Show cause notice scope limits service tax demand when liability is confirmed under unnotified taxable categories.

Service tax demand cannot be sustained where the first appellate authority confirms liability under taxable categories not proposed in the show cause notices. The notices had alleged only cargo handling services, but the appellate authority reclassified part of the demand as manpower recruitment and supply agency service and goods transport agency service. Because the tax entry determines liability, exemption, abatement and quantification, the assessee must receive notice of the correct taxable category to mount an effective defence. In the absence of any proposal in the notices for those new heads, the demand travelled beyond the scope of the notices and was unsustainable; the impugned order was set aside.

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Issues: Whether the service tax demand could be sustained when the first appellate authority reclassified the services and confirmed demand under taxable categories not proposed in the show cause notices.

Analysis: The show cause notices had proposed demand only under cargo handling services. The original adjudication proceeded on that basis. The first appellate authority, however, confirmed part of the demand under manpower recruitment and supply agency service and goods transport agency service without any prior proposal in the notices. Since the tax entry determines liability, classification, exemption, abatement, and quantification, the assessee had to be put on notice about the correct taxable category so that an effective defence could be made. In the absence of any proposal in the notices for the new categories, the demand under those heads travelled beyond the scope of the show cause notices and could not be sustained.

Conclusion: The reclassified demand was held unsustainable and the impugned order was set aside.

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