Service tax demand fails where show cause notice seeks only penalty and interest, not a specific tax demand.

A service tax demand cannot be sustained where the show cause notice calls upon the assessee only to answer proposed penalties and interest, but does not specifically demand service tax. The notice in this matter invoked penalties under Sections 76, 77 and 81 and recovery of interest for delayed payment, yet omitted any explicit tax demand. On that basis, the Tribunal held that the demand was legally untenable and set it aside.

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Issues: Whether a demand of service tax could be confirmed when the show cause notice invoked only penalty and interest and did not specifically demand service tax.

Analysis: The notice required the assessee to show cause only against proposed penalties under Sections 76, 77 and 81 of Chapter V of the Finance Act, 1994 for alleged contravention of Sections 70, 76 and 81, and also against recovery of interest for delayed payment. In the absence of a specific demand for service tax in the notice, the Tribunal held that the demand could not be sustained.

Conclusion: The service tax demand was set aside and the appeal was allowed.

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