Krishak Bharati Co-operative Ltd. vs Union of India

Akil Abdul Hamid Kureshi, J.—Heard learned counsel for final disposal of the petition. The petitioners have challenged the order dated 17.12.2012 at Annexure F to the petition passed by the Appellate Commissioner u/s 35F of the Central Excise Act. The petition arises in following background.

1.1. The petitioner No. 1 is a Multi-State Co-operative Society of Farmers'' Society. The petitioner No. 2 is its office bearer. Against the petitioners, the adjudicating authority had passed an order in original on 13.6.2011 confirming the duty demand of service tax of Rs. 26.68 lakhs (rounded off) with interest and penalty, which comes to approximately Rs. 1.25 crore. The petitioners preferred appeal against such order. Along with the appeal, the petitioners preferred petition for waiver of pre-deposit/stay. On such petition, the Appellate Commissioner passed the impugned order and directed that the petitioners shall deposit the entire amount as per the order of the adjudicating authority by way of pre-deposit. Time was granted to do so up to 11.1.2013.

1.2. Counsel for the petitioners submitted that out of principal tax demand of Rs. 26.68 lakhs (rounded off), a sum of Rs. 15.28 lakhs (rounded off) concerning service tax on the TDS on payment of Foreign Service Provider was already deposited with the authority even before the final order of adjudication was passed. With respect to the remaining amount of Rs. 11.40 lakhs (rounded off), counsel submitted that the petitioners have a strong arguable case. Such demand pertains to service tax on railway wagon owned by the petitioners given on lease/hire to the railway authorities, on which, the petitioners received lease charges from the railways. Counsel submitted that attempt on part of the revenue to cover such payment u/s 65(105)(zzzj) of the Finance Act, 1994 is not justified since the departmental circular dated 29.2.2008 itself makes the position clear that only in cases where supply of tangible goods, such as machinery, equipments etc. with no legal right of possession or effective control would be covered under said provision.

On the other hand, learned counsel Mr. Oza for the department opposed the petition contending that the Appellate Commissioner has found that there is no prima facie case in favour of the petitioners. He has given his brief reasons for the same. The order is passed in exercise of discretionary power. No interference may, therefore, be made.

Having heard counsel for the parties, we are of the opinion that the Commissioner erred in insisting on the petitioners depositing the entire amount by way of pre-deposit. Firstly, the petitioners had already deposited a sizeable sum of Rs. 15.28 lakhs out of total duty, ultimately came to be confirmed of Rs. 26.68 lakhs. Further, even on the remaining amount, the question whether the service tax was payable or not requires further consideration. In other words, it cannot be stated that the petitioners'' appeal has no prima facie case. In the result, the petition is allowed. The impugned order is quashed. Instead of full amount, the petitioners shall deposit a sum of Rs. 20 lakhs before the appropriate authority latest by 30.5.2013. If so done, the Appellate Commissioner shall hear the appeal on merit, if not, the appeal shall stand automatically dismissed.