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Issues: (i) Whether the appellant, being the recipient of the services, was liable to service tax for the period prior to 18-4-2006; (ii) whether, in the circumstances, waiver of pre-deposit could be granted in full.
Issue (i): Whether the appellant, being the recipient of the services, was liable to service tax for the period prior to 18-4-2006.
Analysis: The demand covered a period before and after 18-4-2006. For the pre-18-4-2006 period, the liability sought to be fastened on the appellant was as a recipient of consulting engineer and intellectual property services. Section 66A of the Finance Act, 1994 came into force only on 18-4-2006, and the appellant was found to be only a recipient of service. On that basis, the pre-18-4-2006 demand was treated as not payable by the appellant.
Conclusion: The appellant was not liable to pay service tax for the period prior to 18-4-2006.
Issue (ii): Whether, in the circumstances, waiver of pre-deposit could be granted in full.
Analysis: For the post-18-4-2006 period, the issue was treated as contentious. The Tribunal also noted the payment of R&D cess and the claim of financial hardship. Taking these factors into account, it directed a partial deposit and waived recovery of the balance pending disposal of the appeal.
Conclusion: Full waiver of pre-deposit was declined and partial waiver was granted on condition of deposit of Rs. one crore.
Final Conclusion: The stay petition succeeded only in part, with the pre-18-4-2006 demand held unsustainable and the balance pre-deposit requirement suspended upon compliance with the directed deposit.
Ratio Decidendi: Service tax could not be fastened on a recipient of service for the period before the statutory provision creating such liability came into force, and pre-deposit relief may be tailored on a prima facie view of the case and financial hardship.
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