Prima facie taxability of offshore lead manager services led to only partial pre-deposit relief and conditional stay.

Services received from offshore lead managers were treated at the stay stage as prima facie taxable where they involved underwriting of the issue and managing the issue. Underwriting was regarded as falling within the taxable service category, while issue management was viewed as merchant banking under banking and financial services. The Board circular cited by the appellant did not displace that prima facie view. As the demand related to taxable services and no case for complete waiver was shown, the Tribunal declined full waiver of pre-deposit and granted only partial relief, with recovery of the balance demand, interest and penalty stayed on compliance.

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Issues: (i) Whether the services received from offshore lead managers were prima facie taxable as underwriting services and merchant banking services under the service tax law. (ii) Whether full waiver of pre-deposit and stay of recovery should be granted pending disposal of the appeal.

Issue (i): Whether the services received from offshore lead managers were prima facie taxable as underwriting services and merchant banking services under the service tax law.

Analysis: The services received by the appellant were found, at the stay stage, to include underwriting of the issue and managing the issue. Underwriting services were treated as taxable under the relevant service category, and managing the issue was treated as falling within banking and other financial services in the nature of merchant banking services. The Board circular relied upon by the appellant did not displace the prima facie view that the amounts paid for these services related to taxable services.

Conclusion: The services were held prima facie taxable.

Issue (ii): Whether full waiver of pre-deposit and stay of recovery should be granted pending disposal of the appeal.

Analysis: Since the demand related to taxable services and the appellant had not made out a case for complete waiver, only partial relief was considered appropriate. The Tribunal directed a substantial but limited pre-deposit and ordered that recovery of the balance demand, interest and penalty would remain stayed upon compliance.

Conclusion: Full waiver was declined and partial waiver of pre-deposit was granted.

Final Conclusion: The appeal was not finally decided on merits, but interim relief was restricted to a conditional partial waiver of pre-deposit with stay of recovery of the balance on compliance.

Ratio Decidendi: At the stage of stay, where the services appear prima facie taxable, the Tribunal may grant only partial waiver of pre-deposit and protect the balance demand by conditional stay of recovery.

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