Pre-deposit waiver on advances treated as material purchase consideration in a construction service dispute.

Advances received under an agreement were treated, on a prima facie basis, as payments for purchase of materials rather than taxable consideration for commercial or industrial construction service, so the demand on those advances was not sustainable at the stage of waiver. The assessee's plea that the arrangement was a works contract was noted, but no prima facie finding was recorded on taxability before 1-6-2007. Pre-deposit of service tax and penalties was therefore waived and recovery stayed pending appeal.

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Issues: Whether pre-deposit of service tax and penalties was required to be waived in proceedings concerning liability on advances received for commercial or industrial construction service, and whether the claim of works contract nature of the agreement could be considered at this stage.

Analysis: The advances were shown, on the basis of the agreement, to have been received for purchase of materials. On that prima facie basis, the demand on advances was not sustainable at the stage of considering waiver, even assuming the service fell within commercial or industrial construction service. The contention that the contract was a works contract was noticed, but no prima facie finding was recorded on taxability prior to 1-6-2007.

Outcome: Pre-deposit of the tax and penalties was waived and recovery stayed pending the appeal.

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