2013 (12) TMI 737 - AT - Service Tax

Waiver of pre-deposit - Demand of service tax - Advance received for execution of service contracts - Held that - The two contracts are for service and the applicant had paid service tax and they had received 10% advance in respect of the contracts of service and the applicant had already paid an amount of Rs.33.89 lakhs. In these circumstances, prima facie the applicant has a strong case in their favour - Stay granted.

Summary

Issues:
Waiver of pre-deposit of service tax, demand confirmation based on advance received, composite contract for service and goods, evasion of tax, prima facie case in favor of the applicant.

Analysis:
The case involved an application for the waiver of pre-deposit of service tax amounting to Rs.1,45,88,969, along with interest and penalties, by the applicant. The demand was confirmed due to the applicant receiving an advance of Rs.11.8 Crores for service contracts. The applicant contended that out of the three contracts entered into, two were for services on which service tax was paid, while one was for the supply of goods. The applicant received a consolidated advance of 10% of the total consideration for all three contracts. It was argued that since the advance also covered the contract for goods, the demand for service tax on that portion of the advance was not justified.

The Revenue, however, argued that the applicant had received a consolidated advance for all contracts, suggesting the contracts were artificially separated to avoid tax liability. Upon reviewing the contracts, the Tribunal found that two contracts were indeed for services on which service tax was paid, and the applicant had already paid a significant amount towards it. Considering these facts, the Tribunal concluded that the applicant had a strong case in their favor. Consequently, the Tribunal waived the pre-deposit of the dues and stayed the recovery during the appeal's pendency, thereby allowing the stay petition.

This judgment highlights the importance of examining the specifics of contracts and advances in service tax cases to determine the legitimacy of tax liabilities. It also emphasizes the need for a prima facie case in favor of the applicant to grant waivers or stays on tax demands. The Tribunal's decision to waive the pre-deposit and stay recovery showcases the significance of presenting a compelling argument supported by evidence to challenge tax assessments effectively.