Pre-deposit in service tax freight dispute waived after prima facie doubt over liability where consignees paid freight.

Pre-deposit was waived in a service tax dispute over freight paid for transportation of goods to consignment agents, and recovery was stayed pending appeal. The Tribunal noted that the mere description of buyers as consignment agents did not, by itself, establish that freight was paid by them as agents of the principals. It also recorded a prima facie doubt whether tax could be insisted upon from the consignor where both consignor and consignee appeared to fall within the notified categories, particularly when the freight payments were made by the consignees. Earlier orders in identical matters were relied on.

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Issues: Whether the applicants were required to make pre-deposit of the service tax demand arising from transportation of goods through consignment agents under the relevant service tax arrangement.

Analysis: The dispute arose from service tax liability on freight paid for transportation from the factory to consignment agents. The arrangement was said to fall under Rule 2(d)(i)(5) of the Service Tax Rules, 1997 read with Notification No. 35/2004-ST dated 3.12.2004. The Tribunal noted that the mere fact that the buyers were consignment agents did not, by itself, establish that freight was paid by them as agents of the principals. It also noticed the prima facie doubt whether, where both consignor and consignee fall within the notified categories, Revenue could insist that tax must necessarily be paid by the consignor, especially when the freight payments were made by the consignees. The Tribunal further relied on earlier orders in identical matters.

Conclusion: The requirement of pre-deposit was waived and recovery of the demand was stayed during pendency of the appeals.

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