CESTAT Orders Reconsideration on Merits as Commissioner (Appeals) Incorrectly Rejected Appeal

Municipal Council, Gidderbaha Vs Commissioner Of CGST & Central Excise Ludhiana (CESTAT Chandigarh)

In the case of Municipal Council, Gidderbaha vs. Commissioner Of CGST & Central Excise Ludhiana, the Central Excise and Service Tax Appellate Tribunal (CESTAT) intervened to rectify an erroneous rejection of an appeal. The Commissioner had initially accepted the appeal but later dismissed it on the grounds of non-compliance with the mandatory pre-deposit requirement under Section 35F. This article delves into the details of the case, the key issues raised, and how the CESTAT rectified the situation.

Background: The case involved allegations against the Municipal Council, Gidderbaha, regarding the provision of services related to “renting of immovable property services” and selling of advertising space. The council was accused of failing to discharge their due service tax liability, leading to the issuance of four show cause notices.

Show Cause Notices: The show cause notices covered different periods and demand amounts, totaling a significant sum.

• SCN No. 1: Rs. 12,73,150/-
• SCN No. 2: Rs. 2,45,506/-
• SCN No. 3: Rs. 5,63,607/-
• SCN No. 4: Rs. 1,35,740/-

Appeal to Commissioner (Appeals): After the Assistant Commissioner confirmed the demand with certain adjustments, the appellant filed an appeal before the Commissioner (Appeals). The appeal was initially accepted and scheduled for a hearing on merits.

Pre-Deposit Compliance: During the course of the appeal process, the appellant informed the authorities that they had deposited Rs. 10,35,881 towards the mandatory pre-deposit as required by Section 35F. This fact was communicated through a letter dated 11.03.2017.

Erroneous Rejection: However, after a lapse of time, the Commissioner (Appeals) rejected the appeal, citing non-compliance with Section 35F. Surprisingly, this objection regarding mandatory pre-deposit was not raised or addressed during the appeal hearing. The Commissioner (Appeals) did not verify the facts or obtain a report from the lower authority regarding the deposit of the required amount.

CESTAT Intervention: The CESTAT, upon reviewing the case, found that the Commissioner (Appeals) had entertained the appeal without raising any objections related to mandatory pre-deposit. The appeal had proceeded to be heard on its merits. Subsequently, the Commissioner (Appeals) improperly rejected the appeal for non-compliance with Section 35F. The CESTAT ruled that the appellant had indeed complied with the mandatory pre-deposit requirement.

Remand for Merit: As a result, the CESTAT set aside the erroneous order passed by the Commissioner and remanded the matter back to the Commissioner (Appeals) for a fresh decision on the merits of the case. The Commissioner (Appeals) was directed to dispose of the appeal within three months from the date of receiving the certified copy of the CESTAT’s order.

Conclusion: The case of Municipal Council, Gidderbaha vs. Commissioner Of CGST & Central Excise Ludhiana serves as a reminder of the importance of proper procedural compliance and the need for thorough verification of facts. In this instance, an appeal was initially accepted, heard on merits, and then incorrectly rejected based on pre-deposit compliance. The CESTAT’s intervention rectified the situation, emphasizing the principle that appeals should not be rejected without due consideration of procedural compliance. 

FULL TEXT OF THE CESTAT CHANDIGARH ORDER

The present appeal is directed against the impugned order dated 30.12.2022 passed by the Commissioner whereby the Commissioner has rejected the appeal of the appellant being not maintainable for failure to deposit mandatory pre-deposit.

2. Briefly the facts of the present case are that there are allegations against the appellant that they had provided services namely “renting of immovable property services” defined under Section 65(105)(zzzz) of the Finance Act, 1994 and selling of space or time slots for advertisements defined under Section 65(105)(zzzm) of the Act but failed to discharge their due service tax liability. On these allegations, four show cause notices were issued to the appellant under Section 73(1)/73(A) of the Finance act, 1994. The details of the four show cause notices and the period of demand and the demand amounts are given hereinbelow:-

The appellant filed reply to the show cause notices controverting the allegations in the show cause notices. By following the due process, the Assistant Commissioner vide Order-in-Original dated 25.10.2018 confirmed the demand by allowing the cum tax benefit, ordered the appropriation of the total amount of Rs. 9,73,258/-. Aggrieved by the said order, the appellant filed appeal before the Commissioner (Appeals) and the Commissioner (Appeals) after fixing the appeal for hearing, finally dismiss the appeal being not maintainable on account of non depositing the mandatory pre-deposit under Section 35F. Hence, the present appeal.

3. Heard both the parties and perused the records.

4. Counsel for the appellant submitted that the impugned order is not sustainable in law as the same has been passed without properly appreciating the facts and the law. He further submitted that the appellant had deposited Rs. 10,35,881/- and informed the superintendant vide letter dated 11.03.2017. He further submitted that when the appeal was filed before the Commissioner (Appeals) it was entertained and fixed for regular hearing and it was heard on merits on 27.08.2022. He has annexed the copies of notice of hearing and record of personal hearing also. He further submitted that after a period of one month, the appellant was informed that there was no proof of payment of pre-deposit and the appellant requested for some time for furnishing the evidence and again the case was listed for regular hearing on 11.10.2022 which was attended by the appellant through virtual hearing and submissions were made on merits and on limitations. He further submitted that during the hearing, the issue of mandatory pre-deposit was not raised or addressed by the Commissioner (Appeals) and thereafter finally Order-in-Appeal dated 30.12.2022 was received dismissing the appeal for want of pre-deposit. He further submitted that the appellants were never asked by the range officer for production of evidence because the challans showing payment of service tax covered by the show cause notice were already with him.

5. Counsel for the appellant further submitted that the appellant have satisfied the requirement of Section 35F of Central Excise, Act 1994 as made applicable to the service tax matters.

He further submitted that the Commissioner (Appeals) without application of mind and without verifying the factum of pre-deposit has rejected the appeal for non compliance of Section 35F.

6. On the other hand, Ld. AR reiterated the findings of the impugned order.

7. After considering the submissions made by both the parties and perusal of the material on record, I find that the Commissioner (Appeals) has entertained the appeal without raising the objection of mandatory pre-deposit and the appeal was listed for hearing on merits and it was heard on merits and thereafter the Commissioner (Appeals) has wrongly rejected the appeal for non compliance of Section 35F. The Commissioner (Appeals) did not bother to obtain the report from the lower authority with regard to the deposit of the said amount. The appellant vide his letter dated 11.03.2017 informed the superintendant of Central Excise and Service Tax, regarding deposit of Rs. 10,35,881/- and the copies of that has also been attached with the record which shows that the appellant has complied with the requirement of mandatory pre-deposit.

7. In view of these facts, I set aside the impugned order passed by the Commissioner and remand the matter back to the Ld. Commissioner (Appeals) for deciding the same on merit.

8. It is further directed that the Commissioner (Appeals) should dispose of the present appeal within the period of three months from the date of receipt of the certified copy of this order.