Pre-deposit waiver in service tax dispute turned on distinct contract components and exclusion of free-supplied materials from valuation.

Prima facie waiver of pre-deposit was granted in a service tax dispute on abatement under Notification No. 15/2004-S.T. and inclusion of free-supplied material in the gross amount charged for commercial and industrial construction service. The Bench found that the agreement separated civil works from erection and commissioning, and noted that steel and cement were already included in the civil construction portion. It also observed that cooling tower parts and components appeared, prima facie, unrelated to the taxable service. In view of the prima facie case and a similar High Court stay, tax and penalty pre-deposit was waived pending disposal of the appeal.

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Issues: Whether the appellant was entitled to waiver of pre-deposit in a dispute concerning abatement under Notification No. 15/2004-S.T. and the inclusion of the value of free supplied material in the gross amount charged for commercial and industrial construction service.

Analysis: The Bench found a prima facie case in favour of the appellant. On a perusal of the agreement, the civil works and erection and commissioning of equipment formed distinct components, and the appellant had already included the value of steel and cement in the civil construction portion of the service. The Bench further noted that the cooling tower parts and components appeared, prima facie, not to be related to commercial and industrial construction service. Reliance was also placed on the fact that stay had been granted by the High Court in an identical situation.

Conclusion: The pre-deposit of tax and penalties was waived till disposal of the appeal, and the stay petition was allowed.

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