Service tax exemption for sugar cane transport and harvesting commission rejected; pre-deposit required for interim protection

Service tax on commission received for harvesting and transporting sugar cane was treated as linked to the manufacturing process of sugar, so the claimed exemption under Notification No. 14/2004-S.T. was not made out on the facts presented. The Tribunal also found that invocation of the extended period of limitation was justified. As a result, complete waiver of pre-deposit was refused, and interim relief was made conditional on deposit of the balance service tax within eight weeks, failing which the requested waiver and stay would not operate.

---

---

Issues: Whether the applicants were entitled to waiver of pre-deposit and interim stay on the service tax demand, and whether they had made out a prima facie case for exemption under Notification No. 14/2004-S.T. dated 10-9-2004.

Analysis: The demand was founded on commission received for harvesting and transportation of sugar cane to the factory in relation to manufacture of sugar. On the facts placed before it, the Tribunal held that such activity was connected with a manufacturing process and that the applicants were not entitled to the claimed exemption. It also found that invocation of the extended period of limitation was justified. In view of these findings, complete waiver of pre-deposit was not warranted.

Conclusion: The applicants were directed to deposit the balance amount of service tax within eight weeks, failing which the requested waiver and stay would not operate.

Final Conclusion: Interim relief was granted only on compliance with the directed pre-deposit, while the challenge to the demand was left to be considered in the appeal.

Ratio Decidendi: Where the disputed activity is prima facie linked to manufacturing and the claimed exemption is not made out, the Tribunal may refuse full waiver of pre-deposit and require payment of the balance demand as a condition for interim protection.

---