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Issues: Whether pre-deposit of service tax and interest could be waived and recovery stayed where the show cause notices did not propose demand of service tax but were confined to penalty and interest, and the validity of the retrospective validation and limitation objections were only prima facie in issue.
Analysis: The retrospective validation under the Finance Act, 2000 and the limitation objection raised substantial questions that were not fit for final determination at the interim stage. The decisive consideration, however, was that the notices did not call upon the applicants to show cause against recovery of service tax itself; they proceeded on the footing of alleged failure to pay tax and sought penalty and interest. In the absence of an express proposal for demand of service tax, there was prima facie support for granting interim relief against insistence on pre-deposit of the tax amount and the related interest.
Conclusion: Pre-deposit of the service tax and interest was waived and recovery thereof was stayed pending disposal of the appeals.
Ratio Decidendi: Where a show cause notice does not specifically propose recovery of service tax, insistence on pre-deposit of that tax amount cannot be sustained at the interim stage, and stay may be granted on a prima facie assessment of the notice itself.
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