Delhi High Court
Times Internet Ltd. vs Commissioner Of Central Excise on 18 December, 2013
Author: Sanjiv Khanna
$~20.
* IN THE HIGH COURT OF DELHI AT NEW DELHI
+ CEAC No. 24/2013
Date of decision: 18th December, 2013
TIMES INTERNET LTD. ..... Petitioner
Through Ms. Prem Lata Bansal, Sr. Advocate
with Mr. Ruchir Bhatia, Advocate.
versus
COMMISSIONER OF CENTRAL EXCISE ..... Respondent
Through Mr. Pradeep Desodya, Advocate for
Ms. Anjana Gosain, Advocate.
CORAM:
HON'BLE MR. JUSTICE SANJIV KHANNA
HON'BLE MR. JUSTICE SANJEEV SACHDEVA
SANJIV KHANNA, J. (ORAL):
Having heard learned counsel for the parties, we are inclined to
frame the following substantial question of law:-
"Whether the Customs, Excise and Service Tax
Appellate Tribunal was justified and correct in
directing the appellant to deposit Rs.1.5 crores in
five monthly equal instalments starting March,
2013 as a pre-condition of hearing of the appeal
on merits?"
2. With the consent of the parties, as limited and a short issue
arises for consideration, the appeal is taken for hearing today itself.
3. The appellant is a company engaged in the business of
CEAC No. 24/2013 Page 1 of 6
internet/internet services and providing mobile digital data.
4. By order-in-original dated 6th August, 2012, the appellant was
directed to pay following amounts towards service tax, penalty etc.:
"(i) I confirm and demand ST amounting to
Rs.2,95,63,317/- (Rs. Two Crores Ninety-Five
Lakh Sixty-Three Thousand Three Hundred
Seventeen only) including Education Cess &
Higher Secondary Education Cess short paid on
the total taxable value of the "Business
Auxiliary Service" from M/s TIME under
proviso to sub-section (1) of Section 73, read
with Section 66 and 68 of the of the (sic) Act.
(ii) I confirm and demand ST amounting to
Rs.2,75,95,438/- (Rs. Two Crores Seventy-Five
Lakh Ninety-Five Thousand Four Hundred
Thirty-Eight only) including Education Cess &
Higher Secondary Education Cess short paid on
the total taxable value of the "MMR services"
from M/s TIME under proviso to sub-section
(1) of Section 73, read with Section 66 and 68
of the of the (sic) Act.
(iii) I also order recovery of Interest on the
amount of ST short paid till the date of actual
payment of ST by M/s TIME, at the appropriate
rate under section 75 of the Act.
(iv) I impose a Penalty of Rs.5,71,58,755/-
(Rupees Five Crores Seventy-One Lakh Fifty-
Eight Thousand Seven Hundred Fifty-Five
only) on M/s. TIME under section 78 of the
said Act. In view of penalty imposed under
section 78, I refrain from imposing penalty
under Section 76 of the Act. I further impose a
penalty of Rs.5000/- on M/s TIME under
section 77 of the said Act, for contravening
various provisions of the said Act and the rules
made there under."
CEAC No. 24/2013 Page 2 of 6
5. The appellant has preferred an appeal and by the impugned order
dated 27th February, 2013, as is recorded above, has been directed to
pay Rs.1.5 crores in five equal monthly instalments of Rs.30 lacs each
by 25th of each month starting from March, 2013.
6. At the outset, we notice that financial hardship was not pleaded
by the appellant before the tribunal. Before us, learned counsel for the
appellant has filed today a copy of the revised balance sheet as on 31st
March, 2013, which indicates that the appellant had suffered losses for
the year ending 31st March, 2012 but had positive income for the year
ending 31st March, 2013. Bank balances as on 31st March, 2013 show
positive figures of more than Rs.5 crores. It is submitted that to
overcome the losses and to keep the balance sheet in positive figures
the appellant company had to sell its investments. However, these
contentions do not disclose financial stringency of a nature, that
deserves or requires complete waiver. In any case, we should examine
facts, prima facie case, etc.
7. As is evident from the operative portion of the adjudication
order, the service tax demand is on two accounts; "Business Auxiliary
Service" and "Management, Maintenance and Repair Services" (MMR
Services, for short).
8. On the first account, it is pointed out that the appellant had
entered into contracts with cellular mobile service providers and it was
CEAC No. 24/2013 Page 3 of 6
a joint business venture. The mobile service users or subscribers had
used the data provided by the appellant and while making payment to
the cellular mobile service providers had also paid the service tax. The
adjudication order holds that the cellular service providers should have
again charged or deducted service tax on the payments made to the
appellant, notwithstanding the position that the mobile service
subscribers have already paid service tax. The contention of the
appellant is that they had developed certain data which was utilised
with the telecom companies on revenue sharing basis, i.e., as a joint
venture and it was incorrect to hold that the appellant had rendered
service to the telecom companies. It is submitted that the ultimate
consumer, i.e., the mobile phone users had availed the services and had
paid service tax and second or double taxation for the same service
should not be permitted and was unacceptable. Having considered the
contention raised by the appellant, we feel that the plea does require
consideration and detailed examination by the tribunal. The appellant
has certainly been able to make out a prima facie and a good case on
this aspect, to pray for waiver of pre-deposit.
9. With regard to the second issue, it is an accepted position that
the appellant is engaged and had provided services in form of
development and maintenance of websites. The contention of the
appellant is that software or development and maintenance of websites
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service were exempt from service tax in terms of Circular No. 70 dated
17th December, 2003 till 1st June, 2007. It is pointed out that the
demand in question relates to the period 2004-05 to 31st March, 2006.
On the said aspect, learned counsel for the respondent has relied upon
Circular No.81/2/2005-ST dated 7th October, 2005. The said Circular
relies upon judgment of the Supreme Court in Tata Consultancy
Services versus State of Andhra Pradesh, (2005) 1 SCC 308 which
held that software were goods. We also notice that the appellant
themselves had started paying service tax on the aforesaid service, with
effect from 1st April, 2006 under the head "online information".
10. Keeping in view the aforesaid facts, we feel that the appellant
should pay and deposit Rs.1 crore as a pre-condition for hearing of the
appeal. While fixing the amount, we have taken into consideration the
Circular No.81/2/2005-ST issued on 7th October, 2005 and also
examined the definition of MMR Services as defined in Section 65(4)
of the Finance Act, 1994. The aforesaid payment of Rs.1 crore will be
made in two equal instalments and the first instalment will be paid on
or before 31st January, 2014 and the second will be paid before 15 th
March, 2014.
11. The question of law is accordingly answered. The appeal is
disposed of. In the facts of the case, there will be no order as to costs.
We clarify that opinion expressed in the order will not be binding on
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the tribunal and the contentions will be examined on merits, without
being influenced by the aforesaid observations.
Copy of this order be given dasti to the learned counsel for the
parties under signature of the Court Master.
SANJIV KHANNA, J.
SANJEEV SACHDEVA, J.
DECEMBER 18, 2013
VKR
