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IN THE HIGH COURT OF KARNATAKA AT BENGALURU
DATED THIS THE 13TH DAY OF JUNE, 2018
BEFORE
THE HON’BLE MR. JUSTICE B. VEERAPPA
WRIT PETITION No.24241/2018(T-RES)
BETWEEN:
SRI. M. SEETHAPATHY RAO, S/O LATE JAYARAM RAO, AGED ABOUT 76 YEARS, NO. 7/1, 6TH CROSS, 1 STAGE, PEENYA INDUSTRIAL AREA, BENGALURU - 560 058. ... PETITIONER
(BY SMT. SUSHEELA, ADVOCATE FOR SRI RAMA MURTHY R., ADVOCATE)
AND:
UNION OF INDIA REPRESENTED BY ITS FINANCE SECRETARY, DEPARTMENT OF REVENUE MINISTRY OF FINANCE NORTH BLOCK, NEW DELHI - 110 001.
THE COMMISSIONER OF CENTRAL EXCISE (APPELAS II) TTMC, BMTC BUILDING
2 DOMLUR, BENGALURU - 560 071.
THE ADDITIONAL COMMISSIONER OF SERVICE TAX, COMMISSIONERATE I, TTMC, BMTC BUILDING, DOMLUR, BENGALURU - 560 071. ... RESPONDENTS
(BY SRI K. V. ARAVIND, SENIOR STANDING COUNSEL)
****
THIS WRIT PETITION IS FILED UNDER ARTICLES 226 AND 227 OF THE CONSTITUTION OF INDIA PRAYING TO QUASH THE ORDER PASSED BY THE SECOND RESPONDENT DATED 13.10.2017 IN ORDER NO.329/2017 IN GST APPEAL NO.717/2017 [ANNEXURE-F] ETC.
THIS WRIT PETITION COMING ON FOR PRELIMINARY HEARING THIS DAY, THE COURT MADE THE FOLLOWING:-
O R D E R
Smt. S. Susheela, learned counsel for the petitioner has confined the prayer in the present writ petition only in respect of Prayer No.1(i) and submits that the remaining prayers may be dismissed as not pressed. Accordingly, the
3 writ petition insofar as Prayer Nos.1(ii) to 1(v) is dismissed as not pressed.
The petitioner filed the present writ petition for a writ of certiorari to quash the order dated 13.10.2017 passed by the 2nd respondent made in Order No.329/2017 in GST Appeal No.717/2017 as per Annexure-F dismissing the appeal on the grounds of delay and non-payment of pre-deposit amount.
It is the case of the petitioner that he is working as Managing Director of the Company called M/s Hycom Engineering (India) Private Limited, Peenya, Bangalore. During the assessment year 2011-12, he received a sum of Rs.18,00,000/- as salary and as per the Board’s resolution in extraordinary meeting held on 28.1.2011, he was allotted with 10,00,000 sweat equity shares of Rs.10/- each amounting to Rs.1,00,00,000/- and he declared the same in his income tax return for the assessment year 2011-12 on
4 24.12.2011. In the mean time, 3rd respondent issued show cause notice dated 30.4.2015 contending that the petitioner provided “Management Consultancy Service” to his employer and in return he has received service charges in the form of sweat equity shares amounting to Rs.1,00,00,000/- and the same is liable to tax under the provisions of Service Tax Act and penalty is also leviable. In response to the said show cause notice, petitioner filed reply on 9.6.2015 contending that his nature of service was as an ‘employee’ and that he has not rendered any service to the Company which is liable to tax under the Service Tax Act and requested for dropping the proposed levy.
It is further case of the petitioner that the 3rd respondent without considering the reply properly, confirmed the proposal and levied tax of Rs.10,30,000/- under Section 73 and penalty of Rs.10,30,000/- under Section 78 and Rs.10,000/- each under Sections 68 and 69 of the Finance Act.
Being aggrieved by the order passed by the 3rd respondent, the petitioner filed appeal before the 2nd respondent – Commissioner of Central Excise (Appeals II) in No.329/2017 in GST Appeal No.717/2016, who after hearing both the parties by the impugned order dated 13.10.2017 dismissed GST appeal mainly on the ground of delay and non-payment of pre-deposit amount. Hence the present writ petition is filed.
I have heard the learned counsel for the parties to the lis.
Smt. Susheela, learned counsel for the petitioner vehemently contended that the impugned order passed by the 2nd respondent dismissing the appeal mainly on the ground of delay of 5 months and 3 days and non-payment of pre-deposit amount, is erroneous and contrary to the material on record. She would further contend that the petitioner has in fact made pre-deposit before the appellate
6 authority on 10.7.2017 and the same has not been considered and the appellate authority ought to have decided the appeal on merits instead of dismissing the appeal on technicalities. She further contended that the 2nd respondent ought to have done justice between the parties on substantial rights and ought not to have dismissed the appeal on technicalities. Therefore she sought to allow the writ petition by quashing the impugned order passed by the 2nd respondent.
Per contra, Sri K.V. Aravind, learned Senior Standing Counsel for the respondents sought to justify the impugned order and contended that the provisions of section 85 of the Finance Act, 1994 stipulates that the appeal should be presented within two months from the date of receipt of the order by the appellant, which is extendable by another one month on sufficient cause being shown. The appeal came to be filed on 31.8.2017 after lapse of 5 months and 3 days from the date of receipt of
7 the order by the appellant. Therefore the 2nd respondent – appellate authority was justified in dismissing the appeal on the ground of delay. He would further contend that the appellant also failed to pay pre-deposit amount within the time and therefore he sought to dismiss the writ petition.
Having heard the learned counsel for the parties, it is the specific case of the petitioner that he was allotted 10,00,000 sweat equity shares of Rs.10/- each amounting to Rs.1,00,00,000/- and he has declared the same in the income tax return for the assessment year 2011-12 on 24.12.2011. In the mean time, 3rd respondent issued show cause notice dated 30.4.2015 contending that the petitioner provided “Management Consultancy Service” to his employer and in return he has received service charges in the form of sweat equity shares amounting to Rs.1,00,00,000/- and the same is liable to tax under the provisions of Service Tax Act and penalty is also leviable. In response to the said show cause notice, petitioner filed
8 reply on 9.6.2015 contending that his nature of service was as an ‘employee’ and that he has not rendered any service to the Company which is liable to tax under the Service Tax Act and requested for dropping the proposed levy. The 3rd respondent without considering the reply has proceeded to pass the order confirming the proposal and levied tax of Rs.10,30,000/- under Section 73 and penalty of Rs.10,30,000/- under Section 78 and Rs.10,000/- each under Sections 68 and 69 of the Finance Act.
Being aggrieved by the order passed by the 3rd respondent, the petitioner filed an appeal before the 2nd respondent. It is the specific case of the petitioner before the 2nd respondent appellate authority that he is aged about 76 years and could not file the appeal within the period of two months as provided under the provisions of Section 85(3A) of the Finance Act. Since he was not an assessee under the Service Tax Provisions, in order to pay service tax with penalty and interest, he has to get registered
9 online as an assessee. Since he has never rendered consultancy services, he did not have the knowledge of the above aspects and hence he has to run to various divisions of the department for getting registered as an assessee in order to pay portion of the tax demand, which is a condition precedent to prefer an appeal. Being an old aged, he could not get proper assistance and finally he requested one Mr.Anjan Kumar, Accounts Manager of the Company for help. The said Anjan Kumar sent an application 22.4.2017 for registration online and on 26.4.2017 when the petitioner’s representative visited the office for enquiry, he learnt that the application was rejected and the same has to be submitted along with the bank statement, electricity bill and again on 11.5.2017 application submitted complying all the requirements. Thereafter ultimately he was able to deposit on 10.7.2017 a sum of Rs.1,50,000/- being 7.5% of the tax demand through State Bank of India. Thereafter appeal came to be filed on 31.8.2017 after
10 consultancy. The delay was due to the aforesaid reasons and not intentional. The said aspect has not been considered by the 2nd respondent – appellate authority. The appellate authority proceeded to dismiss the appeal on the ground that it has no power to condone the delay beyond three months in view of the provisions of Section 85 of the Finance Act and also on the ground of non-payment of pre-deposit amount.
The 2nd respondent – appellate authority failed to take into consideration the reasons assigned by the petitioner that he is aged about 76 years and could not get registered online as an assessee within time and thereafter he could finally able to deposit the amount on 10.7.2017 through State Bank of India and filed the appeal on 31.8.2017. The appellate authority ought to have condoned the delay in order to give an opportunity to the petitioner and decide the case on merits. The same has not been done.
It is well settled that when substantial justice and technical considerations are pitted against each other, cause of substantial justice deserves to be preferred for the other side cannot claim to have vested right in injustice being done because of a non-deliberate delay. There is no presumption that delay is occasioned deliberately, or on account of culpable negligence, or on account of malafides. A litigant does not stand to benefit by resorting to delay. In fact he runs a serious risk. It must be grasped that judiciary is respected not on account of its power to legalise injustice on technical grounds but because it is capable of removing injustice and is expected to do so. It is also not in dispute that appellate authority has proceeded in view of the provisions contemplated under Section 85 of the Finance Act. In order to do justice between the parties, this Court exercising the powers under Articles 226 and 227 of the Constitution of India, condone the delay in filing the
12 appeal in the interest of justice and taking into consideration the age of the petitioner and accepting the cause shown by the petitioner.
In view of the above, the writ petition is allowed. The impugned order passed by the 2nd respondent dated 13.10.2017 in Order No.329/2017 in GST Appeal No.717/2016 as per Annexure - F is hereby quashed. The matter is remanded to the 2nd respondent to decide the appeal on merits. The 2nd respondent – appellate authority is directed to decide the appeal on merits without reference to the limitation and subject to verification of pre-deposit amount said to have been deposited by the petitioner before the appellate authority on 10.7.2017 and pass orders strictly in accordance with law.
Ordered accordingly.
Sd/-
JUDGE Gss/-