2014 (8) TMI 618 - AT - Service Tax

Services of goods transport agency - by retrospective amendment made to the relevant provisions of the Finance Act, 1994 by the Finance Acts of 2000 and 2003, the appellant became liable for payment of service tax during 1997-98 period as the service recipient - However, they neither paid the service tax nor filed the return under section 70, as there was no provision for them to file the return - Held that - The show-cause notice dated November 4, 2003 had been issued to the appellant subsequent to the introduction of section 71A which required the appellant to ascertain their service tax liability on self assessment basis, pay the service tax and file one-time return within a period of six months from the date on which the Finance Bill, 2003, receives the assent of the president. But in spite of this provision, the appellant neither paid the service tax nor filed the return as required under section 71A. However, though section 71A had been introduced by section 158 of the Finance Act, 2003, section 73 was not amended - section 73 regarding recovery of service tax not paid or short-paid, did not cover the case where a person was required to file return under section 71A. Section 73 was amended with effect from September 10, 2004 but no show-cause notice under amended section 73 was issued. Since the issue involved in this case stands decided against the Department by the Tribunal in the case in the case of L.H. Sugar Factories Ltd. 2004 (1) TMI 111 - CESTAT, NEW DELHI and this judgment has been upheld by the honourable Supreme Court vide judgment L.H. Sugar Factories Ltd. reported in 2005 (7) TMI 106 - SUPREME COURT OF INDIA , the impugned order upholding the service tax demand along with interest and upholding the imposition of penalty is not sustainable - Decided in favour of assessee.

Summary

Issues:
- Validity of show-cause notice issued for non-payment of service tax during 1997-98 period
- Applicability of section 71A introduced by Finance Act, 2003
- Interpretation of section 73 of the Finance Act, 1994
- Imposition of penalty under sections 76 and 77

Validity of Show-Cause Notice:
The appellant availed services of a goods transport agency (GTA) during 1997-98 but did not discharge the service tax liability. A show-cause notice was issued under section 73 of the Finance Act, 1994 for recovery of the non-paid service tax amount. The appellant argued that the notice was invalid as section 71A required them to file a return within six months, and section 73 did not cover cases where a person was required to file a return under section 71A. The Tribunal and the Supreme Court had previously ruled in similar cases that such notices were not valid. The show-cause notice issued in this case was found to be unsustainable.

Applicability of Section 71A:
Section 71A, introduced by the Finance Act, 2003, required the appellant to pay the service tax and file a return within six months from the date of the Finance Bill's assent. The appellant failed to comply with these provisions, leading to the issuance of the show-cause notice. The Department argued that the notice was justified as the appellant did not fulfill the requirements of section 71A. However, the Tribunal found that despite the introduction of section 71A, section 73 was not amended to cover cases like the appellant's. The failure to issue a revised notice under the amended section 73 further weakened the Department's position.

Interpretation of Section 73:
The Tribunal analyzed the provisions of section 73 regarding the recovery of service tax not paid or short-paid. It was observed that section 73 did not cover situations where a person was required to file a return under section 71A. While section 73 was later amended, no revised notice was issued to the appellant under the amended section. The Tribunal's interpretation aligned with previous judgments, including those upheld by the Supreme Court, leading to the setting aside of the service tax demand and penalty imposed on the appellant.

Imposition of Penalty:
The Additional Commissioner had confirmed the service tax demand against the appellant and imposed a penalty under section 76 of the Act. The Commissioner (Appeals) upheld the demand but reduced the penalty. The appellant challenged the imposition of the penalty, arguing that since the service tax demand was not sustainable, there was no basis for imposing a penalty. The Tribunal, considering the invalidity of the show-cause notice and the unsustainable service tax demand, dismissed the Revenue's appeal for the enhancement of the penalty.

In conclusion, the Tribunal allowed the appellant's appeal, set aside the service tax demand and penalty, and dismissed the Revenue's appeal for penalty enhancement. The judgment emphasized the importance of aligning show-cause notices with relevant legal provisions and ensuring the sustainability of tax demands and penalties imposed on taxpayers.