Abatement under service tax notification cannot be denied on unstated grounds; liability must be re-quantified by service date.

Denial of abatement under Notification No. 9/2004-ST was held unsustainable because the show cause notice had itself quantified demand after allowing the 60% abatement and did not allege breach of the condition regarding non-availment of Cenvat credit. The lower authorities could not deny the benefit on a ground not stated in the notice. Service tax liability also had to be re-quantified with reference to the date of provision of service, since the applicable rate depends on that date and the factual basis had not been examined. The matter was remanded for fresh quantification, without reopening the abatement issue.

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Issues: (i) whether the denial of abatement under Notification No. 9/2004-ST could be sustained when the show cause notice did not allege violation of the notification conditions; (ii) whether service tax liability had to be re-quantified with reference to the date of provision of service.

Issue (i): Whether the denial of abatement under Notification No. 9/2004-ST could be sustained when the show cause notice did not allege violation of the notification conditions.

Analysis: The notice itself had quantified the demand after extending the 60% abatement under Notification No. 9/2004-ST and did not allege breach of the condition regarding non-availment of Cenvat credit. The lower authorities nevertheless denied the abatement on a ground not forming part of the notice, which was impermissible. The alleged credit was also stated to relate to input services, and the record did not support denial of the benefit on that basis in the present proceedings.

Conclusion: The denial of abatement under Notification No. 9/2004-ST was not sustainable.

Issue (ii): Whether service tax liability had to be re-quantified with reference to the date of provision of service.

Analysis: The differential demand required examination of whether the tax had been computed by reference to receipt of consideration instead of the actual date of provision of service. The applicable rate of service tax was to be determined on the date on which the service was provided, and the lower authorities had not examined this factual aspect. The matter therefore required verification and fresh quantification on that basis.

Conclusion: The service tax liability had to be re-quantified on the basis of the date of provision of service.

Final Conclusion: The impugned order was set aside and the matter was sent back for fresh quantification, without permitting reconsideration of the abatement issue.

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