Refundable deposits, reimbursable expenses and input-service credit were all treated as prima facie non-demandable for stay relief.

Refundable security deposits received from tenants were treated as prima facie outside service tax, because the deposits were stated to be refundable on termination of the lease and were not shown to be consideration for service. Reimbursable water, electricity and diesel charges were also treated as prima facie excludible from taxable value, as the valuation approach under Rule 5(1) of the Service Tax (Determination of Value) Rules, 2006 had been struck down by the Delhi HC. CENVAT credit on input services used in construction of property was treated as prima facie admissible where the property was later used for taxable renting services, so waiver of pre-deposit was granted and recovery stayed.

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Issues: (i) Whether service tax was prima facie payable on refundable security deposits received from tenants. (ii) Whether reimbursable amounts towards water, electricity and diesel charges were includible in the taxable value. (iii) Whether CENVAT credit on input services used in construction of the property was prima facie admissible.

Issue (i): Whether service tax was prima facie payable on refundable security deposits received from tenants.

Analysis: The deposits were stated to be refundable on termination of the lease, and that factual position was not disputed in the adjudication order. The levy depends on rendition of service, and on the facts noted the receipt of a refundable deposit did not, at this stage, establish taxability.

Conclusion: The demand on security deposits was held to be prima facie unsustainable and waiver was granted.

Issue (ii): Whether reimbursable amounts towards water, electricity and diesel charges were includible in the taxable value.

Analysis: The impugned demand proceeded on Rule 5(1) of the Service Tax (Determination of Value) Rules, 2006, which was relied upon to add reimbursable expenses to gross value. That approach had been struck down by the Delhi High Court, and the demand on this head was therefore viewed as prima facie incorrect.

Conclusion: The demand on reimbursable expenditure was held to be prima facie unsustainable and waiver was granted.

Issue (iii): Whether CENVAT credit on input services used in construction of the property was prima facie admissible.

Analysis: The services were used for construction of property that was subsequently used for providing taxable renting services on which service tax was discharged. In that context, the availment of credit was treated as consonant with the applicable legal position.

Conclusion: The denial of CENVAT credit was held to be prima facie unjustified and waiver was granted.

Final Conclusion: The applicant established a prima facie case on all the disputed heads, and the pre-deposit was waived with recovery stayed pending disposal of the appeal.

Ratio Decidendi: For stay and waiver purposes, refundable security deposits not shown to form part of consideration, reimbursable expenses excluded by the governing valuation rule, and input-service credit linked to taxable output services can each justify prima facie relief against pre-deposit.

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