M/S M K Gupta And Co And Anr vs. Union Of INDIA And Anr

Facts

The appellants, M/s M K Gupta and Co. and another, filed an intra-court appeal against an order dated July 31, 2023, passed by a learned Single Bench in WPA 16637 of 2023. The Single Bench had admitted the writ petition and granted interim orders subject to the condition that the appellants make a pre-deposit of 5% of the total demand of tax arising from the adjudication order impugned in the writ petition. The appellants sought condonation of a six-day delay in filing the appeal, which was allowed. The appeal challenges the pre-deposit condition imposed by the Single Bench.

Held

The Court allowed the appeal and set aside the order of the learned Single Bench directing a 5% pre-deposit. The Court held that given the learned Single Bench's prima facie satisfaction that the appellants had made out a good case for entertaining the writ petition, there was no necessity for the appellants to make any pre-deposit. The Court found that the adjudication order itself contained findings indicating that the services rendered by the appellants were exempted. The Court also noted that the learned Single Bench had rightly observed that if further documents were required, the adjudicating authority should have called for them, a procedure not followed. Therefore, the Court was convinced that the adjudication order should remain stayed until the writ petition is heard and disposed of. The operative direction was an interim stay of the adjudication order until the writ petition is heard and disposed of. The respondent department was directed to file their affidavit-in-opposition within two weeks, and a reply within a week thereafter. The writ petition was directed to be listed before the concerned Single Judge in the week commencing February 5, 2024.

Key Issues

1. Whether the learned Single Bench erred in directing the appellants to make a pre-deposit of 5% of the total demand of tax as a condition for interim stay of the adjudication order, when the Single Bench was prima facie satisfied that the appellants had made out a good case for entertaining the writ petition. Petitioner's Contention: The appellants argued that given the learned Single Bench's prima facie satisfaction with their case, a pre-deposit should not have been mandated. They contended that the adjudication order itself contained findings that the services rendered were exempted, and the authority should have sought further documentation rather than confirming the demand. They relied on the principle that if the court is satisfied that a good case is made out, the adjudication order should be stayed without imposing onerous conditions. Revenue's Contention: The respondent department, through the learned senior standing counsel, contended that in terms of Section 35 of the Central Excise Act, as applicable to the service tax regime, the interest of revenue has to be protected. They argued for the necessity of a pre-deposit to safeguard revenue.