High Court reduces pre-deposit for service tax dispute on road construction work, sets new deposit amount, stays recovery

The High Court modified the pre-deposit requirement for a service tax dispute on road construction work, reducing it to Rs. 10,00,000 from Rs. 35,00,000. The petitioner was allowed to deposit this amount within three weeks, with recovery of the remaining demand stayed pending appeal disposal. The Court emphasized that the Appellate Authority would decide the case's merits based on the law, considering that road construction for commercial activities was found non-taxable in a similar case involving the principal company.

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Issues:
1. Applicability of service tax on road construction work.
2. Prima facie view of the Appellate Authority.
3. Requirement of pre-deposit for stay over recovery proceedings during appeal.

Analysis:
1. The case involved a dispute regarding the applicability of service tax on road construction work carried out by the petitioner for a power generation company. The revenue claimed that the petitioner provided taxable services falling under "Commercial or Industrial Construction Services" and evaded service tax. The petitioner argued that their services fell under an exception in the Finance Act, 1994. The Adjudicating Authority imposed service tax and penalties on the petitioner, leading to an appeal before the Commissioner (Appeals), Central Excise, Jaipur-I.

2. The Appellate Authority, in its order dated 21.02.2013, directed the petitioner to deposit Rs. 35,00,000 towards the demand in question for stay over recovery proceedings during the appeal. The petitioner contended that they had a strong prima facie case based on a previous order by the same Appellate Authority regarding the power generation company, which held that road construction was excluded from service tax. The respondents supported the order, citing the statutory requirement of pre-deposit and no need for interference.

3. The High Court considered the submissions and observed that the condition of pre-deposit should be softened to avoid undue hardship to the petitioner. The Appellate Authority's order was analyzed, noting that the construction of roads for commercial activities was not taxable in the case of the principal company, M/s NLC. Therefore, the High Court modified the pre-deposit requirement to Rs. 10,00,000, allowing the petitioner to deposit this amount within three weeks. The recovery of the remaining demand was stayed until the appeal's final disposal, emphasizing that the final decision on the case's merits would be made by the Appellate Authority in accordance with the law.

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