Limited pre-deposit in service tax dispute upheld where prior payment and prima facie scrutiny supported stay of recovery.

A limited pre-deposit was considered appropriate in a service tax appeal challenging denial of Notification No. 12/2003 benefit, because the appellant had already deposited a substantial amount and the interim order did not show a proper examination of the work orders and materials relied upon. At the stay stage, the demand was not required to be secured in full where only a prima facie review was involved. The appellant was therefore directed to deposit a further Rs. 20 lakhs, and recovery of the balance demand was stayed pending disposal of the appeal.

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Issues: Whether the appellant was required to make full pre-deposit of the service tax demand, or whether a limited pre-deposit with stay of recovery pending appeal was justified.

Analysis: The appeal arose from a challenge to denial of the benefit claimed under Notification No. 12/2003 and the consequent service tax demand. The record disclosed that the appellant had already deposited a substantial amount. The order under challenge did not reflect a categorical examination of the work orders and materials relied upon by the appellant before declining the claimed benefit. In view of the limited scrutiny at the interim stage and the existing deposit already made, insistence on the entire demand as pre-deposit was not warranted.

Conclusion: The appellant was directed to make only a further pre-deposit of Rs. 20 lakhs, and recovery of the balance demand was stayed during pendency of the appeal.

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