Nk Sharma vs. Assistant Commissioner

Facts

The Petitioner, N.K. Sharma, filed a writ petition before the Delhi High Court seeking a partial waiver of pre-deposit amounting to Rs. 1,12,000, which represented 2.5% of the penalty imposed. This pre-deposit was required to file an appeal before the Customs, Excise and Service Tax Appellate Tribunal (CESTAT). The appeal stemmed from a Show Cause Notice dated April 27, 2022, which led to an Order-in-Original dated March 20, 2023. This order confirmed a demand of service tax totaling Rs. 44,74,935, along with interest and penalties, under Section 73(1) of the Finance Act, 1994, read with Section 174 of the Central Goods and Service Tax Act, 2017. The Petitioner had already deposited 7.5% of the pre-deposit and claimed financial inability to arrange the remaining 2.5%.

Held

The Court held that the prayer for a partial waiver of the pre-deposit cannot be entertained. It relied on the settled legal position as articulated in 'Diamond Entertainment Technologies' and 'Impressive Data Services Private Limited', which interpreted Section 107(6) of the Act. The Court found that the provision does not grant discretion for waiving the pre-deposit. The reasoning was based on the binding precedent of 'Anjani Technoplast', which was merged with a Supreme Court order, and the subsequent Division Bench judgment in 'Diamond Entertainment', which affirmed that appeals before CESTAT are maintainable only if the mandatory pre-deposit is made. The Court noted that earlier decisions allowing appeals on partial pre-deposit due to financial stringency were not in line with this settled position. While the waiver was denied, the Petitioner was granted time until October 31, 2025, to make the remaining pre-deposit. The Court also suggested that if the Petitioner wished to rely on any amount lying with government entities as part of the pre-deposit, or the Rs. 20 lakhs already with the Department, these submissions could be made before the concerned Appellate Authority.

Key Issues

1. Whether the Court has the discretion to grant a waiver of the mandatory pre-deposit required for filing an appeal before the CESTAT, as stipulated under Section 107(6) of the Act? The Petitioner argued for a partial waiver of the pre-deposit due to financial hardship, having already deposited 7.5% and being unable to arrange the remaining 2.5%. The Respondent, relying on the decisions in 'Diamond Entertainment Technologies vs. Commissioner Central Goods and Service Tax Commissionerate Dehradun and Another' (2019 SCC OnLine Del 12414) and 'Impressive Data Services Private Limited vs. Commissioner (Appeals-I), Central Tax GST' (2025 SCC OnLine Del 2497), contended that Section 107(6) of the Act does not provide for any discretion to waive the pre-deposit. These judgments, particularly 'Diamond Entertainment', emphasized that appeals are maintainable only upon making the mandatory pre-deposit, citing precedents like 'Anjani Technoplast' and distinguishing earlier judgments that allowed partial pre-deposits based on financial stringency.