2015 (11) TMI 725 - AT - Service Tax

Demand of service tax - GTA Service - Reverse charge mechanism - Held that - Rule 2(1)(d)(xii) and (xvii) of the Service Tax Rules, 1994 was held to be ultra vires by Supreme Court in the case of Laghu Udyog Bharti Vs. Union of India (1999 (7) TMI 1 - SUPREME COURT OF INDIA). The re-validation done by Section 117(i) of Finance Act, 2000 provide that any action for the period 16.11.1997 to 01.06.1998 was required to be taken before the Finance Act, 2000 got assent by the Hon ble President of India, which was on 12.05.2000. Further re-validation only took place vide Finance Act, 2003. It is thus obvious on 15.11.2002, when the show cause notice was issued, Revenue lacked the competence to do so. As has been held by CESTAT in the cases of CCE Vs. EID Parry (India) Ltd. 2004 (10) TMI 7 - CESTAT (CHENNAI) , Vishnuram Textiles Pvt. Ltd. 2004 (11) TMI 574 - CESTAT CHENNAI and CCE Vs. Vaidvambigai Textile Mills Ltd. & Others 2004 (12) TMI 673 - CESTAT CHENNAI , the show cause notices which were issued after 12.05.2000 were not sustainable. - Decided against Revenue.

Summary

Issues:
- Validity of service tax demand under GTA service
- Legislative competence of the Revenue to issue show cause notice

Analysis:
1. Validity of service tax demand under GTA service:
The appeal was filed against an Order-in-Appeal that set aside an Order-in-Original confirming a service tax demand under GTA service. The service tax was demanded under reverse charge mechanism for the period of 16.11.1997 to 01.06.1998. The Revenue contended that the liability of service tax on the respondent was established by an amendment in Rule 2 of the Service Tax Rules, 1994, making the service receiver liable to pay the tax. Despite the Supreme Court declaring certain rules ultra vires, the levy of service tax on the service receiver during the disputed period was re-validated by subsequent Finance Acts, including the Finance Act, 2000 and Finance Act, 2003. Rule 7A was inserted in the Rules to specify the obligations of the assessee concerning the service provided by goods transport operators during the relevant period.

2. Legislative competence of the Revenue to issue show cause notice:
The respondent's advocate argued that at the time the show cause notice was issued, the Revenue lacked legislative competence to do so. The Tribunal analyzed the legislative history and re-validation of the relevant provisions. It was noted that the show cause notice was issued on 15.11.2002, whereas the legislative competence to take action for the period in question was only re-validated by the Finance Act, 2003. Citing previous judgments, including those of CESTAT, it was established that show cause notices issued after 12.05.2000 were not sustainable due to lack of legislative competence at the time.

In conclusion, the Tribunal found no merit in the Revenue's appeal and dismissed it based on the analysis of the legislative history and the lack of legislative competence at the time of issuing the show cause notice. The judgment highlighted the importance of legislative timelines and the need for actions to be in accordance with the prevailing legal framework to maintain their validity.