Show cause notice limits service tax classification; demand on an unalleged taxable category and beyond remand scope was set aside.

Service tax demand based on Franchise Service could not be sustained where the show cause notice alleged only Management Consultancy Service, because a taxpayer must be put to notice of the precise taxable category proposed for levy. The Tribunal also held that, after remand, the adjudicating authority was confined to reconsideration within the remand directions and could not introduce a fresh basis for demand. By confirming tax on a ground outside both the notice and the remand scope, the order was beyond jurisdiction and was set aside, with consequential relief to the assessee.

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Issues: (i) Whether service tax demand could be sustained on the basis of classification under Franchise Service when the show cause notice alleged Management Consultancy Service; (ii) Whether the adjudication order, passed after remand, was valid when it travelled beyond the limited scope of the remand directions.

Issue (i): Whether service tax demand could be sustained on the basis of classification under Franchise Service when the show cause notice alleged Management Consultancy Service.

Analysis: The notice specifically proceeded on the footing that royalty received for use of trade mark was taxable as Management Consultancy Service. In the remand proceedings, the adjudicating authority held that the activity did not fall under that category, but nevertheless confirmed the demand under Franchise Service. The Tribunal noted that the new basis of demand was not part of the original notice and the assessee had not been called upon to meet that allegation in the notice.

Conclusion: The demand could not be sustained on a ground not alleged in the show cause notice, and the finding under Franchise Service was unsustainable.

Issue (ii): Whether the adjudication order, passed after remand, was valid when it travelled beyond the limited scope of the remand directions.

Analysis: The earlier remand required the adjudicating authority to reconsider the matter in the light of the CBEC circular and the submissions of the assessee. The Tribunal held that the remand did not permit enlargement of the controversy or introduction of a fresh taxable category. By confirming demand on a basis outside the remand directions, the adjudicating authority acted beyond jurisdiction.

Conclusion: The impugned order was beyond the scope of the remand and liable to be set aside.

Final Conclusion: The service tax demand was quashed and the assessee obtained consequential relief.

Ratio Decidendi: A demand cannot be confirmed on a taxable category not alleged in the show cause notice, and an adjudicating authority in remand cannot travel beyond the confines of the remand directions.

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