Court directs petitioner on service tax; CESTAT to adjudicate, demand on hold. Challenge up to CESTAT. Compliance if Tribunal rules. Petition withdrawn, disposed without costs.

The Court directed the petitioner to respond to the demand notice and show cause notices regarding service tax. The authority was instructed to adjudicate the matter, with any demand for service tax to be put on hold until resolved by CESTAT. The petitioner could challenge decisions by tax authorities up to CESTAT. The petitioner was not required to pay service tax until a final decision by CESTAT, but compliance was mandatory if the Tribunal ruled against the petitioner. The petitioner withdrew the petition and challenge against the Circular, leading to the Court disposing of the petition without costs.

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Issues:
Challenge to validity of demand notice for service tax issued before 1-7-2003.

Analysis:
The petitioner contested a demand notice dated 29-6-2005, requiring payment of service tax and interest. The key issue was whether service tax was applicable to an amount received by the assessee before 1-7-2003, the date when service tax became leviable under Section 66 of the Finance Act, 1994. The respondent authorities believed that service tax was due even if the services related to the received amount were rendered after 1-7-2003, based on a Circular dated 5-11-2003. The Court decided not to delve into the legal aspects at that stage since no adjudication had occurred, instructing the petitioner to respond to the demand and show cause notices. The authority was directed to adjudicate the matter, and if a demand for service tax was made, it was to be put on hold until the issue was resolved by the CESTAT.

Furthermore, the petitioner was permitted to challenge any adverse decision by the Assistant Commissioner, Commissioner (Appeals) of Service Tax, or CESTAT. Until the CESTAT issued a final decision, the petitioner was not obligated to pay the service tax if levied by the authorities. However, upon a decision against the petitioner by the Tribunal, compliance with the law was mandated. Consequently, the petitioner withdrew the petition and the challenge against the Circular. The Court disposed of the petition, making the rule absolute only to the extent specified, without any order as to costs.

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