ST - Service provided by Indian Railways exempted retrospectively by section 99 of FA, 2013 - Tribunal should not have ordered pre-deposit and in event of failure dismissed appeal when matter concerned Railways- Order of CESTAT quashed -Matter to be disposed on merits by Tribunal: High Court
By TIOL News Service
MUMBAI, JULY 02, 2014: THE appellant, a division of the Indian Railways, are inter alia engaged in the activities of Renting of Immovable Property Service, Sale of place or time for Advertisement Service and Mandap Keeper Service.
Since they did not discharge their Service Tax liability, a SCN dated 19.4.2010 along with addendum dated 20.7.2010 demanding Service Tax of Rs.1,28,22,481/- was issued and the same was adjudicated by the CCE, Nagpur on 13.12.2010 confirming the tax demand and imposing penalties and interest.
The appellant filed a stay application before the CESTAT.
After hearing both sides, the Bench placed reliance on the apex Court decision delivered on a reference made by the President of India in the context of Section 20 of the Sea Customs Act, 1876 reported in 1964 (3) SCR 787 and observed that it was clear that even the Government is liable to pay indirect taxes for the activities undertaken by it if the activity undertaken comes within the scope of taxable event as defined in the law. Holding that prima facie the applicant was liable to pay Service Tax on the services as undertaken by them and the Tax liability would be definitely sustainable in respect of the demands made within the normal period of limitation, the CESTAT directed the applicant to make a pre-deposit of Rs.25 lakhs for obtaining a stay in the matter.
We reported this order dated 27.02.2013 as 2013-TIOL-575-CESTAT-MUM.
The Central Railway, as was expected, filed appeals before the Bombay High Court. In the meanwhile, since the pre-deposit order was not complied with, the CESTAT dismissed their appeal. Incidentally, this order was passed on 26.04.2013 when none represented the appellant. See 2013-TIOL-799-CESTAT-MUM .
Against this order also, the C.R. is in appeal before the High Court.
Both the appeals were heard recently.
The appellant submitted that the Tribunal should not have directed payment of any pre-deposit of Rs.25 lakhs as the Railway would have always abided by the final orders 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 in the knowledge of the Department and the Tribunal; such harsh order is 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 10.05.2013.
The said section 99 reads -
Special provision for taxable services provided by Indian Railways.
"99. (1) Notwithstanding anything contained in section 66, as it stood prior to the 1st day of July, 2012, or in section 66B, no service tax shall be levied or collected in respect of taxable services provided by the Indian Railways during the period prior to the 1st day of October, 2012.
(2) No refund shall be made of service tax paid in respect of taxable services provided by the Indian Railways during the said period prior to the 1st day of October, 2012.".
The Counsel for the Revenue submitted that the order passed by the Tribunal is discretionary and there cannot be any complaint of the Tribunal acting arbitrarily or capriciously; as the Appeals do not raise any substantial question of law they deserve to be dismissed.
The High Court observed that the Tribunal in exercising discretion in this case had failed to take note of a strong prima facie case that was pleaded; 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 and in such circumstances there was no reason to pass an order directing payment of the sum of Rs.25 lakhs 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.
Holding that the appeals do raise a substantial question of law, the same was formulated and the High Court passed the following order -
"6. 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 10.05.2013, we are of the opinion that the Appellants have made out a strong prima facie case and of complete waiver of a pre-deposit condition. The impugned order is, therefore, quashed and set aside. The application for stay/waiver of pre-deposit is allowed accordingly. However, we clarify that we have not expressed any opinion on the rival contentions and merits of the Appeal. Since we have 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 disposed of.
In passing : The Stay order was passed on 27.02.2013 and the appeal was dismissed on 26.04.2013. The Finance Bill, 2013 was presented on 28.02.2013 and enacted on 10.05.2013.
(See 2014-TIOL-1043-HC-MUM-ST)
