HIGH COURT OF GUJARAT
Ronak Travels Thro Proprietor Anas Patel
Union of India
SPECIAL CIVIL APPLICATION NO. 5026 OF 2012
OCTOBER 10, 2012
Ms. Harsha Devani, J.
Having regard to the controversy involved in the present case, which lies in a very narrow compass, the petition is taken up for final hearing today. Rule. Mr. A.Y. Kogje, learned counsel waives service of rule for the respondents.
2. The petitioner in this petition under Article 226 and 227 of the Constitution has called in question the orders dated 10th January, 2012 and 20th March, 2012 passed by the Customs, Excise and Service Tax Appellate Tribunal (hereinafter referred to as “the Tribunal”).
3. This case has a chequered history. However, shorn of all unnecessary details the basic facts necessary for the adjudication of the present petition are that against an order dated 29th November, 2010 passed by the Commissioner (Appeals), the petitioner preferred appeal before the Tribunal. Alongwith the appeal, the petitioner also filed a stay application seeking waiver of pre-deposit of the amount of service tax of Rs. 2,51,790/-, interest and penalties under sections 76 and 78 of the Finance Act, 1994 (hereinafter referred to as ‘the Act’). The Tribunal after hearing the parties, by the impugned order dated 10th January, 2012 directed the petitioner to deposit the entire amount of service tax, interest and penalty imposed by the adjudicating authority as requantified and upheld by the first appellate authority. It was further directed that the said amount shall be paid within four weeks from the date of the said order and compliance be reported on 13th February, 2012.
4. The petitioner challenged the aforesaid order of the Tribunal before this court by way of a writ petition being Special Civil Application No.1668/2012. By an order dated 3rd February, 2012, the petitioner was permitted to withdraw the petition for approaching the Tribunal for filing modification application. Subsequent thereto, the petitioner filed an application for modification of the stay order which came to be dismissed by the impugned order dated 20th March, 2012. However, while dismissing the application, the Tribunal extended the time limit for compliance of the impugned order dated 10th January, 2012 for a period of four weeks thereafter and directed the petitioner to report compliance on 19th April, 2012.
5. It is at this stage that the petitioner has filed the present petition challenging the previous order dated 10th January, 2012 as well as the subsequent order dated 20th March, 2012. Later on, the matter came up before the Tribunal for ascertaining compliance of the order of pre-deposit. Since there was no compliance with the earlier order, by an order dated 19th April, 2012, the Tribunal dismissed the appeal. Such order came to be challenged in the present petition by moving an amendment which was granted.
6. Mr. Hasit Dave, learned counsel for the petitioner invited attention to the provisions of section 78 of the Act which makes provision for “Penalty for suppressing value of taxable service” and more particularly to the first proviso thereto which lays down that where service tax determined under sub-section (2) of section 73, and interest payable thereon under section 75, is paid within thirty days from the date of communication of order of the Central Excise Officer determining such service tax, the amount of penalty liable to be paid by such person under the said section shall be twenty five per cent of the service tax so determined. It was submitted that while directing the petitioner to deposit the entire amount of penalties imposed, the Tribunal has failed to give the petitioner the benefit of the said provision. Reference was made to the fifth proviso to section 78 which says that if the penalty is payable under section 78, the provisions of section 76 shall not apply. It was pointed out that in the present case penalty of Rs.2,51,790/-has been imposed both under section 76 and 78 of the Act which is not permissible in law. Under the circumstances the amount of pre-deposit is required to be proportionately reduced in the light of the above statutory provisions. The Tribunal was, therefore, not justified in insisting upon payment of the entire amount of service tax, interest and penalties, thereby depriving the petitioner of the benefit of the above provisions.
7. On the other hand, Mr. A.Y. Kogje, learned counsel for the respondents vehemently opposed the petition by submitting that the Tribunal has exercised its discretion on the question of pre-deposit and as such, the same does not warrant any interference by this court.
8. This court has considered the submissions advanced by the learned counsel for the respective parties and has perused the record of the case. In the opinion of this court, having regard to the provisions of section 78 of the Act and more particularly the first and the fifth proviso thereto as referred to hereinabove, the Tribunal was not justified in directing the petitioner to deposit the entire amount of penalties in addition to the service tax and interest. In the light of the above provisions, this court is of the view that impugned order dated 10th January, 2012 passed by the Tribunal deserves to be modified to the extent the petitioner has been directed to deposit the entire amount of the penalties under sections 76 and 78 of the Act.
9. The petition is, therefore, allowed to the following extent. The order dated 20th March, 2012 rejecting the application for modification of the stay order is hereby quashed and set aside. The impugned order dated 10th January, 2012 shall stand modified to the extent that instead of depositing the entire amount of penalties under sections 76 and 78 of the Act, the petitioner shall deposit 25% of the penalty under section 78 of the Act. The application for modification of stay order stands allowed to the aforesaid extent. The impugned order dated 19th April, 2012 passed by the Tribunal dismissing the appeal for non-compliance is hereby quashed and set aside. The appeal shall stand restored to file subject to the petitioner depositing the entire amount of service tax liability with interest and 25% of the penalty imposed under section 78 of the Finance Act on or before 15th December, 2012. Upon such amount being deposited by the petitioner, the Tribunal shall hear the appeal on merits. Rule is made absolute to the aforesaid extent with no order as to costs.
10. It is clarified that this order is based on a prima facie opinion and shall not be construed as if the court has expressed any opinion on the merits of the case, including the levy of penalties under sections 76 and 78 of the Act. The Tribunal shall consider the case on merits without in any manner being influenced by this order.