Prima facie case on materials component secured waiver of predeposit and stay in service tax dispute

A strong prima facie case was found for waiver of predeposit and stay of recovery in a service tax dispute arising from denial of Notification No. 15/2004-S.T. The demand was based on the view that the work constituted finishing and completion services, but the contracts on record indicated that the appellant's activities included supply and use of materials as well as service. On that basis, it was accepted that, even if the services fell within the excluded category, service tax could not be levied on the materials component. Predeposit of the tax and penalty was waived and recovery was stayed pending appeal.

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Issues: Whether the appellant had made out a prima facie case for waiver of predeposit and stay of recovery of the demand of service tax and penalty.

Analysis: The demand arose from denial of the benefit of Notification No. 15/2004-S.T. on the footing that the services rendered were finishing and completion services. The contracts placed on record showed that the appellant's work involved supply and use of materials in addition to service. On that basis, the appellant established a strong prima facie case that, even assuming the services fell within the excluded category, service tax could not be levied on the materials component.

Conclusion: Predeposit of the demanded tax and penalty was waived and recovery was stayed pending the appeal.

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