Service tax classification and limitation issues led to stay of recovery pending appeal.

Interpretation of the taxability of repair and maintenance services, including whether the relevant clarification operated prospectively or retrospectively, and the limitation defence were treated as prima facie issues requiring fuller examination at the final hearing. As software had been regarded as goods under law, the classification question also required detailed consideration. On that basis, interim recovery of the service tax demand was stayed, and no coercive recovery was permitted until disposal of the appeal.

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Issues: Whether recovery of the impugned service tax demand should be stayed pending disposal of the appeal.

Analysis: The dispute involved classification and taxability issues, including whether the clarification bringing repair and maintenance within the ambit of taxable service operated prospectively or retrospectively, and whether the demand was barred by limitation. As both sides accepted that software had been treated as goods under law, the question required detailed examination at the final hearing. In view of the prima facie issues arising on interpretation and limitation, the matter warranted protection against recovery during pendency of the appeal.

Conclusion: Interim recovery of the demand was stayed and no coercive recovery was to be made until disposal of the appeal.

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