Pre-deposit waiver in service tax dispute granted where documentary proof supported exclusion of goods and materials from the tax base.

Pre-deposit of disputed service tax was waived pending appeal where the assessee claimed exemption under Notification No. 12/2003 by showing that the works contract receipts included identifiable goods and materials supported by documentary evidence. The Tribunal noted that service tax applies only to the service element and not to the sale of goods, and that the notification requires specific documentary proof of the goods and materials. As the adjudicating authority had not properly examined the accounts and material placed on record and had denied the benefit mechanically, the assessee was held to have a prima facie case for interim protection, and waiver of pre-deposit was granted.

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Issues: Whether pre-deposit of the disputed service tax demand should be waived pending appeal in view of the assessee's claim to exemption under Notification No. 12/2003 dated 20-6-2003 and the material placed on record.

Analysis: The disputed demand arose from works contract receipts where the assessee claimed that the value of goods and materials used was supported by documentary evidence and was therefore outside the service tax base to that extent. The Tribunal noted that service tax is intended to tax only the service element and not sale of goods, and that the notification requires documentary proof specifically indicating the goods and materials. It found that the adjudicating authority had not properly examined the materials and accounts placed before it and had proceeded mechanically in denying the benefit of the notification and confirming the demand.

Conclusion: The assessee had made out a prima facie case for interim protection, and waiver of pre-deposit during the pendency of the appeal was granted.

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