2011 (1) TMI 679 - AT - Service Tax

Waiver of pre-deposit - construction services and works contract services under Section 65 of the Finance Act 1994 - claim of abatement of 67% - cost of free material - Held that - the issues involved in the present appeal are contentious and arguable and a final view can only be taken at the time of disposal of the appeal. - appellants have not disputed their healthy financial position and has offered to make some pre-deposit as a condition of hearing of their appeal. - Directed to pre deposit Rs. 5 crores in addition to Rs. 49 lakhs as against demand of Rs. 37 crores.

Summary

Issues involved:
Prayer to dispense with the condition of pre-deposit of service tax and penalty, Incorrect availing of abatement under service tax notifications, Deliberate evasion of tax, Switching to works contract services to evade tax, Inclusion of value of free supplied items, Applicability of service tax to services provided to non-profit organizations, Compliance with pre-deposit conditions.

Analysis:
The judgment by the Appellate Tribunal CESTAT, New Delhi, involved a prayer to dispense with the pre-deposit condition of a substantial service tax amount and penalty confirmed against the appellant. The appellant, registered for construction services, had been availing abatement under specific notifications but investigations revealed incorrect availing due to not including the value of free supplied items by customers and wrongly applying Works Contract Rules. The Commissioner found deliberate evasion of tax by the appellant and observed that switching to works contract services was an attempt to pay less tax. The Commissioner emphasized that the value of taxable service should include all components, including raw materials supplied free. Additionally, services provided to non-profit organizations were held leviable to service tax, citing relevant provisions of the Finance Act, 1994.

The Tribunal acknowledged the contentious nature of the issues and noted a previous case where the appellant had deposited the entire service tax amount. Considering the appellant's financial position and offer to make a pre-deposit, the Tribunal directed the appellant to deposit a specified amount within a set period, waiving the pre-deposit condition for the remaining duty, interest, and penalty during the appeal's pendency. The judgment highlighted the importance of compliance and set a date for verifying the deposit's fulfillment.