Works contract service pre-deposit reduced after prima facie findings on PHED construction and abatement entitlement.

At the interim stage of a service tax dispute on works contract service, the Tribunal found prima facie support for the contention that construction work undertaken for PHED was not for commerce or industry and that abatement had not been granted. It also noted, however, that construction for the Jaipur Development Authority would not, prima facie, fall outside the scope of commerce or industry. On that mixed prima facie assessment, the Tribunal required only a partial pre-deposit under the stay provisions and stayed recovery of the balance during the appeal, subject to compliance.

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Issues: Whether, at the interim stage, the service tax demand arising from works contract service deserved complete waiver of pre-deposit on the grounds that the construction was for PHED and not for commerce or industry, and that abatement had not been granted.

Analysis: The Tribunal found prima facie force in the plea that construction service rendered to PHED was outside the scope of being meant for commerce or industry. It also found prima facie force in the contention that abatement had not been granted. At the same time, it observed that the construction for Jaipur Development Authority would not, prima facie, fall outside the scope of being meant for commerce or industry. In these circumstances, the Tribunal considered a partial pre-deposit sufficient under the statutory requirement governing stay applications.

Outcome: Pre-deposit of 10% of the impugned service tax demand was directed within eight weeks, and recovery of the remaining adjudicated liability was stayed during pendency of the appeal subject to compliance.

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