Amended export of service rules override the old provision, and a non-merits dismissal warrants remand for fresh adjudication.

A service tax demand based on the pre-amendment version of Rule 3(2) of the Export of Service Rules, 2005 could not be sustained where the amended rule had already come into force before the relevant period, so the assessee was entitled to waiver of pre-deposit. Where the Commissioner (Appeals) dismissed the appeal only for non-compliance with a stay direction and did not decide the dispute on merits, the proper course was to set aside that order and remand the matter for fresh adjudication after hearing the appellant.

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Issues: (i) Whether the demand could be sustained by reliance on the unamended Rule 3(2) of the Export of Service Rules, 2005 when the amended rule had come into force before the demand period; (ii) Whether the order dismissing the appeal for non-compliance without deciding the merits called for interference and remand.

Issue (i): Whether the demand could be sustained by reliance on the unamended Rule 3(2) of the Export of Service Rules, 2005 when the amended rule had come into force before the demand period.

Analysis: The demand was founded on the pre-amendment formulation of Rule 3(2) of the Export of Service Rules, 2005. The amendment had taken effect from 27.02.2010, while the demand related to the later period. Once the amended rule governed the dispute, the earlier restriction relied upon by the Revenue was inapplicable.

Conclusion: The demand was not sustainable on the basis invoked by the Revenue, and the assessee made out a case for waiver of pre-deposit.

Issue (ii): Whether the order dismissing the appeal for non-compliance without deciding the merits called for interference and remand.

Analysis: The appellate order had not adjudicated the controversy on merits and had only proceeded on non-compliance with the stay direction. In that situation, the proper course was to set aside the order and restore the matter for a merits-based decision after hearing the appellant.

Conclusion: The impugned order was set aside and the matter was remanded to the Commissioner (Appeals) for on merits after affording an opportunity of hearing.

Final Conclusion: The assessee obtained relief on the pre-deposit issue, and the appeal was sent back for a fresh decision on the substantive controversy.

Ratio Decidendi: A demand cannot be sustained by applying an omitted or superseded service tax rule to a later period, and an appeal dismissed without a merits determination should be restored for fresh adjudication after hearing the affected party.

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