Pre-deposit waiver and limitation relief where abatement eligibility was claimed on a bona fide belief and no further inquiry was made.

At the interim stage, CESTAT granted unconditional stay of pre-deposit for service tax and penalties where the demand arose from denial of abatement under an exemption notification. The tribunal found prima facie that the appellant may have held a bona fide belief that the activity was construction-related and eligible for abatement, especially since returns had been filed and tax had been paid on that understanding. It also noted that the Revenue had not carried out further inquiry into the exact nature of the work, and therefore the demand was prima facie barred by limitation under the extended period.

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Issues: Whether, at the interim stage, the appellant was entitled to waiver of pre-deposit in respect of service tax and penalties arising from denial of abatement under the exemption notification, and whether the demand was prima facie barred by limitation.

Analysis: The appellant had been filing returns and paying service tax under the belief that the activity undertaken was construction-related and qualified for abatement. The demand had been raised by invoking the extended period of limitation. The record disclosed prima facie that the appellant could have entertained a bona fide belief regarding the eligibility to abatement, and there had been no inquiry or further investigation by the Revenue into the exact nature of the work done.

Conclusion: The demand was prima facie held to be barred by limitation, and unconditional stay of pre-deposit was granted in favour of the appellant.

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