Service tax pre-deposit waiver limited where construction of a commercial complex for a municipality was treated as prima facie taxable.

A stay application concerning service tax on construction of a commercial complex for a municipality is analysed on the basis of prima facie waiver of pre-deposit. The Tribunal found that complete waiver was not justified because the construction service was treated as covering work performed even for a municipal recipient, so the tax demand had to be secured by deposit. However, penalty pre-deposit was waived and recovery of the penalty was stayed subject to compliance. The note therefore reflects partial relief only, with deposit ordered for the service tax component and interim protection granted against penalty recovery pending the appeal.

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Issues: Whether complete waiver of pre-deposit was justified in a stay application involving service tax confirmed on construction of a commercial complex for a municipality, and whether pre-deposit of the tax demand and stay of penalty recovery should be granted.

Analysis: The order records that the service tax demand arose from construction of a commercial complex under a contract with a town municipal council. The appellant relied on the nature of the recipient to contend that no service tax was leviable, but the Tribunal found that a prima facie case for complete waiver was not made out, as construction of commercial complex service was treated as covering services rendered even to a municipality. On that basis, the Tribunal required deposit of the service tax amount and granted waiver only in respect of the penalty pre-deposit, with recovery of the penalty stayed subject to compliance.

Outcome: Complete waiver of pre-deposit was declined. The appellant was directed to deposit the service tax amount, while pre-deposit of penalty was waived and recovery of penalty was stayed pending disposal of the appeal.

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