The High Court of Delhi waived the ₹17.21 lakh pre-deposit noting that the petitioner had already paid ₹5.36 crore in a service tax dispute involving composite works contracts

MCM Construction and Real Estate Private Ltd.,petitioner-assessee,was issued two Show Cause Notices by the Central Goods and Service Tax (CGST) Department, one on 7 March 2008 for the period 2005-06 and 2006-07, and another on 28 November 2008 for 2007-08, alleging nonpayment of service tax on construction related services.

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The petitioner responded, arguing that the services were part of a composite works contract and not taxable. However, the Order in Original dated 5 January 2024 rejected this claim and denied exemptions under relevant service tax notifications. A demand of ₹4.28 crore was raised out of a total liability of ₹8.35 crore, after adjusting for payments already made.

The petitioner challenged the order before Customs,Excise and Service Tax Appellate Tribunal (CESTAT) and sought a waiver of the pre deposit. The tribunal directed a deposit of ₹17.21 lakh on 27 September 2024. A rectification application against this was also rejected on 15 May 2025. Both these orders are now under challenge in the present petition.

The petitioner counsel argued that a large part of the service tax had already been paid and should have been considered while calculating the pre deposit. It was submitted that the entire demand was disputed since the services were part of a composite works contract, which was not taxable and eligible for exemption. The counsel relied on a Supreme Court judgment in VVF India Ltd. v. State of Maharashtra, where the Court held that any amount paid before filing an appeal should count towards the pre deposit.

It was further submitted that the petitioner had already paid around 39% of the total demand, which was more than the required pre deposit.

In response, the respondent counsel stated that the amounts paid earlier were based on self assessment and were not part of the show cause notices. Since the notices dealt only with the short paid amount, the petitioner was required to make a separate pre deposit for that, and no credit could be given for earlier payments.

Justice Prathiba M Singh and Rajneesh Kumar Gupta considered whether the total service tax demand should be treated as a whole or split into pre- and post-show cause notice (SCN) amounts. It noted that the petitioner had already deposited ₹5.36 crore against the total demand of ₹13.66 crore, which was a substantial portion.

The petitioner claimed that composite works contracts were not liable for service tax and sought a refund, while the department disagreed. The Court did not examine the tax liability at this stage and focused only on whether there was a shortfall in pre-deposit and if waiver could be granted.

It found that the remaining pre-deposit of ₹17.21 lakh was minor compared to the amount already paid. Relying on past judgments, the bench held that it could grant waiver in deserving cases.

The Court waived the balance pre-deposit and directed that the appeal before CESTAT be heard on merits without being dismissed on technical grounds. The petition was disposed of.

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