Tribunal grants waiver on service tax liability, stays recovery proceedings in favor of Petitioner

The Tribunal granted a waiver and stay on recovery proceedings in favor of the Petitioner, who provided services under loan-licence agreements with a pharmaceutical products manufacturer. The Tribunal considered the service as manufacturing and not taxable under the applicable provision, aligning with a previous case involving Business Support Services. Consequently, the Tribunal ruled in favor of the Petitioner, providing relief from the proposed service tax liability and staying further recovery proceedings pending appeal disposal.

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Issues:
1. Classification of service provided by the Petitioner under loan-licence agreements with a pharmaceutical products manufacturer.
2. Applicability of service tax on the service provided by the Petitioner.
3. Comparison with a similar case involving Business Support Services.
4. Granting of waiver and stay on recovery proceedings.

Analysis:

1. The Petitioner entered into loan-licence agreements with a pharmaceutical products manufacturer for job-work basis manufacturing of bulk medicines and other products. The agreements contained covenants regarding conversion facilities, conversion charges, monthly payments, and reimbursement of expenses incurred by the Petitioner.

2. Show cause notices were issued proposing service tax for 'renting of immovable property' service. The Petitioner argued that the service provided fell under 'Business Auxiliary Service' (BAS) as it involved production or processing of goods for the client. The Petitioner contended that since the activity amounted to manufacturing excisable goods, it should be outside the purview of taxable service.

3. The adjudicating authority classified the service as renting of immovable property based on the lease agreement between the Petitioner and the pharmaceutical manufacturer. However, a similar case involving Business Support Services was decided differently by the Tribunal. In that case, the service provider's activity was considered manufacturing and not taxable under Section 65(19)(v).

4. Considering the decision in the similar case, the Tribunal found a strong prima facie case in favor of the Petitioner. As a result, the Tribunal granted a waiver of pre-deposit and stayed further proceedings for recovery of the adjudicated liability pending the appeal's disposal. The stay application was disposed of accordingly.

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