2015 (1) TMI 223 - AT - Service Tax

Waiver of pre-deposit - Revenue imposed tax on the assumption that in respect of the service of repair and maintenance during the warranty period since the service is extended free of cost no value of the service is computable and service tax payable thereon; that such service falls within an exempted category and therefore separate account should be maintained in respect of service of repair and maintenance during the warranty period and during the extended warranty period, separately - Held that - assumption of the Revenue is prima facie contrary to the provision of Section 65(105)(zzg) read with Section 65(64) of the Finance Act, 1994. The assumption by Revenue that since no service tax is payable in fact though the service falls within the aforesaid provision, the service constitutes are an exempted category is also prima facie contrary to Rule 2(e) of Cenvat Credit Rules, 2004. - prima facie case in favour of the petitioner and balance of convenience, for granting the petitioner-assessee absolute waiver of pre-deposit and we accordingly grant stay of all further proceedings pursuant to the impugned order in appeal, pending the appeal. - Stay granted.

Summary

Issues:
Waiver of pre-deposit under Section 35 of the Central Excise Act, 1944 for tax, interest, and penalties levied on the appellant.

Analysis:
The appellant provides three types of services: sale/trading of consumer durables, repair & maintenance during the warranty period without charging the customer, and paid repair and maintenance under annual maintenance contracts. The Revenue confirmed a demand and levied penalties based on the assumption that services provided during the warranty period are exempted from service tax as they are extended free of cost. However, this assumption is challenged as contrary to relevant provisions of the Finance Act, 1994 and Cenvat Credit Rules, 2004. The Tribunal finds a strong prima facie case in favor of the appellant, granting a waiver of pre-deposit and staying further proceedings pending appeal.

Overall, the judgment revolves around the issue of waiver of pre-deposit under Section 35 of the Central Excise Act, 1944 for tax, interest, and penalties levied on the appellant. The appellant's provision of different services, the Revenue's demand based on the assumption of exempted services during the warranty period, and the Tribunal's analysis of the legal provisions form the crux of the decision. The Tribunal's finding of a strong prima facie case in favor of the appellant leads to the grant of a waiver and stay of further proceedings, pending appeal.