Prima facie waiver of pre-deposit upheld where machinery value and reimbursement charges were excluded from service tax base.

A prima facie case for waiver of pre-deposit was established where the assessee showed separate billing for machinery, VAT payment and VAT returns, supporting the contention that the machinery was sold and the value of goods was excludible from the service tax base under the relevant notification. The Tribunal also accepted that reimbursement expenses were prima facie outside the taxable value, as the valuation rule invoked for their inclusion had been struck down by the Delhi High Court. Recovery of the disputed service tax, interest and penalties was stayed pending disposal of the appeal.

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Issues: Whether the appellant had made out a prima facie case for waiver of pre-deposit of service tax, interest and penalties by contending that the value of machinery supplied was not includible in the service tax base and that reimbursement expenses could not be included in the taxable value.

Analysis: The appellant produced material to show separate billing for the machinery supplied, payment of VAT, and filing of VAT returns, supporting the contention that the machinery was sold to the service recipient and that the benefit of the notification permitting exclusion of the value of goods from the gross value of services was available. The Tribunal also noted that the claim regarding reimbursement charges was supported by the view that the valuation rule relied upon for including such amounts had been struck down by the Delhi High Court.

Conclusion: The appellant was held to have established a prima facie case for waiver of pre-deposit, and recovery of the disputed amounts was stayed pending disposal of the appeal.

Final Conclusion: Interim relief was granted to the appellant on the basis of a strong prima facie challenge to the demand.

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