Facts of the Case

M/s. Suraksha Security and Maintenance Service filed a writ petition under Article 226 of the Constitution of India challenging the Order-in-Original dated 28 April 2021 passed by the Additional Commissioner, Office of the Principal Commissioner of Central Tax, Hyderabad GST Commissionerate.

By the impugned Order-in-Original, the adjudicating authority confirmed a Service Tax demand of Rs. 78,93,478 for the period October 2014 to June 2017 under Section 73(2) of the Finance Act, 1994. The authority also imposed a penalty of an equivalent amount under Section 78 of the Finance Act, 1994, besides confirming liability towards interest and other consequential amounts.

The petitioner sought to have the Order-in-Original declared illegal, arbitrary and unjust and prayed for its setting aside. The petitioner also sought stay of further proceedings, including recovery of the disputed tax and penalty.

During the proceedings, the High Court noted that the impugned Order-in-Original was an appealable order. Earlier, on 10 October 2022, the Court had recorded that the challenge was directed against an appealable Order-in-Original and listed the matter under the caption “for dismissal.” On 17 October 2022, the Court was informed that the petitioner’s counsel was indisposed, following which the matter was again listed for consideration.

Issues Involved

The principal issues before the Telangana High Court were:

  1. Whether a writ petition under Article 226 of the Constitution of India should be entertained against an Order-in-Original when a statutory appellate remedy was available under the Finance Act, 1994.
  2. Whether the petitioner could bypass the statutory appeal mechanism on the ground that it was financially unable to make the required pre-deposit because of closure of business and the intervening COVID-19 pandemic.
  3. Whether the High Court could waive the statutory pre-deposit requirement for filing an appeal.
  4. Whether granting such waiver would amount to altering or rewriting the statutory framework enacted by the legislature.

Petitioner’s Arguments

The petitioner challenged the Order-in-Original dated 28 April 2021 confirming the Service Tax demand, interest and equivalent penalty.

The petitioner’s counsel submitted that the petitioner’s business had closed and that the intervening COVID-19 pandemic had adversely affected its financial position. On that basis, it was argued that the petitioner was not in a position to pay the pre-deposit required for filing the statutory appeal.

Accordingly, the petitioner requested the High Court to waive the pre-deposit requirement so that the challenge to the adjudication order could be pursued without complying with that statutory financial condition.

The essential basis of the petitioner’s request was therefore financial incapacity arising from business closure and pandemic-related circumstances.

Respondent’s Arguments

The judgment records the appearance of learned counsel for respondent No. 1. The central legal position emerging from the proceedings was that the impugned Order-in-Original was an appealable order and that the petitioner had an available statutory remedy before the Commissioner (Appeals).

The Court specifically recorded that the Order-in-Original was appealable under Section 85(3A) of the Finance Act, 1994. Therefore, the dispute was required to be pursued through the statutory appellate mechanism rather than by directly invoking writ jurisdiction.

The judgment does not record any elaborate independent factual submissions by the respondents beyond the legal position concerning availability of the appellate remedy. Accordingly, no additional respondent arguments should be attributed beyond what is reflected in the order.

Court Order / Findings

The Telangana High Court held that the impugned Order-in-Original was admittedly an appealable order under Section 85(3A) of the Finance Act, 1994 before the Commissioner (Appeals).

The Court considered the petitioner’s submission that, due to closure of business and the intervening COVID-19 pandemic, it was unable to pay the pre-deposit required for filing the appeal. However, the Court expressly declined to accept the request for waiver.

The High Court made the significant finding that accepting such a request would tantamount to rewriting the statute.

Accordingly, the Court relegated the petitioner to the statutory appellate forum under Section 85 of the Finance Act, 1994.

Subject to that observation, the writ petition was dismissed. Pending miscellaneous applications, if any, were ordered to stand closed. There was no order as to costs.

Important Clarification

The judgment is important for the distinction between financial hardship and the Court’s power to dispense with a statutory requirement.

The petitioner specifically relied upon:

  • closure of business;
  • financial inability to make the pre-deposit; and
  • the intervening COVID-19 pandemic.

Despite these circumstances, the High Court did not waive the statutory pre-deposit requirement. The Court held that accepting the request would effectively amount to rewriting the statute.

Therefore, the ruling clarifies that where the statute provides an appellate remedy and prescribes conditions governing access to that remedy, a writ court ordinarily cannot remove or rewrite those statutory conditions merely because the assessee pleads financial difficulty.

A further important clarification is that the High Court did not adjudicate the merits of the Service Tax demand of Rs. 78,93,478, the equivalent penalty under Section 78, or the interest liability. The writ petition was dismissed because the petitioner was relegated to the statutory appellate forum. Therefore, the decision should not be described as a judicial affirmation of the tax demand on merits.

Sections Involved

Section 73(2) of the Finance Act, 1994: Concerned the determination and confirmation of Service Tax liability. In the present case, the adjudicating authority confirmed a demand of Rs. 78,93,478 for October 2014 to June 2017.

Section 78 of the Finance Act, 1994: Concerned penalty in specified circumstances. The impugned Order-in-Original imposed a penalty equivalent to the confirmed tax demand.

Section 85(3A) of the Finance Act, 1994: Identified by the High Court as the provision under which the impugned Order-in-Original was appealable before the Commissioner (Appeals).

Section 85 of the Finance Act, 1994: The High Court relegated the petitioner to the statutory appellate forum under this provision.

Article 226 of the Constitution of India: The constitutional provision under which the petitioner invoked the writ jurisdiction of the Telangana High Court.

Link to download the order -https://mytaxexpert.co.in/uploads/1783326202_1316compressed.pdf

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