Service tax liability on gross amount charged and limits on new pleas in appeal, with interim penalty protection

A plea that service tax was not payable because the amount had not been realised could not be raised for the first time in appeal, as it had not been urged before the adjudicating authority. The court also treated service tax on monetary consideration as prima facie linked to the gross amount charged under section 67 of the Finance Act, 1994, rather than actual receipt during the relevant period. On pre-deposit and penalty, it considered the issue debatable in light of the appellant's government ownership and granted stay of penalty during the appeal, while directing deposit of the service tax amount.

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Issues: (i) Whether the plea that service tax was not payable because the amount had not been realised could be raised for the first time in appeal and whether service tax liability depended on receipt of the amount. (ii) Whether, in the circumstances, the appellant was entitled to waiver of pre-deposit and stay of penalty.

Issue (i): Whether the plea that service tax was not payable because the amount had not been realised could be raised for the first time in appeal and whether service tax liability depended on receipt of the amount.

Analysis: The plea regarding non-realisation of the charged amount had not been raised before the adjudicating authority and was therefore not open to be urged for the first time in appeal. The decision also proceeded on the basis that, under section 67 of the Finance Act, 1994, the taxable value in a case of consideration in money is the gross amount charged by the service provider, so the prima facie liability to service tax does not depend on actual receipt of the amount during the relevant period.

Conclusion: The new plea was not entertained, and the view that service tax liability was not contingent on actual receipt was upheld.

Issue (ii): Whether, in the circumstances, the appellant was entitled to waiver of pre-deposit and stay of penalty.

Analysis: The appellant was a corporation owned and controlled by the Central Government, and the question arising from the amendment relating to deemed provision of service under rule 6(1)(ii) was treated as debatable. On that footing, the matter warranted protection against immediate recovery of the penalty during the pendency of the appeal.

Conclusion: Stay of penalty was granted during the pendency of the appeal, while deposit of the service tax amount was directed.

Final Conclusion: The appeals were disposed of by sustaining the demand to the extent of service tax, granting interim protection against penalty, and restoring the dismissed appeal for hearing on merits upon compliance with the deposit direction.

Ratio Decidendi: A plea not raised before the adjudicating authority cannot ordinarily be introduced for the first time in appeal, and service tax on a monetary consideration is prima facie linked to the gross amount charged rather than actual receipt.

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