Payment of Pre-Deposit by Parent Company can be treated as ‘Proper Compliance’: Madras HC quashes Tribunal’s Action Dismissing Appeal [Read Order]

A two-judge bench of the Madras High Court comprising Justice R.Subramanian and Justice N. Sathish Kumar has quashed the CESTAT order wherein the Tribunal dismissed an appeal for non-compliance of the conditions imposed for grant of stay since the payment of pre-deposit was done by the Parent Company.

The appellant company was directed to make a pre-deposit of Rs.20,00,000/- and report compliance on 02.08.2013. At that relevant point in time, an application for the merger of the appellant company with M/s.St.John Freight System Limited was pending and therefore, the parent company name, M/s.St.John Freight System Limited deposited the money as directed by the conditional order. The Tribunal has refused to accept such deposits as proper compliance with the conditional order passed, because both the companies had separate service tax registration. It now turns out that the parent company, which has deposited a sum of Rs.20,00,000/- pursuant to the interim order is under liquidation.

The appellant approached the Court contending that it cannot be penalized for the error.

The division bench, while quashing the order by observing that “No doubt, the Tribunal was justified in concluding that the deposit by the parent company, which had a separate service tax registration, cannot be taken as a proper compliance, at the same time, the order of the Tribunal imposing a condition has been complied with an ends, we find that such a rigid view would only result in the appeal being thrown out on a technical ground, thereby, resulting in a denial of opportunity to the appellant.” “We, therefore, direct the payment made by the parent company to be taken as a payment made by the appellant company for the purposes of the compliance with the interim order alone. We, therefore, set aside the order of the Tribunal. The appeal is restored to file. The Tribunal is requested to dispose of the appeal on merits,” the Court said.

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