Sarvodaya Suitings Ltd. vs Union of India

By the Court: In this writ petition, the petitioner has questioned the Order dated 30-1-2014 (Annex. 1), as passed by the Commissioner (Appeals-II), Customs & Central Excise, Jaipur on its prayer for stay over recovery proceedings during pendency of the appeal against the Order-in-Original No. 134/ST/JP-II/2011, dated 11-11-2011, as passed by the Joint Commissioner, Central Excise, Jaipur-II. By the impugned order dated 30-1-2014, the Appellate Authority has directed the appellant to deposit service tax amounting to Rs. 27,22,638/- within two weeks and has ordered that upon such deposit, recovery of interest and penalty would remain stayed until disposal of the appeal. The subject-matter of this writ petition being confined to the prayer for interim relief until final disposal of the appeal before the said Appellate Authority, suffice would be to notice, in brief, the relevant background aspects of the matter as follows : The referred appeal arises out of the aforesaid order dated 11-11-2011, which came to be passed by the Joint Commissioner with the finding that the petitioner was having two divisions, namely, Textile Division and Online Business Marketing Division (''SOBM''). In Textile Division, three units were engaged in multi level marketing of various types of goods. It was observed that SOBM were making payment of commission to their distributors after deduction of renewal fees and card charges; and the amount so deducted was taken as liable to Service Tax w.e.f. 2005-06 under the category of "Business Support Service". The Joint Commissioner ultimately ordered recovery of Service Tax amounting to Rs. 27,22,638/- and also ordered recovery of interest and penal-

In the appeal preferred by the present petitioner, the appellate authority in its impugned order dated 30-1-2014 has made the aforesaid directions against the condition of pre-deposit. In this writ petition, against the aforesaid order relating to the condition of pre-deposit, on 6-5-2014, the submissions of the petitioner were noted that it had deposited in the account of the respondents a sum of Rs. 13,61,321/- on 5-5-2014, representing 50% of the amount ordered to be paid by the Appellate Authority.

The learned counsel for the petitioner has particularly referred to the stand of the petitioner in context of the Order-in-Original and submitted that the petitioner has strong prima facie case to maintain that the activity in question does not attract the levy of Service Tax. It is submitted that if the petitioner is forced to part with the substantial amount against the demand in question, it would be causing the petitioner undue hardship.

The learned counsel for the respondents, on the other hand, has duly supported the order impugned and submitted, inter alia, that the condition of pre-deposit being a statutory condition and the Appellate Authority having passed the impugned order after due consideration of all the factual and legal aspects, no interference is called for.

Having given thoughtful consideration to the rival submissions and having examined the record, we are clearly of the view that in the given set of facts and circumstances, even if the condition of pre-deposit is maintained, its rigour deserves to be brought down and softened to the extent of avoiding undue hardship to the petitioner.

We would not be making any comments on the merit of the case but it does appear appropriate to observe that on the submissions as made, the petitioner appears to be having an arguable case. In the totality of the circumstances, it appears just and proper that the petitioner be allowed an opportunity of merit-hearing of the appeal without being forced to deposit an amount equal to the principal demand of duty in question.

Of course, where the matter would require proper adjudication after hearing the parties and otherwise, pre-deposit remains a statutory requirement, subject to modification as deemed fit and proper in case of undue hardship, we are of the view that it would serve the cause of justice if the requirement of the order passed by the Appellate Authority is modified and the condition of pre-deposit is reduced to an amount of Rs. 13,61,321/- (thirteen lacs sixty one thousand three hundred twenty one), which has already been deposited by the petitioner.

Accordingly and in view of the above, this writ petition is allowed in the manner and to the extent indicated; and with the following directions and observations:--

"(1) The directions contained in the impugned order dated 30-1-2014 (Annex. 1) requiring the petitioner to deposit a sum of Rs. 27,22,638/- to satisfy the condition of pre-deposit shall stand modified in the manner that the condition shall be of the petitioner depositing an amount of Rs. 13,61,321/- (thirteen lacs sixty one thousand three hundred twenty one), which condition already stands satisfied.

(2) The Appellate Authority shall put the petitioner to notice of the date of hearing and then, shall proceed to hear the appeal in accordance with law.

(3) It is made clear that we have not pronounced on the merits of the case either way and this relaxation order shall otherwise have no bearing on the merit consideration of the appeal."

No costs.