Free service consideration issue justified complete waiver of pre-deposit and stay of recovery in service tax dispute

Free services rendered by an authorised service station were treated as having no separate consideration from the vehicle manufacturer for the first three services, giving the contention that service tax could not be fastened on those services considerable force. At the stay stage, the appellants had already paid the tax and cess demanded, and the balance exposure related only to interest and penalty. On that basis, complete waiver of pre-deposit was granted and recovery of the dues was stayed.

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Issues: Whether the appellants were entitled to complete waiver of pre-deposit and stay of recovery of service tax, interest and penalty in respect of free services rendered as an authorised service station.

Analysis: The appellants had not received any separate consideration from the vehicle manufacturer for the first three free services rendered to buyers. The demand was at the stay stage and the appellants had already paid the tax and cess demanded, while the remaining dues pertained only to penalty and interest. In these circumstances, the claim that no tax could be fastened on the free services for want of consideration was found to have considerable force.

Conclusion: The appellants were granted complete waiver of pre-deposit and stay of recovery of the dues.

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