitor General of India appearing for the respondents. The learned Counsel for the petitioner would submit that the Tribunal was not right in imposing condition that the petitioner should pre-deposit Rs. 71,200 which is the service tax covered under the impugned order. He would submit that while considering the petition for stay during the pendency of the appeal, the first respondent is required to consider two main aspects, namely, (i) prima facie case and (ii) financial position of the petitioner. The learned Counsel would rely on a judgment of the honourable Supreme Court in Benara Valves Ltd. and Others Vs. Commissioner of Central Excise and Another, , and a judgement of this court in Ramaswamy Naidu Textiles Ltd. v. CEGAT, Chennai reported in [2003] 111 ECR 397 and another judgment of this court in W.P. No. 4535 of 2004 Sri Naga Nanthana Mills Limited v. Commissioner of Central Excise (Appeals) in support of the above contentions.

The Assistant Solicitor General of India for the respondent would submit that in this case the Tribunal has considered all the aspects of the case and has come to the conclusion that the petitioner was liable to pay tax and there is no prima facie case in favour of the petitioner. He would further submit that the financial position of the petitioner was also taken note of. The learned Counsel would rely on a judgement of a learned single Judge of this court in W.P. (MD) No. 2386 of 2004 Tansi Structurals Limited v. The Assistant Registrar, Customs Excise and Service Tax Appellate Tribunal wherein the learned single Judge has reiterated the above legal proposition in respect of pre-deposit.

I have considered the rival contentions. In this case, the main contention of the learned Counsel for the petitioner is that the service of the petitioner for imparting education to the students under Distance Education Programme run by certain Universities would not fall within the definition of "commercial training or coaching" as defined u/s 65(26) of the Finance Act. In my considered opinion, that is the main question to be answered in the appeal, which is now pending before the first respondent-Tribunal. Therefore, in this writ petition, I cannot express any opinion as to whether the activities of the petitioner would fall within the ambit of Section 65(26) of the Finance Act or not. The Tribunal has been prima facie satisfied that the petitioner is not entitled for absolute stay and that is how taking a very lenient view has directed the petitioner to deposit the service tax amount alone. In respect of the financial position of the trust also, admittedly the trust is collecting fees from other students. Even the honourable Supreme Court in the judgment cited by the learned Counsel for the petitioner in Benara Valves Ltd. and Others Vs. Commissioner of Central Excise and Another, has held as follows:

As noted above there are two important expressions in Section 35(F). One is undue hardship. This is a matter within the special knowledge of the applicant for waiver and has to be established by him. A mere assertion about undue hardship would not be sufficient. It was noted by this court in S. Vasudeva Vs. State of Karnataka and others, that under Indian conditions expression ''undue hardship'' is normally related to economic hardship. ''Undue'' which means something which is not merited by the conduct of the claimant, or is very much disproportionate to it. Undue hardship is caused when the hardship is not warranted by the circumstances.

For a hardship to be ''undue'' it must be shown that the particular burden to have to observe or perform the requirement is out of proportion to the nature of the requirement itself, and the benefit which the applicant would derive from compliance with it.

As extracted above, the honourable Supreme Court has held that undue hardship on the part of the petitioner must be shown since the same is within the exclusive knowledge of the petitioner. A mere assertion about undue hardship would not be sufficient. In this case, except for a mere assertion, no more material is placed by the petitioner to say that the condition of pre-deposit would cause undue hardship to the petitioner''s trust. In view of the above position, I am fully satisfied that the first respondent-Tribunal has considered both the essential aspects, namely, prima facie case in favour of the petitioner and also the alleged undue hardship and has rightly come to the conclusion that there is no prima facie case in favour of the petitioner and there will be no undue hardship to the petitioner because of the condition to make pre-deposit. In view of the above position, I do not find any merit in this writ petition. The writ petition fails and the same is dismissed.

At this juncture, the learned Counsel for the petitioner would request the court, to issue a direction to the first respondent-Tribunal to dispose of the appeal within a time frame. It is needless to say that the appeal is pending for quite sometime only because of the interim order obtained in this case by the petitioner. But for this writ petition, by this time, the appeal would have been over. So, the Tribunal cannot be blamed for the delay. However, having regard to the facts and circumstances of the case, the first respondent-Tribunal is directed to dispose of the appeal preferred by the petitioner within a period of two months from the date of receipt of a copy of this order, on merits and in accordance with law.

In the result, the writ petition is dismissed. No costs. Consequently, the connected miscellaneous petition is closed.