2004 (7) TMI 6 - AT - Service Tax

Service Tax Goods Transport Operators (1) Retrospective effect (2) Penal provision cannot be retrospective they can only be prospective (3) Interest payable

Summary

Issues:
1. Applicability of service tax on goods transport operator services.
2. Imposition of interest under Section 75 of the Finance Act.
3. Retrospective effect of the levy and liability of the appellant.

Analysis:
1. The appeal challenged the imposition of service tax on goods transport operator services received by the appellant for the period 16-11-97 to 1st June, 98. The Hon'ble Supreme Court had initially struck down the levy, but the Govt. reintroduced it with retrospective effect through the Finance Act, 2000. The question was whether the appellant was liable to pay the service tax for the mentioned period. The Tribunal noted that the service tax was not applicable during that period and could only be imposed prospectively. The liability to pay tax arose only after the revalidation of the Finance Act in May, 2000. The appellant was not obligated to discharge the tax liability for the period in question, and the Tribunal partially allowed the appeal on this issue.

2. The Deputy Commissioner had demanded the service tax amount along with interest under Section 75 of the Finance Act. The appellant contended that interest should not be imposed as it was a penal provision, especially considering the retrospective nature of the levy and the prompt payment of dues. The Tribunal referred to a previous decision and held that any penal provision could not be made effective retrospectively. It ruled that the appellant was liable to pay interest only from May, 2000 onwards when the duty became payable. The Tribunal partially allowed the appeal on this issue as well, directing the appellant to pay interest from May, 2000.

3. The main contention of the appellant revolved around the retrospective effect of the levy and their liability. The Tribunal emphasized that the appellant was not under an obligation to discharge the tax liability for the period in question, as the service tax was not applicable during that time. The Tribunal found that the interest had been realized from a date earlier than when the duty was payable, which was contrary to the law. Therefore, the Tribunal allowed the appeal in part, stating that the appellant would be liable to pay interest from May, 2000 onwards, aligning with the date when the duty became payable. The decision provided consequential relief to the appellant based on the retrospective nature of the levy and the timing of the duty liability.