Service tax demand beyond show cause notice and unsupported penalty were held unsustainable under retrospective amendment.

An adjudicatory order cannot impose a service tax demand where the show cause notices were confined to penalty, because relief cannot travel beyond the notice. The service tax demand was therefore unsustainable. Penalty also could not be upheld on the basis of the retrospective amendment to the Finance Act, 2000, as that amendment did not justify penalty on the facts considered. The penalty was therefore unsustainable. The impugned order was set aside and the appeal was allowed.

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Issues: (i) Whether the demand of service tax could be sustained when the impugned order travelled beyond the scope of the show cause notice; (ii) whether penalty could be imposed on the appellant in the light of the retrospective amendment to the Finance Act, 2000.

Issue (i): Whether the demand of service tax could be sustained when the impugned order travelled beyond the scope of the show cause notice.

Analysis: The notices issued in the proceedings were confined to penalty. A further notice was issued under Section 84 of the Finance Act, 1994, but it also proposed only penalty. The impugned order, however, introduced a demand of service tax in addition to penalty. An adjudicatory order cannot travel beyond the allegations and reliefs set out in the show cause notice.

Conclusion: The demand of service tax was not sustainable as it went beyond the show cause notice, in favour of the assessee.

Issue (ii): Whether penalty could be imposed on the appellant in the light of the retrospective amendment to the Finance Act, 2000.

Analysis: The retrospective amendment relied upon for levying penalty did not justify imposition of penalty on the facts of the case. The Tribunal followed its earlier view that penalty could not be sustained on that basis.

Conclusion: The penalty was unsustainable in law, in favour of the assessee.

Final Conclusion: The impugned order was set aside and the appeal was allowed.

Ratio Decidendi: An adjudication cannot impose a demand beyond the scope of the show cause notice, and penalty cannot be sustained where its levy rests only on an impermissible retrospective amendment.

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