Service tax demand under the wrong category fails where travel agent activity was taxed only from a later date and no proper notice was issued.

Service tax demand under Business Auxiliary Services was held unsustainable where the activity was essentially that of a travel agent and the relevant travel agent service entered the tax net only from 10-09-2004. Because no show cause notice was issued under the correct taxable category, recovery could not be sustained under an incorrect service head. The demand was therefore set aside and consequential relief followed.

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Issues: Whether service tax demand could be sustained under the category of Business Auxiliary Services when the activity was essentially that of a travel agent and the relevant travel agent service came into the tax net only from 10-09-2004, and no notice was issued under that category.

Analysis: The activity was treated as travel agent service, which was specifically brought within the service tax net only from 10-09-2004. The demand, however, had been raised under Business Auxiliary Services for a period that partly overlapped the taxable period. As the assessee had not been put to notice under the correct category, tax could not be recovered for that category without a proper show cause notice. The demand under Business Auxiliary Services was therefore unsustainable.

Conclusion: The demand of service tax under Business Auxiliary Services was set aside in favour of the assessee. The appeal was allowed with consequential relief.

Ratio Decidendi: A tax demand cannot be sustained under an unnotified or incorrect service category when the assessee was not put to notice under the proper taxable category and recovery is sought without a valid show cause notice.

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