Show cause notice limits and exemption conditions govern abatement under service tax notification, with procedural circulars unable to curtail relief.

A demand under Notification No. 32/2004-ST was held unsustainable where the adjudication introduced a ground not alleged in the show cause notice; the notice proceeded only on the footing that the assessee was not a goods transport agency, so denial based on alleged non-fulfilment of notification conditions could not be sustained. The abatement benefit was also held admissible because the department did not show that the service provider had taken CENVAT credit or the benefit of Notification No. 12/2003-ST, and a board circular could not add to or override the exemption notification by imposing a further declaration requirement. The denial of abatement was therefore set aside.

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Issues: (i) whether the demand could be sustained when the adjudication travelled beyond the allegations made in the show cause notice; (ii) whether the assessee was entitled to the abatement benefit under Notification No. 32/2004-ST and the benefit could be denied for production of declaration or on the alleged non-fulfilment of the notification conditions.

Issue (i): whether the demand could be sustained when the adjudication travelled beyond the allegations made in the show cause notice.

Analysis: The show cause notice proceeded only on the basis that the appellant was not a goods transport agency and, therefore, not entitled to the benefit of Notification No. 32/2004-ST. The order in original and the appellate order, however, denied the benefit on an additional basis, namely, alleged non-fulfilment of the conditions of the exemption notification. Since no such allegation was made in the notice, the adjudication could not validly rest on a new foundation introduced later. A demand based on material or grounds beyond the notice was not sustainable.

Conclusion: The demand was unsustainable on this ground and the assessee succeeded on Issue (i).

Issue (ii): whether the assessee was entitled to the abatement benefit under Notification No. 32/2004-ST and the benefit could be denied for production of declaration or on the alleged non-fulfilment of the notification conditions.

Analysis: The tribunal held that the relevant conditions related to the service provider and the department had not produced evidence that the GTA had availed CENVAT credit or the benefit of Notification No. 12/2003-ST. It further held that a board circular prescribing a declaration procedure could not add to or override the exemption notification. The denial of abatement on a purely procedural requirement was therefore impermissible where the substantive entitlement was otherwise not disproved.

Conclusion: The assessee was entitled to the abatement benefit and the denial thereof was set aside.

Final Conclusion: The impugned orders were held to be legally unsustainable and the appeal was allowed with consequential relief.

Ratio Decidendi: An adjudication cannot be sustained on grounds not alleged in the show cause notice, and a circular or procedural requirement cannot curtail a substantive exemption benefit when the statutory conditions are not shown to have been violated.

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