2004 (1) TMI 111 - AT - Service Tax

Service Tax - Liability to pay tax for utilizing services of goods transport operators for transportation of raw material, packing materials without payment of tax - Capital goods - HELD THAT - Show cause notices were issued to the appellant on different dates in 2002 demanding service tax from them for the services received from goods transport operators. Show cause notice proposed to invoke extended period of limitation and there was also a proposal for imposition of penalty and demand of interest. It is the case of the appellants that no show cause notice could have been issued to them u/s 73 even after the amendment brought under Finance Act, 2000. The appellants are fully justified in contending that no show cause notice could have been issued against them u/s 73 as it stood on the date of issue of show cause notice. But the appeals cannot be closed on the above basis in view of subsequent amendment brought under the Finance Act, 2003 with retrospective affect. These provisions will have effect for the period from 16-7-1997 to 16-10-1998. Admittedly, the liability to file return is cast on the appellants only u/s 71A. The class of persons who come u/s 71A is not brought under the net of Section 73. The above being the position show cause notices issued to the appellants invoking Section 73 are not maintainable. We therefore come to the conclusion that the show cause notices issued to the appellants are not sustainable both under the provisions of Section 73 as it stood on the date of issue of show cause notice and also under the provisions as amended by Finance Act, 2003. In the result, we set aside the order impugned and allow the appeals.

Summary

Issues involved:
Appeal against order confirming demand of service tax for utilizing services of goods transport operators without payment of tax.

Summary:

Issue 1: Demand of service tax from appellants for services of goods transport operators.
The Commissioner (Appeals) dismissed the appeals filed by the assessees, confirming the demand of service tax for availing services of goods transport operators without paying the required tax. The Finance Act, 1994 mandated service tax payment for services rendered by Clearing and Forwarding Agents and Goods Transport Operators from specific dates. The Supreme Court held that certain provisions making persons other than agents responsible for collecting service tax were ultra vires the Act. Subsequent amendments validated the levy and collection of service tax for the relevant period and denied refunds as per the Supreme Court judgment.

Issue 2: Show cause notices and imposition of penalty.
Show cause notices were issued to the appellants in 2002 demanding service tax for services received from goods transport operators, proposing extended limitation period, penalty, and interest. The appellants argued that no show cause notice could have been issued to them under Section 73 even after the Finance Act, 2000 amendment.

Issue 3: Amendments to relevant provisions and retrospective effect.
Amendments to the Finance Act, 2000 and 2003 validated the levy of service tax for specific periods and introduced provisions for filing returns and self-assessment. The amended Section 73 only applies to assessees liable to file returns under Section 70, not including those falling under Section 71A. Show cause notices invoking Section 73 were deemed not maintainable for the appellants.

In conclusion, the Appellate Tribunal set aside the order and allowed the appeals, ruling that the show cause notices issued to the appellants were not sustainable under the original Section 73 or the amended provisions by the Finance Act, 2003.