By TIOL News Service

CHENNAI, JULY 15, 2015: PETITIONER is engaged in the business of sourcing Orders for Foreign Buyers to procure Indian Garments. Issue raised in Writ Petition is whether receipt of Trade margin by the petitioner in convertible foreign exchange is liable to service tax under the category of “Business Auxiliary Services”. Petitioner contended that respondent passed Order without following the ratio already decided in earlier orders in their own case and that Order is non-speaking and without jurisdiction. Petitioner submitted that though they have merits in the matter, they are prepared to file appeal before CESTAT and relied on decisions of Andhra Pradesh High Court (decision in M/s K.Rama Mohana Rao & Co - 2015-TIOL-511-HC-AP-CX) and Kerala High Court (decision in M/s. Muthoot Finance Limited - 2015-TIOL-632-HC-KERALA-ST) wherein direction was given to file appeal without making payment of pre-deposit of 7.5%

Respondent opposed the prayer and contended that High Court of Kerala and Andhra Pradesh High Court did not deal with the second proviso to Section 35F of the Act and hence petitioner should pay pre-deposit as per law. The High Court however rejected the submissions of the department. The High Court held that in the present case to apply the second proviso and to deny the benefit of filing the appeal without making the payment of 7.5% before the CESTAT, it should be shown that the Petitioner had filed appeal/ stay application and the same are pending. Therefore, The High Court held that the petitioner is entitled to have the benefit of the ratio laid down by both the Kerala High Court and Andhra Pradesh High Court. The High Court also relied on the decision of the Madras High Court decision in 2006 (147) STC 218 (Mad) and directed the Petitioner to file an Appeal before the CESTAT along with stay application, without making pre-deposit of 7.5% within a period of two weeks.

(See 2015-TIOL-1592-HC-MAD-ST)