Whether imposition of pre deposit on railways justifiable?

PJ/CASE LAW/2015-16/2654

Case:- CENTRAL RAILWAY, DRM OFFICE, NAGPUR DIVISION VERSUSC.C.E. & CUSTOMS

Citation:- 2015 (38) S.T.R. 10 (Bom.)

Brief facts:- These Central Excise Appeals were by the Central Railway. The Central Railway was aggrieved and dissatisfied with the order passed on the stay application. By the order impugned in the Central Excise Appeal No. 90/2013, namely, the order dated 27-2-2013 the Customs, Excise & Service Tax Appellate Tribunal [2014 (35)S.T.R.746 (Tri. - Mum.)] had disposed of the stay application filed by the appellant/Central Railway on the condition that it would have to make a pre-deposit of Rs. 25 lacs within a period of eight weeks and report compliance. Since the amount was not deposited, but the order came to be challenged in this Court, the appeal came to be dismissed. Against dismissal of the said appeal, the appellant/Central Railway had filed the Central Excise Appeal No. 265/2013.
They heard Mr. R.V. Desai, learned Senior Counsel appearing in support of these appeals and Mr. Jetly, learned counsel appearing for the Respondent/Revenue. The order-in-original had been passed on 13-12-2010 by the Commissioner of Central Excise & Customs, Nagpur. That was in relation to the liability for payment of Service Tax.

Appellant’s contention:- Mr. Desai submitted that the nature of services provided by the railway and considering its status in law, the Tribunal should not have directed payment of any sum of Rs. 25 lacs. The Railway would have always abided by the final orders and subject to legal rights. There was no necessity of securing the sum when the financial position and other matters in relation to the railway were to the knowledge of the Department and the Tribunal. Such harsh order was passed in the teeth of the later clarification given by Section 99 which was brought on the statute book by Finance Act, 2013 with effect from 10-5-2013.

Respondent’s contention:- Mr. Jetly, on the other hand, submitted that the order passed by the Tribunal is discretionary and there cannot be any complaint of the Tribunal acting arbitrarily or capriciously. Resultantly the appeals did not raise any substantial question of law and they deserved to be dismissed.

Reasoning of judgment:- They were of the opinion that the Tribunal in exercising discretion in this case had failed to take note of a strong prima facie case that was pleaded. Secondly, bearing in mind the nature of services and that the railway was rendering public service, the balance of convenience was also in favour of the railway/appellant before them. In such circumstances there was no reason to pass an order directing payment of the sum of Rs. 25 lacs in the given facts and circumstances. The issue was debatable and there was no apprehension of the Revenue that the amount to be recovered would not be recovered in the event the Revenue succeeds. In these circumstances the appeals do raise a substantial question of law. Same was formulated as under :-
“Whether, in the facts and circumstances of the case and in law, the Tribunal has failed to exercise its discretion and erred in imposing a condition of pre-deposit on the Indian Railway which was suing through the Central Railway, Divisional Railway Manager Office, Nagpur Division?”
After having heard the learned counsel appearing for the parties and perusing Section 99 which came to be inserted by the Finance Act, 2013 with effect from 10-5-2013, we were of the opinion that the appellants had made out a strong prima facie case and of complete waiver of a pre-deposit condition. The impugned order was, therefore, quashed and set aside. The application for stay/waiver of pre-deposit was allowed accordingly. However, they clarified that they had not expressed any opinion on the rival contentions and merits of the appeal. Since they had set aside the impugned order and allowed the application for stay/waiver of pre-deposit in its entirety, needless to clarify that the appeal preferred by the appellant before the Tribunal shall stand revived and restored to its file for disposal on merits and in accordance with law.
Both the appeals were, accordingly, disposed of. No costs.

Decision:- Appeal allowed.

Comment:- The core of this case is that when the Indian Railway have always abided the laws and regulations, and the financial position of railways is very strong and stable, there was no need to order pre deposit. Further, as per section 99 inserted by Finance Act, 2013, no service tax is leviable in respect of taxable services provided by Indian Railways during the period prior to 01.10.2012. Consequently, the stay application was unconditionally allowed and appeal restored in Tribunal that was dismissed for non-compliance.

Prepared by: Prayushi Jain

Comments

PJ/CASE LAW/2015-16/2654

Post a Comment

Query