Cess on service tax must be computed on the net tax after exempted deduction, with consistency barring re-litigation.

Education cess and secondary and higher education cess were held to be computable on the net service tax after deducting the exempted research and development cess, not on the gross service tax base. The Tribunal also noted that an identical dispute for a later period had already been decided in the assessee's favour and accepted by the department, so the same audit-based issue could not be re-agitated against the same assessee. On that reasoning, the demand was found unsustainable, the impugned order was set aside, and relief followed according to law.

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Issues: Whether education cess and secondary & higher education cess were correctly payable on the net service tax after deduction of research and development cess, and whether the demand confirmed on the contrary basis could be sustained.

Analysis: The Appellant had been availing the service tax exemption linked to research and development cess under the relevant notifications, and the same controversy had already been decided in its favour for a subsequent period. That later order had been accepted by the department and had attained finality. In these circumstances, the same audit-based dispute could not be re-agitated against the same assessee on an identical issue. The Tribunal also accepted the position that education cess and secondary & higher education cess were required to be computed on the net service tax, that is, after deducting the exempted amount of research and development cess.

Conclusion: The issue was decided in favour of the Appellant, and the demand of education cess and secondary & higher education cess on the gross service tax basis was not sustainable.

Final Conclusion: The impugned order was set aside and the appeal was allowed with consequential relief according to law.

Ratio Decidendi: Where a later final order on an identical issue between the same parties has been accepted by the department, consistency requires the same treatment, and cess linked to service tax is to be computed on the net tax after the exempted amount is deducted.

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