Prima facie case on service tax classification led to waiver of pre-deposit and stay of recovery.

A CESTAT Chennai bench considered whether service tax demand and penalties should be pre-deposited pending final hearing. The activity was treated as potentially falling either under Erection, Commissioning and Installation Services or Works Contract Service, and the Bench noted a similar earlier matter where demand had been vacated. It also took into account that the appellants were sub-contractors, with a separate demand pending against the main contractor. On that basis, the Bench found a prima facie case, waived pre-deposit of service tax and penalties, and stayed recovery until final disposal.

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Issues: Whether the demand of service tax and penalties required pre-deposit pending final hearing, and whether the appellants had made out a prima facie case for stay.

Analysis: The activity in question was described as being capable of classification either under "Erection, Commissioning and Installation Services" or under "Works Contract Service". The Bench noted that the activity appeared similar to an earlier matter in which a similar demand had been vacated, and also noted that the appellants were working as sub-contractors with a separate demand pending against the main contractor.

Conclusion: The appellants were found to have a prima facie case, pre-deposit of service tax and penalties was waived, and recovery was stayed pending final hearing.

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