Service tax pre-deposit reduced where taxable service and valuation were both seriously arguable on the record.

A prima facie challenge to service tax liability justified interference with the interim pre-deposit condition where the assessee argued that the arrangements may not constitute a taxable service and that the taxable value was wrongly taken as the entire consideration received under the memoranda of understanding. The Court noted that the adjudicating authority had itself accepted that the value of land could not form part of the taxable base, yet the demand was computed on the full amount received. As the nature of the activity, the alleged return of part of the consideration in shares, and the correct valuation basis required examination by the tribunal, the pre-deposit was reduced on balance of convenience.

---

---

Issues: Whether the order directing pre-deposit of 25% of the service tax demand required modification in view of the assessee's prima facie case on the nature of the services alleged and on the computation of the taxable value.

Analysis: The Court found that the assessee had raised an arguable case on whether the arrangements reflected any taxable service at all, and also on whether the entire amount received under the memoranda of understanding could be treated as the gross value for service tax purposes. It noticed that the adjudicating authority itself had accepted that the cost or value of land could not be included in the taxable value, yet the demand had been computed on the entire sum received. The Court further noted that the questions regarding the actual nature of the activity, the effect of the amount allegedly returned in shares, and the proper basis for valuation required examination by the appellate tribunal at the final hearing. On the limited question of interim pre-deposit, the Court held that the balance of convenience supported a reduction.

Conclusion: The direction to deposit 25% of the demand was modified and reduced to 5% of the stated net profit figure, and the assessee was granted the corresponding interim relief.

---