Pre-deposit waiver in service tax dispute upheld where exemption scope and franchisee receipts required fuller examination.

At the stay stage, the Tribunal held that the appellants had shown a prima facie case for waiver of pre-deposit and stay of recovery. It noted that the scope of exemption under Notification No. 12/2003-ST could not be curtailed by departmental clarification, and that the appellants had material to contest the inclusion of study material value in the coaching service demand. It also observed that reconciliation of receipts shown against franchisee services required examination at final hearing. On that basis, the amount already deposited was treated as sufficient for admission of the appeal.

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Issues: Whether the appellants had made out a prima facie case for waiver of pre-deposit and stay of recovery of the disputed service tax demand.

Analysis: The dispute arose from demand of service tax on the value of study material sold during coaching classes and on receipts shown against franchisee services. At the stay stage, the Tribunal noted that the scope of exemption under Notification No. 12/2003-ST could not be narrowed by a departmental clarification, and that the appellants had placed material to contest that the value of services was not transferred to the cost of books sold. The Tribunal also observed that reconciliation of receipts for franchisee service required examination at the final hearing. On that basis, the Tribunal found that the amount already deposited was adequate for admission of the appeal.

Conclusion: The appellants were entitled to waiver of pre-deposit of the balance dues and stay of recovery during pendency of the appeal.

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