Works contract classification supported complete pre-deposit waiver and stay of service tax recovery pending appeal.

A prima facie case justified complete waiver of pre-deposit and stay of recovery in a service tax dispute involving works contract classification. The appellants relied on Tribunal rulings that activity falling within the later works contract category could not be taxed under an earlier category for the prior period, and that a works contract could not be vivisected for service tax purposes. The dispute also involved denial of abatement under an exemption notification, but the record showed sufficient prima facie support that the activity was part of a works contract not exigible during the material period. Recovery was stayed pending disposal of the appeals.

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Issues: Whether the appellants were entitled to complete waiver of pre-deposit and stay of recovery of the adjudged service tax, interest and penalty pending disposal of the appeals.

Analysis: The appellants established a prima facie case by relying on Tribunal decisions holding that activity covered by the later works contract category could not be taxed under an earlier category for the prior period, and that a works contract could not be vivisected for service tax purposes. The disputed demand also turned on denial of the abatement under the exemption notification, but the record disclosed sufficient prima facie support for the appellants' contention that the taxed activity was part of a works contract not exigible during the material period. In these circumstances, the balance of convenience warranted protection against coercive recovery pending appeal.

Conclusion: Complete waiver of pre-deposit was granted and recovery of the adjudged dues was stayed pending disposal of the appeals.

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