Thermal and acoustic insulation contracts: pre-deposit waived after Tribunal found a prima facie case on service tax treatment of materials.

Thermal and acoustic insulation work in buildings was examined to determine whether it fell within the exclusion under Notification No. 1/2006-ST when materials such as mineral wool and gypsum slab were used. The Tribunal followed its earlier view in Lloyd Insulation (India) Ltd., noting that the contracts involved supply of materials along with service and that service tax could not prima facie be levied on goods. On that basis, it held that the appellant had established a prima facie case and granted waiver of pre-deposit of the tax, interest and penalty, while staying recovery pending disposal of the appeal.

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Issues: Whether the appellant was entitled to waiver of pre-deposit and stay of recovery in respect of the demand raised by denying abatement under Notification No. 1/2006-ST for thermal and acoustic insulation work.

Analysis: The dispute turned on whether the activities of finishing thermal and acoustic insulation in buildings, involving use of materials such as mineral wool and gypsum slab, were covered by the exclusion in the notification. The Tribunal noted that an identical issue had already been considered in Lloyd Insulation (India) Ltd., where it was held that the contracts involved supply of materials in addition to service and that, prima facie, service tax could not be levied on materials (goods). Following that view, the Tribunal found that the present case was covered by the earlier order and that the appellant had made out a prima facie case.

Conclusion: The appellant was entitled to waiver of pre-deposit of the entire amount of tax, interest and penalty, and recovery was stayed till disposal of the appeal.

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