Pre-deposit and limitation in service tax dispute: prima facie time bar led to conditional stay of recovery.

Service tax pre-deposit relief was considered on a prima facie basis where the extended period finding was found to be sketchy. The demand for the earlier period appeared prima facie time-barred, while the balance demand within limitation required detailed examination of the nature of the activities and taxability at final hearing. Conditional protection was therefore granted: the appellant was directed to deposit Rs. 2.5 crores within eight weeks, and on compliance, waiver of pre-deposit of the balance amount and stay of recovery were granted pending disposal of the appeal.

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Issues: Whether the appellant was entitled to waiver of pre-deposit and stay of recovery in respect of the service tax demand on terminal charges, demurrage and royalty charges, and whether the demand for the earlier period was prima facie barred by limitation.

Analysis: The appellant had raised limitation before the lower authorities, but the finding for invoking the extended period was found to be sketchy. On a prima facie view, the demand for the period from 1-4-2002 to 31-8-2006 appeared to be hit by limitation. For the balance demand within the limitation period, the nature of the activities and the applicability of service tax required detailed examination at the stage of final hearing. In these circumstances, conditional protection was considered appropriate.

Outcome: The appellant was directed to deposit Rs. 2.5 crores within eight weeks, and on compliance, waiver of pre-deposit of the balance amount and stay of recovery were granted till disposal of the appeal.

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