Statutory hydro testing of LPG cylinders treated as outside service tax, supporting full waiver of pre-deposit and remand

Hydro testing of LPG cylinders was treated as a statutory activity under the Gas Cylinder Rules, 2004 and, on the basis of prior Tribunal decisions, was regarded as outside the service tax levy in the context considered. That prima facie position justified complete waiver of pre-deposit for the appellants. As the lower appellate authority had not yet decided the dispute on merits, the matter was remanded for fresh adjudication without insisting on pre-deposit.

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Issues: Whether the appellants were entitled to complete waiver of pre-deposit and a remand of the appeal for decision on merits without insisting on pre-deposit.

Analysis: The activity of hydro testing of LPG cylinders was treated as a statutory activity under the Gas Cylinder Rules, 2004. Relying on prior Tribunal decisions, the activity was held to be outside the service tax levy in the context considered, and the appellants were found to have established a prima facie case for full waiver of pre-deposit. Since the lower appellate authority had not decided the matter on merits, the appeal could be sent back for fresh adjudication without requiring pre-deposit.

Conclusion: Complete waiver of pre-deposit was granted and the matter was remanded to the lower appellate authority for decision on merits without insisting on pre-deposit.

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