Debatable sponsorship classification supports waiver of balance pre-deposit and interim stay of recovery in tax appeal.

A prima facie case for waiver of balance pre-deposit and stay of recovery may be made out where the service tax demand turns on a debatable classification issue. The Tribunal noted that sponsorship, as understood in the statute and circular, ordinarily relates to events and excludes donations or gifts where nothing is required in return. As two views were possible on the material before it, and the appellant had already paid the undisputed portion with interest, interim relief was granted during the pendency of the appeal.

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Issues: Whether the appellant had made out a prima facie case for waiver of the balance pre-deposit and stay of recovery pending appeal.

Analysis: The demand arose from service tax proposed on alleged sponsorship service in relation to donations and publicity arrangements. The Tribunal noted that the definition of sponsorship excluded donations or gifts where nothing was required to be provided in return, and that the Board circular indicated sponsorship was ordinarily understood in connection with events. On the material before it, the issue was debatable, two views were possible, and the appellant's construction carried greater weight at the interim stage. The appellant had also segregated and paid the part of the liability which was admittedly covered, with interest.

Conclusion: The appellant established a prima facie case for waiver of the balance dues and stay of recovery was granted during the pendency of the appeal.

Ratio Decidendi: Where the demand raises a debatable question and the appellant demonstrates prima facie merits, waiver of pre-deposit and interim stay of recovery may be granted.

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