2012 (2) TMI 271 - AT - Service Tax

Whether proceeding dropped before revalidation law shall revive after revalidation GTA services - proceeding initiated by SCN dated 31.12.98 ended with no liability - said proceeding was revalidated by SCN dated dated 9.2.2004 u/s 116 of Validation Act, 2000 - Held that - Under the provision of law at the relevant point of time when recipient was not required to discharge tax liability for availing GTA service filing of return did not arise. Once such legal obligation was not there, it cannot be said that Section 73 of Finance Act, 1994 is invokable. Accordingly, appeal is allowed without re-adjudication.

Summary

Issues:
1. Validity of revalidation of proceedings initiated by show cause notice.
2. Interpretation of Section 73 of the Finance Act, 1994 regarding tax liability.

Issue 1: Validity of revalidation of proceedings initiated by show cause notice

The appellant argued that the initial proceeding, which ended with no liability, was revalidated by a subsequent show cause notice based on the Validation Act, 2000. The appellant contended that activities not taxable initially and dropped in earlier orders should not be taxed under revalidation. The appellant cited various tribunal and court decisions to support this argument. To clarify whether proceedings dropped before revalidation would revive after revalidation, guidance was sought from a learned Advocate who highlighted that Section 73 of the Finance Act imposes a limitation provision to fasten liability. In this case, since the appellant, as the recipient of service, was not required to file a return at the relevant time, the proceeding was deemed fully time-barred when there was no obligation to file a return. Reference was made to guidelines issued by the Gujarat High Court and the views of other High Courts to support this position.

Issue 2: Interpretation of Section 73 of the Finance Act, 1994 regarding tax liability

The Revenue representative argued that the proceedings were revalidated by the Validation Law and should be considered as validated proceedings. However, after hearing arguments from both sides and the amicus curiae on the dutiable issue, the Tribunal concluded that under the law applicable at the relevant time when the recipient was not obligated to discharge tax liability for availing GTA service, the filing of a return was not required. As there was no legal obligation to pay tax at that time, Section 73 of the Finance Act, 1994 could not be invoked. Therefore, the limitation provision in Section 73 did not apply to bring the appellant within the purview of the law when there was no obligation incurred. Consequently, the Tribunal found merit in the appellant's plea to allow the appeal without re-adjudication, leading to the appeal being allowed.

This detailed analysis of the judgment addresses the issues of revalidation of proceedings and the interpretation of Section 73 of the Finance Act, 1994, providing a comprehensive understanding of the legal reasoning and conclusions reached by the Tribunal in this case.