Show-cause notice scope and agricultural exemption defeated cargo handling service tax demand.

Service tax could not be sustained on a ground not alleged in the show-cause notice, because the demand was originally based on manpower recruitment and supply but was later upheld as cargo handling service. The tribunal held that a liability cannot be fastened on a different basis from the one pleaded in the notice. It also held that, even if the activity of loading, unloading, labour and cartage for shifting foodgrains were treated as cargo handling service, the service was exempt as one in relation to agriculture under Notification No. 10/2002-ST. The impugned orders were set aside and no tax or penalty survived on the grounds sustained below.

---

---

Issues: (i) whether service tax could be sustained on the footing that the appellant was providing cargo handling service when that basis was not alleged in the show-cause notice; (ii) whether the service, even if treated as cargo handling service, was covered by the exemption for services in relation to agriculture.

Issue (i): whether service tax could be sustained on the footing that the appellant was providing cargo handling service when that basis was not alleged in the show-cause notice.

Analysis: The demand in the show-cause notice proceeded on the allegation that the appellant was rendering manpower recruitment and supply service. The appellate authority, however, sustained the demand on a different footing by treating the appellant as a provider of cargo handling service. A demand cannot be upheld on a basis for which no allegation was made in the notice.

Conclusion: The finding that the appellant was liable as a provider of cargo handling service could not be sustained on the scope of the notice.

Issue (ii): whether the service, even if treated as cargo handling service, was covered by the exemption for services in relation to agriculture.

Analysis: The appellant's activity was connected with loading, unloading, labour and cartage for shifting foodgrains in purchase centres. The Tribunal held that cargo handling service in relation to agriculture was exempt under Notification No. 10/2002-ST dated 1-8-2002. On that footing, even if the activity were treated as cargo handling service, no tax liability survived.

Conclusion: The service was exempt and the demand was not sustainable.

Final Conclusion: The impugned orders were set aside and the appeals were allowed, leaving no service tax or penalty liability on the appellant on the grounds sustained by the lower authority.

Ratio Decidendi: A demand cannot be sustained on a ground not alleged in the show-cause notice, and an activity covered by a specific exemption notification cannot be taxed despite its characterization under another service head.

---