Pre-deposit waiver in service tax dispute over advance membership amounts refused for lack of prima facie case

Service tax liability on advance amounts collected from prospective members was treated as a matter requiring detailed examination at final hearing, because applicants were only temporary members or member-elect during the admission process. On the material then available, the Tribunal found no prima facie basis for complete waiver of pre-deposit, and also noted the absence of any plea of financial hardship. Complete waiver was therefore declined; the appellant was directed to deposit part of the demand, and upon compliance, waiver of the balance pre-deposit and stay of recovery were granted until disposal of the appeal.

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Issues: Whether the appellant was entitled to complete waiver of pre-deposit and stay of recovery in respect of service tax demanded on advance amounts collected from persons seeking membership.

Analysis: The demand arose from amounts received in advance from applicants for membership, who were required to undergo a substantial evaluation process before admission and were treated only as temporary members or member-elect during the intervening period. The Tribunal held that the legal questions concerning taxability of such advance amounts required detailed examination at the stage of final disposal and that, on the material then available, the appellant had not established a prima facie case for complete waiver. It also noticed the absence of any plea of financial hardship, while taking into account that the appellant was a society and that the amounts were received as advances from persons desirous of membership.

Conclusion: Complete waiver of pre-deposit was declined. The appellant was directed to deposit Rs. 30 lakhs and, on compliance, waiver of the balance pre-deposit and stay of recovery were granted till disposal of the appeal.

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