Service tax on roads and runways: strong prima facie case barred a heavy pre-deposit for hearing the appeal.

The Bombay HC considered whether service tax could be levied on maintenance and repair of roads and airport runways, and whether the statutory exemption for roads could extend to runways. It held that the assessee had a strong prima facie and arguable case on taxability, and that the Tribunal had not adequately addressed whether runways fall within the genus of roads before requiring a substantial pre-deposit. The pre-deposit direction of Rs. 3 crores was set aside, and the appeal was to be heard on merits without insisting on any pre-deposit of duty, interest or penalty.

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Issues: Whether the Tribunal was justified in directing pre-deposit of Rs. 3 crores as a condition for hearing the appeal on merits.

Analysis: The dispute concerned the applicability of service tax to maintenance and repair of roads and airport runways, in the context of the statutory exemption for roads and the appellant's contention that runways are also covered within that expression. The Court found that the appellant had a strong prima facie and arguable case, and that the Tribunal had not given adequate consideration to the question whether runways fall within the genus of roads before insisting on a substantial pre-deposit. In these circumstances, the Tribunal's order directing deposit of Rs. 3 crores was not sustained.

Conclusion: The pre-deposit direction was set aside and the appeal was directed to be heard on merits without insisting on any pre-deposit of duty, interest or penalty.

Ratio Decidendi: Where the assessee raises a substantial prima facie challenge on the taxability of the demand and the Tribunal fails to properly consider that issue, insistence on a heavy pre-deposit is unwarranted.

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