Debatable service tax credit on telephone services led to partial pre-deposit waiver pending appeal.

A debatable issue arose on eligibility of service tax credit for telephone services used in connection with mandap keeper services, especially where no separate account was maintained. The authorities questioned the credit claim based on the telephone's location at the reception counter, while the appellant relied on the credit rules allowing limited utilisation and the broad statutory scope of mandap keeper service. On a prima facie view, the telephone connection was treated as capable of meeting the rule's requirements, making the dispute fit for appellate consideration. Partial waiver of pre-deposit was therefore granted, subject to a deposit of Rs. 10,000, and the balance demand and penalty were stayed pending appeal.

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Issues: Whether the appellant was entitled to waiver of pre-deposit of the disputed service tax and penalty in view of a debatable claim to service tax credit on telephone services used in connection with mandap keeper services.

Analysis: The claim turned on the interaction between the credit rules governing utilisation of service tax credit where no separate account is maintained and the nature of telephone connection used for providing the output service. The order notes that the authorities had relied on the location of the telephone at the reception counter to deny the benefit, while the appellant relied on the provision permitting limited utilisation of credit and the broad statutory meaning of mandap keeper service. On a prima facie view, the connection of the telephone to the mandap area was treated as capable of satisfying the rule relating to telephone connection, making the issue arguable and fit for consideration at the appeal stage.

Conclusion: The appellant was granted partial waiver of pre-deposit on depositing Rs. 10,000, and the balance of the service tax and penalty was stayed during the pendency of the appeal.

Final Conclusion: The order only determines interim protection in the appeal by recognising a debatable credit issue and granting limited relief against pre-deposit.

Ratio Decidendi: Where the underlying tax-credit controversy is prima facie debatable, full pre-deposit of the disputed demand and penalty may be waived in part pending disposal of the appeal.

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