Service tax on lease premium: prima facie coverage in favour of the assessee justified waiver of pre-deposit and stay.

Service tax on lease transactions was examined under the scope of taxable service in section 65(105)(zzzz) of the Finance Act, 1994, with the central question being whether the levy extended only to lease rent or also to a one-time lease premium. The Tribunal's own final view treated tax as leviable on lease rent and not on the premium, which supported a prima facie case for the assessee. In that setting, insisting on a large pre-deposit and refusing unconditional stay of recovery was not justified, and waiver of the precondition with stay of recovery was warranted.

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Issues: Whether the Tribunal was justified in directing pre-deposit and refusing unconditional stay of recovery when the dispute on service tax liability over lease premium appeared prima facie covered in favour of the assessee.

Analysis: The dispute turned on the scope of taxable service under section 65(105)(zzzz) of the Finance Act, 1994, namely whether service tax could be levied on the rent alone or also on a one-time lease premium. The Tribunal's own final view treated service tax as leviable on the quantum of lease rent and not on the lease premium. On that basis, and in view of the prima facie case in favour of the assessee, the demand for security of Rs. 20 crores was not justified at the interim stage.

Conclusion: The Tribunal was not justified in insisting on pre-deposit and in declining unconditional stay; waiver of the precondition and stay of recovery were warranted.

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