2007 (6) TMI 125 - AT - Service Tax

Stay/Dispensation of pre-deposit - Appellant contested that the entire activity is covered under exemption notification and the activity can t split in other way - Appellant directed to pre-deposit of Rs. 5 lakhs and balance waived off on the ground of part of activity is covered under notification

Summary

Issues:
1. Interpretation of Notification regarding exemption for maintenance services.
2. Requirement of pre-deposit of Service Tax and penalty under Sections 76 and 78.
3. Classification of maintenance activity under the Service Tax regime.

Analysis:
1. The case involved a dispute over the interpretation of a Notification exempting certain maintenance services from Service Tax. The appellants argued that their entire maintenance activity, including hardware and system software, fell within the ambit of the Notification. However, the department contended that the specific maintenance of MICR Cheque Processing Solution with imaging facilities was not covered by the exemption, leading to demands being raised for a certain period.

2. The appellant was required to pre-deposit a substantial amount of Service Tax along with penalties under Sections 76 and 78 for failure to deposit the required sum. The appellant contested this requirement, stating that they had a strong case on merits and should not be obligated to make any pre-deposit. The Tribunal, after considering the arguments, directed the appellant to pre-deposit a specified amount within a given timeframe to avail of a waiver on the remaining duty and penalty.

3. The Tribunal analyzed the terms of the maintenance agreement and the nature of the services provided by the appellants. It was observed that while a portion of the maintenance activity was exempted under the Notification, there was a separate activity related to the services of MICR cheque clearing system that did not fall under the exemption. The Tribunal found that the appellants had a valid ground for waiver of duty demand on the exempted category but directed them to make a partial pre-deposit to avail of the waiver on the remaining duty and penalty. Failure to comply with the terms of the stay order would result in dismissal of the appeal.