Fixing amount of Pre-desposit

PJ/Case Laws/2012-13/1009

Case: MASTER MARINEN SERVICES P. LTD. V/s COMMR. OF SERVICE TAX, MUMBAI

Citation: 2012 (25) S.T.R. 227 (Bom.)

Issue:- Fixing amount of Pre-deposit – factors weighing for determining amount.

Brief Facts: - Appellants engage in the activity of storage and warehousing of containers, survey of ship/cargo/containers and other ancillary services in relation to export cargo. The Appellants were registered with the Service tax Authorities under the following categories:

"Storage and warehousing service"; "Cargo handling service", and "Technical inspection service".

Show cause notice was issued to the appellants demanding service tax dues on the ground that they had short paid the service tax for the period between April 2003 to March 2007. Penalty was also proposed to be imposed.

Before the Commissioner, during the course of adjudication proceedings, the appellants submitted that an amount of Rs. 5.57 crores was admittedly paid towards service charge dues out of the total dues of Rs. 5.85 crores. Of this, Rs. 1 crore was paid before the investigating Officer visited their office while an amount of Rs. 2.51 crores was deposited regular payment for Financial Year 2006-07. According to the appellant, the total dues which ought to have been demanded was only Rs. 28.64 lakhs being the difference between the total amount due of Rs. 5.85 crores and Rs. 5.57 crores which was the service tax admittedly paid. It was contended that if the amount due was only Rs. 28.64 Lakhs, the adjudication would have to be before the Additional Commissioner of Central Excise under the relevant notification and they would have been entitled to a right of appeal before the Commissioner. The Appellants, however, stated that they did not desire to litigate the matter any further. Accordingly, they sought to avail of the benefit under Section 73(1A) of the Finance Act, 1994. In order to do so, the Appellants stated that they had paid the entire amount of Rs. 28.64 lakhs together with interest in the amount of Rs. 8.06 lacs by challans dated 19th November 2008 and 20 November 2008 and the penalty representing 25% of the total dues in the amount of Rs. 7.19 lakhs on 20th November 2008 and 29th November 2011 within thirty days from the receipt of the notice. The Appellants stated that the payment of interest of Rs. 5.06 lakhs was effected beyond the period of thirty days as a result of the fact that on 26th and 27th November 2008 City of Mumbai had been paralyzed due to terror attacks.

Appellant’s submissions were rejected by the Commissioner observing that the Appellants had made payment belatedly from time to time. The Commissioner by his order confirmed the demand of Rs. 5.85 crores, appropriated the amount of Rs. 5.70 crores which is paid by the Appellants and confirmed the demand for payment of interest. A penalty of Rs. 6 crores was imposed under Section 78.

In appeal before the Tribunal, Appellant moved an application for waiver of a pre deposit. The Tribunal observed that the Appellants ought to have paid the service tax within time and should have filed periodical returns. The Tribunal observed that it was not concerned whether the Appellants had or not charged/collected service tax since it was their duty to file returns and pay service tax on time. The Tribunal did take notice of the fact that the Appellants had admitted their service tax liability of almost Rs. 5.71 crores. Taking note of the fact that the Appellants had paid an amount of Rs. 7 lakhs towards penalty, they were further directed to pay Rs. 50 lakhs towards the penalty.

Appellant have filed appeal before the High Court being aggrieved by the order passed by the Tribunal on an application for waiver of pre-deposit of under Section 83 of the Finance Act, 1994 read with Section 35F of the Central Excise Act, 1944.

Appellant’s Contention: - Appellant asserted that they were entitled to the benefit of Section 73(1A) and had in fact complied with the statutory provision. Further they submitted that they had paid almost 99% of the service tax dues besides 25% of the penalty and interest as required in law. In these circumstances, he submitted that they ought to have been granted waiver from the requirement of depositing a sum of Rs. 50 lakhs.

Respondent’s Contention: - Revenue submitted that no case for waiver is made out.

Reasoning of Judgment: -The High Court held that according to the Appellants, an amount of Rs. 3.51 crores was paid even before the issuance of the notice to show cause dated 24th October 2008 comprising of an amount of Rs. 1 crore which was paid before the visit of the investigating officer and Rs. 2.51 crores being the regular payment for Financial Year 2007-08. The Appellants did not dispute the liability to pay service tax dues. While seeking the benefit of Section 73(1A), the Appellants claim to have paid duty in the amount of Rs. 78.64 lakhs, 25% of the penalty payable on the aforesaid amount and interest. Whether the Appellant has in fact fulfilled the requirement of Section 73(1A) is a matter which will fall for determination before the Tribunal in the pending appeal. From the record before the Court, it appears from the order of the Tribunal that the Appellants had by their stay application sought a waiver of a pre-deposit of an amount of Rs. 14,61,843/- being the balance amount payable towards Service tax and of the penalty. The Tribunal has directed the Appellants to deposit an amount of Rs. 50 lakhs. They viewed that having regard to the fact that the Appellants had admitted their liability to pay service tax and had paid an amount initially of Rs. 5.57 crores and, thereafter a further amount of Rs. 28.64 lakhs, these factors should weigh in the determination of the total amount which they must now be called upon to deposit. Further the ends of justice would be met if in addition to the amount of Rs. 14.61 lakhs which is claimed towards service tax dues, the Appellant is directed to pay an additional amount so as to make up a total deposit of Rs. 25 lakhs. Accordingly, they modify the order of the Tribunal by directing that the Appellant shall deposit an amount of Rs. 25 lakhs within a period of four weeks from today instead and in substitution of the direction issued by the Tribunal. In the event the Appellant fails to make deposit as directed, necessary consequences under the law shall ensue.

Decision: - Appeal disposed off.

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PJ/Case Laws/2012-13/1009

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