Prima facie service tax classification dispute led to a limited pre-deposit and interim waiver of balance dues.

At the interim stage, CESTAT Chandigarh treated the dispute as a prima facie case of business promotion under Business Auxiliary Service, while leaving the final classification question open for hearing. The appellant's reliance on Notification No. 06/2005 and its claim that the activity was in the nature of franchisee services were noted, but not finally decided. To secure the appeal, the Tribunal directed a limited pre-deposit and waived recovery of the remaining service tax, interest and penalties during pendency of the appeal on compliance.

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Issues: Whether the appellant was required to make only a partial pre-deposit and whether the balance of the tax, interest and penalties could be waived during pendency of the appeal.

Analysis: The appeal arose from a demand treated as service tax under the head of Business Auxiliary Service on the basis that the appellant was promoting the business of its client and earning commission. The plea of exemption under Notification No. 06/2005 and the contention that the activity was in the nature of franchisee services were noted, but the classification dispute was left for final hearing. At the interim stage, the Tribunal formed a prima facie view that the appellant was engaged in business promotion and considered it appropriate to secure the matter by directing a limited deposit.

Conclusion: The appellant was directed to deposit Rs. 44,000 within four weeks, and on compliance the balance amount of service tax, interest and penalties was waived during the pendency of the appeal.

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