Prima facie exemption and timing of service tax claims supported substantial predeposit waiver, with limited deposit on bad debts.

Prima facie waiver of predeposit was considered for service tax demands on supplies to SEZ units, food court receipts, unbilled revenue and bad debts. The SEZ supply issue was viewed against the exemption notifications and supporting agreements, bills and invoices, which indicated a prima facie claim to exemption. Food court receipts were treated, at least prima facie, as restaurant activity, with tax on restaurant services introduced only from 1.7.2012. Unbilled revenue was supported by reconciliation showing realisation in the next financial year, and service tax would arise on realisation. The bad debt issue was confined to a limited balance, so partial predeposit was directed and stay granted on the remainder.

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Issues: Whether the appellant had made out a prima facie case for waiver of predeposit in respect of the demand relating to supplies to Special Economic Zone units, food court receipts, unbilled revenue and bad debts.

Analysis: The demand relating to supplies to Special Economic Zone units was examined with reference to the exemption notifications governing services provided to SEZ units, and the agreements, bills and invoices indicated a prima facie claim to exemption. The receipts from food courts were found, at least prima facie, to relate to restaurant-type activity rather than outdoor catering, and service tax on such restaurant services was introduced only from 1.7.2012. As regards unbilled revenue, the Chartered Accountant's certificate and reconciliation showed that the amount was realised only in the next financial year, supporting the view that service tax would arise on realisation. The dispute relating to bad debts was confined to the year 2011-12 after allowance for the earlier period, leaving only a limited amount in issue.

Conclusion: A substantial waiver of predeposit was warranted for the SEZ, food court and unbilled revenue demands, but a deposit of Rs. 5,00,000 was directed towards the bad debt component, with waiver and stay on the balance during the appeal.

Final Conclusion: The appeal succeeded to a substantial extent at the interim stage, with recovery of the major part of the demand stayed on partial predeposit.

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