Pre-deposit waiver in service tax dispute: pre-closure charges were not treated as prima facie interest, and limitation failed at this stage.

In a prima facie assessment of waiver of pre-deposit, CESTAT Chennai found the service tax demand not time-barred at this stage because the dispute spanned several years and the details of pre-closure charges were furnished to the department only during audit and later correspondence. It also held that the pre-closure charges could not, on the available record, be treated as prima facie equivalent to interest for classification under banking and other financial services. Applying a similar approach taken in a comparable matter, the tribunal directed partial pre-deposit, granted waiver of the balance, and stayed recovery during the appeal subject to compliance.

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Issues: Whether the demand of service tax was prima facie time-barred and whether pre-closure charges were prima facie taxable under the category of banking and other financial services for the purpose of considering waiver of pre-deposit.

Analysis: The period in dispute was found to extend over several years, while the details of pre-closure charges had not been furnished to the department until departmental audit and subsequent correspondence. On that basis, the claim of limitation was not accepted at the prima facie stage. The pre-closure charges were also not treated as prima facie equivalent to interest, and a similar view had been taken in a comparable matter when directing pre-deposit of 50% of the tax amount.

Outcome: Pre-deposit of Rs. 85 lakhs was directed within eight weeks, with waiver of the balance and stay of recovery during the pendency of the appeal, subject to compliance.

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