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Service Tax - Waiver of pre-deposit - Pay or Perish? Tax collection a sovereign power - proper adjudication a sovereign's duty: High Court

By TIOL News Service

HYDERABAD, FEB 03, 2014: THE Service Tax demand was to the tune of Rs. 33 Crores with the attendant interest and penalties. The services were in relation to irrigation projects of the Government of Andhra Pradesh. The CESTAT ordered pre-deposit of more than Rs. 30 Crores and interest [ 2013-TIOL-1779-CESTAT-BANG ].

The hapless assessee rushed to the High Court with a writ petition. The High Court held that writ is not maintainable as the proper course would have been to file an appeal [2013-TIOL-997-HC-AP-ST]. So the assessee filed an appeal and in a classic judgement, the High Court disposed of the appeal making some noteworthy observations on the vexed issue of stay and waiver of pre-deposit.

The High Court observed,

++ The condition as to pre-deposit of the entire amount involved would certainly put heavy burden on the assessee.

++ Whatever may be the justification in enacting such a provision, the remedy of appeal for a citizen cannot be made so dearer, nor can it be kept beyond the reach of an assessee.

++ Indiscriminate denial of the power of waiver would result in a situation where an aggrieved party would be indirectly told "pay or perish".

++ Just as levy of taxes is an attribute of sovereign power, adjudication of disputes is equally an important attribute of the same species.

++ The only difference is while the former partakes the character of the right of the sovereign Government, the latter is in the form of its duty.

++ Unless it is tempered with an element of reasonableness, the adjudicatory mechanism is prone to be just an eye-wash .

Even after such strong observations, the High Court took the view that the interests of the appellant on the one hand and the revenue on the other hand can be protected by directing that the appellant shall pay half of the amount demanded towards arrears of service tax and granting waiver for the remaining half as well as the components of interest and penalty under the relevant provisions of the Finance Act.

(See 2014-TIOL-137-HC-AP-ST)


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