Delhi HC Grants Relief in Service Tax Dispute: Pre-Deposit Waived After Substantial Payment

High Court Observes ‘Deserving Case’ in Composite Works Contract Dispute

In a significant development for businesses embroiled in service tax disputes, the Delhi High Court has granted relief to an assessee by waiving a pre-deposit of ₹17.21 lakh. This decision comes in light of the fact that the assessee had already paid a substantial amount of ₹5.36 Crore towards the disputed service tax liability arising from a composite works contract.

Understanding the Case: Composite Works Contract and Service Tax

Composite works contracts, common in construction and infrastructure projects, often involve a mix of goods and services. The taxation of these contracts has been a subject of considerable debate and litigation under the erstwhile service tax regime. This particular case revolves around such a dispute, where the tax department had raised a demand which the assessee contested.

Court Considers ‘Substantial Compliance’ and ‘Genuine Hardship’

The High Court, in its order, observed that a significant portion of the demanded tax amount had already been paid. The pending pre-deposit amount of ₹17.21 lakh was deemed relatively minor in comparison to the already remitted ₹5.36 Crore. The Court held that in deserving cases, a waiver of the pre-deposit requirement can be granted, especially where there is evidence of substantial compliance and potential hardship to the assessee.

• The Court emphasized that the purpose of pre-deposit is not to create an undue financial burden on the assessee.
• The decision aims to balance the interests of revenue collection with the principles of fairness and justice.
• Experts believe this ruling may offer guidance in similar cases where substantial payments have already been made against disputed tax demands.