Partial pre-deposit and stay granted in an arguable service-tax dispute pending appeal

At the stay stage, the Tribunal found the service-tax dispute arguable and fit for detailed examination at final hearing. It accepted the applicants' plea for only partial relief, balancing the facts and circumstances rather than granting complete waiver. A modest pre-deposit was ordered, and on compliance recovery of the remaining service tax, interest and penalty was stayed during pendency of the appeal.

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Issues: Whether the applicants were entitled to waiver of pre-deposit and stay of recovery of the balance demand, interest and penalty pending disposal of the appeal.

Analysis: The dispute at the stay stage was held to be arguable and suitable for detailed consideration at final hearing. While the applicants contended that the service activity was in the nature of research and development and that liability, if any, was lower because tax arose only on receipt of payment, the Tribunal found it appropriate to grant only partial relief. Balancing the facts and circumstances, it directed a modest pre-deposit and protected the applicants against recovery of the balance amount during pendency of the appeal.

Conclusion: Partial relief was granted. The applicants were required to pre-deposit Rs. 75,000 and, on compliance, recovery of the remaining service tax, interest and penalty was stayed pending appeal.

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