Tribunal grants stay on service tax demand, cites abatement issue, waives pre-deposit

The Tribunal granted a stay on the recovery of the remaining service tax demand of Rs. 7,13,098/-, along with interest and penalties, during the appeal's pendency. This decision was based on the appellant's argument that they were entitled to a 67% abatement under certain notifications, citing relevant case law. The Tribunal found that the appellant's failure to include the value of free supplies in the gross amount received led to the denial of the abatement benefit. Given the appellant's partial payments and the prima facie favorable judgment from a previous case, the Tribunal waived the need for further pre-deposit.

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Issues:
Service tax demand confirmation based on non-application of exemption notifications due to exclusion of value of free supplies in gross amount received.

Analysis:
The appellant filed a stay application and appeal against the order-in-appeal confirming a service tax demand of Rs. 7,13,098/- along with interest and penalties. The demand was upheld as the appellant paid service tax on only 33% of the gross amount received, excluding the value of free supplies, thereby not meeting the criteria of Notifications No. 19/2003-ST and 1/2006-ST. The appellant argued that it paid Rs. 1,91,700/- towards the tax liability and deposited Rs. 44,436/- as interest, claiming entitlement to a 67% abatement under the said notifications, citing the judgment of CESTAT Larger Bench in the case of Bhyana Builders Vs. CCE.

Upon considering the contentions, the Tribunal noted that the benefit of the exemption notifications providing for 67% abatement was denied due to the exclusion of the value of free supply materials from the gross amount received for services. The Tribunal found that the issue was prima facie covered in favor of the appellant by the judgment of CESTAT Larger Bench in the case of Bhayana Builders. Consequently, given that the appellant had already made partial payments towards the tax liability and interest, the Tribunal waived the requirement of further pre-deposit and stayed the recovery of the remaining amount during the appeal's pendency.

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