Service tax on associated enterprise transactions: prima facie prospective section 67 view justified waiver of pre-deposit and stay.

Waiver of pre-deposit and stay of recovery were granted in a dispute over service tax on transactions between associated enterprises, where the demand for interest and penalty arose from alleged delay in payment. The assessee argued that the amendment to section 67, which treated tax as payable on entry in the books of account, operated prospectively from 10-05-2008 and not retrospectively. On that prima facie basis, reinforced by an earlier Tribunal order on the same issue, the disputed interest and penalty were protected pending appeal.

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Issues: Whether waiver of pre-deposit and stay of recovery of interest and penalty was justified where the demand arose from alleged delay in payment of service tax on transactions between associated enterprises, and whether the amendment to section 67 governing such liability operated prospectively.

Analysis: The application was considered in the light of the assessee's contention that the amendment to section 67, which made service tax payable on transactions with associated enterprises on entry in the books of account, was prospective with effect from 10-05-2008 and not retrospective. It was also noted that the same assessee had earlier obtained support from a prior final order of the Tribunal on the same issue. On that prima facie basis, the demand for interest and the connected penalty were treated as fit for protection pending appeal.

Conclusion: Waiver of pre-deposit was granted and recovery of the disputed amounts was stayed pending disposal of the appeal.

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