Prima facie waiver of pre-deposit granted where warranty spare parts and dealer incentives were treated as outside service tax value.

At the stay stage, the Tribunal considered whether the appellant had shown a prima facie case for waiver of pre-deposit and stay of recovery in a service tax dispute. It found prima facie that spare parts and components sold during warranty repairs, supported by VAT or sales tax invoices, were not includible in service value, and that dealer incentives had a direct nexus with sale of goods rather than business auxiliary service consideration. The remaining demands, including other services and limitation, required fuller examination at final hearing. Financial hardship was pleaded but not substantiated. Partial relief was granted on deposit of Rs. 40,00,000, with recovery of the balance stayed pending appeal.

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Issues: Whether the appellant had made out a prima facie case for waiver of pre-deposit of the balance demand, interest and penalties and stay of recovery.

Analysis: The dispute at the stay stage concerned service tax demands arising from alleged taxable services and denial of credit. The Tribunal found prima facie that the sale of spare parts and components during warranty repairs, against invoices with VAT or sales tax paid, could not be treated as part of the service value. It also found prima facie that dealer incentives paid by the manufacturer had a direct nexus with the sale of goods and were not, on the face of it, consideration for business auxiliary service. The remaining issues, including demands relating to other services and the limitation plea, required detailed examination at final hearing. Financial hardship was pleaded but not substantiated by evidence.

Conclusion: The appellant was granted partial relief by way of waiver of pre-deposit of the balance amount on deposit of Rs. 40,00,000, and recovery of the balance demand was stayed till disposal of the appeal.

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