Business Auxiliary Service classification and prior payment of tax defeated both penalties and later demand.

Business Auxiliary Service classification was amended from 1 May 2006 by replacing "commercial concern" with "person", and the assessee's suo motu tax compliance from that date showed no contumacious conduct or suppression. On that basis, service tax was held not payable for the pre-amendment period and the penalties were deleted. For the later period, the demand could not survive because the tax had already been paid through TR-6 challans before the show cause notice was issued and the amount had been appropriated. The notice was therefore unsustainable, and the impugned orders were set aside with consequential relief.

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Issues: (i) Whether the appellant was liable to service tax under Business Auxiliary Service for the period prior to 1 May 2006 and whether the penalties imposed were sustainable; (ii) Whether the show cause notice demanding tax for the later period was maintainable when the tax had already been paid before issuance of the notice.

Issue (i): Whether the appellant was liable to service tax under Business Auxiliary Service for the period prior to 1 May 2006 and whether the penalties imposed were sustainable.

Analysis: The classification of Business Auxiliary Service was amended with effect from 1 May 2006 by substituting the expression "commercial concern" with "person". The record also showed that the appellant had made suo motu compliance and paid service tax from the date of amendment. In that background, the Tribunal found no contumacious conduct or suppression of facts. The appellant's reliance on the departmental circular and the amended definition supported the view that the pre-amendment period was not covered in the manner alleged by the department.

Conclusion: The appellant was not liable to service tax under Business Auxiliary Service for the period prior to 1 May 2006, and the penalties were deleted.

Issue (ii): Whether the show cause notice demanding tax for the later period was maintainable when the tax had already been paid before issuance of the notice.

Analysis: The adjudication record showed that the tax demand had already been discharged by payment through TR-6 challans before the show cause notice was issued, and the amount had been appropriated. In those circumstances, no further tax remained payable, and the notice could not survive under the statutory scheme governing recovery of service tax.

Conclusion: The show cause notice was held to be unsustainable and the impugned order was set aside.

Final Conclusion: The appeals were allowed, the tax demand did not survive for the disputed periods, and the penalties and impugned orders were set aside with consequential relief.

Ratio Decidendi: Where the assessee has complied after a statutory amendment and the department fails to establish suppression or contumacious conduct, penalties cannot be sustained; and a tax demand is not maintainable for a period already discharged by payment before issuance of the notice.

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