Mohabir Enterprises vs Commissioner of Central Excise (Appeals) and Others

V. Dhanapalan, J.—Heard Mr. M. N. Bharathi, learned counsel for the petitioner and Mr. M. Santhanaraman, learned Senior Central

Government Standing Counsel appearing for the respondents. The order passed by the first respondent-appellate authority in Pre-Deposit-cum-

Appeal Order No. 62/2013 (M-ST(PD)) (in A. No. 366/2012 (M-ST)), dated January 22, 2013, whereby and whereunder, the authority has

decided that for taking up the appeal, the pre-condition for depositing the entire amount of Rs. 47,93,469 towards service tax, with interest,

penalty, etc., had been reduced to Rs. 4 lakhs u/s 35F of the Central Excise Act, 1944 (hereinafter referred to as, ""the Act"") made applicable to

the service tax as per section 83 of the Finance Act, 1994 and the balance amount was waived, is called in question, seeking to quash the same as

unlawful, arbitrary and not sustainable in law.

According to the petitioner-company, the officers attached to the second respondent called for certain details relating to the activities of the

petitioner with one M/s. Shiv-Vani Oil and Exploration Services Limited, New Delhi and M/s. Max-Tech Oil and Gas Services Private Limited,

New Delhi, for providing short hole drilling and 3D seismic job services. The petitioner engages labourers to drill the land up to a depth stipulated

by the clients, which is performed manually by unskilled labourers hired by the petitioner from time to time and the petitioner informed the

Department that they are only sub-contractors and as per the agreement, the petitioner is precluded from charging/collecting service tax, as the

main contractors remit service tax on the services provided by them to the ultimate client. The petitioner relies upon the trade notices issued and the

clarification issued by the Central Board of Excise and Customs (CBEC) to the effect that sub-contractors are not liable to remit service tax when

the same is remitted by the main contractors. The petitioner contested the classification and taxability of the impugned services under the category

survey and exploration of mineral services"" as defined'' u/s 65(104a) of the Finance Act, 1994.

While so, it is the case of the petitioner that a show-cause notice in No. 608/2009, dated November 30, 2009 was issued by the second

respondent to the petitioner, requiring the petitioner to show cause as to why a sum of Rs. 47,93,649 towards service tax, should not be

demanded u/s 73(1) of the Finance Act, 1994, apart from demand of interest. However, the petitioner filed reply, dated January 19, 2010 to the

adjudicating authority, and the adjudication proceedings were transferred to the third respondent in terms of Notification No. 6/2009, Service Tax,

dated January 30, 2009 issued by the Chief Commissioner of Central Excise, Chennai Zone. The counsel for the petitioner appeared before the

then adjudicating authority on March 14, 2011 and made submissions and the successor-adjudicating authority fixed hearing on January 27, 2012,

and the counsel for the petitioner, vide letter dated January 29, 2012 informed his inability to attend the hearing due to other pre-occupation. The

third respondent then fixed the hearing on February 27, 2012, on which date, the counsel for the petitioner appeared before the authority and the

third respondent passed the order in Order-in-Original No. 20/2012, dated February 29, 2012, levying service tax of Rs. 47,93,469, with

interest, penalty, etc., against which, the petitioner filed a statutory appeal u/s 85 of the Finance Act, 1994, before the first respondent-appellate

authority, along with petition for stay/waiver of pre-deposit of service tax, interest and penalty and the said appeal was numbered as A. No.

366/2012(MST). The first respondent passed the impugned order, dated January 22, 2013, in Pre-Deposit-cum-Appeal Order No. 62/2013 (M-

ST(PD)) (in A. No. 366/2012 (M-ST)), thereby directing the petitioner to pay the amount of Rs. 4 lakhs as pre-deposit in cash on or before

February 12, 2013 u/s 35F of the Act, made applicable to service tax as per section 83 of the Finance Act and the balance amount was waived.

Challenging the said order dated January 22, 2013, the petitioner has filed this writ petition.

Mr. M.N. Bharathi, learned counsel for the petitioner mainly focussed his arguments on the point that any order towards pre-deposit would

create undue hardship to the petitioner, as the same is not reimbursable by the main contractor in terms of the agreement, as the main contractor

has undertaken to remit the service tax liability to the Department.

Per contra, Mr. M. Santhanaraman, learned Senior Central Government Standing Counsel appearing for the respondents, submitted that the

first respondent was so lenient in considering the prima facie case, balance of convenience, undue hardship and financial burden of the petitioner-

company and thereby reduced the amount of pre-deposit to Rs. 4 lakhs from Rs. 47,93,469, and such a lenient approach has been questioned by

the petitioner, which is not permissible under law, and therefore, the writ petition is liable to be dismissed in limine.

On the above background of pleadings and the submissions, I have heard the learned counsel appearing for the parties.

It is not in dispute that the petitioner is a company engaging labourers to drill the land up to a depth stipulated by the clients, which is performed

manually by unskilled labourers hired by the petitioner from time to time and the petitioner informed the Department that they are only sub-

contractors and as per the agreement, the petitioner is precluded from charging/collecting service tax, as the main contractors remit service tax on

the services provided by them to the ultimate client. The petitioner relies upon the trade notices issued and the clarification issued by the Central

Board of Excise and Customs (CBEC) to the effect that sub-contractors are not liable to remit service tax when the same is remitted by the main

contractors. The petitioner contested the classification and taxability of the impugned services under the category ""survey and exploration of

mineral services'''' as defined u/s 65(104a) of the Finance Act, 1994. A show-cause notice, dated November 30, 2009 was issued to the

petitioner, to show cause as to why Rs. 47,93,469 should not be demanded as service tax with interest, etc., and thereafter, the matter was

contested by the parties and adjudication was made and the original authority passed the order on February 29, 2012 in Order-in-Original No.

20/2012, confirming the levy of the said service tax, interest, etc., against which, the petitioner filed appeal before the first respondent, which is

pending. The condition for taking up the appeal is that there must be a pre-deposit of the amount in full and the first respondent passed the

impugned order in Pre-Deposit-cum-Appeal Order No. 62/2013 (M-ST(PD)), dated January 22, 2013, which is called in question in this writ

petition by the petitioner.

It is to be noted that when once appeal is filed by the aggrieved person against the original order, it is mandatory requirement u/s 35F of the Act

to pay the entire amount ordered by the original authority, as a condition precedent for taking up the appeal.

Law is well-settled that the capacity of a party to pay the pre-deposit amount had to be noticed and the financial burden and undue hardship for

the party to resort to claim waiver of the pre-deposit have also to be considered. In this regard, it is worthwhile to notice a decision of a Division

Bench of this court reported in Trendy Moods Vs. Customs, Excise and Gold (Control) Appellate Tribunal (now known as Customs, Excise and

Service Tax Appellate Tribunal) and Commissioner of Customs, Appellate Tribunal, Chennai), wherein, this court, after taking into account the

various decisions of the Supreme Court, for and against, ultimately came to the conclusion that the capacity of the appellant therein to pay the

amount having been noticed and in the absence of any financial burden, it cannot be construed that there is an undue hardship for the appellant

therein to resort to claim waiver of pre-deposit.

The cardinal principle of consideration of the waiver of pre-deposit is based on undue hardship, prima facie case, balance of convenience,

financial burden and other difficulties expressed by the party before taking the matter on appeal and these factors have to be weighed in relevant

circumstances, taking into account all the material facts, which alone can come to the wisdom of the authority to give certain waiver of pre-deposit

to the party who is on appeal.

In this case, a sum of Rs. 47,93,469 as service tax, with interest etc., were levied by the original authority, and thereafter, in the appeal stage,

the first respondent passed the impugned order, reducing the amount to Rs. 4 lakhs as pre-deposit amount, and the prima facie case, balance of

convenience, undue hardship, financial burden, etc., which were focussed by the petitioner, had been duly considered by the first respondent in

accordance with law, while reducing the amount of pre-deposit to Rs. 4 lakhs, and therefore, such a lenient approach made by the first

respondent, in my considered opinion, cannot be called in question in this writ petition by the petitioner, particularly, when there is no substantial

hardship made out by the petitioner. Such an approach made by the petitioner to file this writ petition challenging the order of pre-deposit, is no

way called for interference by this court, and therefore, the writ petition deserves no merit consideration, which is liable to be dismissed.

Further, the question regarding the petitioner''s liability to pay the service tax as a sub-contractor, when it is alleged that the main contractor

would remit the service tax on the services, has to be considered only by the first respondent-appellate authority at the time of deciding the appeal.

At this stage, learned counsel for the petitioner made a plea that the appeal pending before the first respondent-appellate authority may be

directed to be disposed of within a time-frame and the petitioner may be given liberty to raise all the contentions that are raised in this writ petition,

before the first respondent-appellate authority. It is needless to state that it is always open for both the parties to make out all the contentions that

are raised in this writ petition, before the first respondent-appellate authority and it is for the first respondent-appellate authority to consider the

same in accordance with law. The petitioner shall pay the amount of pre-deposit as ordered by the first respondent in the impugned order, and on

such payment to be made by the petitioner, the first respondent shall take up the appeal itself and dispose of the same, on merits and in accordance

with law, within a period of six weeks from the date of payment of the predeposit amount. With the above observations and directions, the writ

petition is dismissed. No costs. The miscellaneous petition is closed.