Service tax recovery from service users fails without a statutory machinery provision, with remand ordered for fresh determination.

Service tax recovery against the user of taxable services could not be sustained where the Finance Act, 1994 did not provide a clear machinery for recovery from that person. The Tribunal noted that the demand had been confirmed on the service recipient rather than the provider, and held that recovery under section 73 was not maintainable in the absence of an enabling statutory mechanism. It therefore set aside the determination and remanded the matter to the original authority for fresh redetermination after the machinery provision was introduced.

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Issues: Whether service tax demand could be confirmed against the service recipient when the machinery for recovery from such user was not available, and whether the matter required remand for redetermination.

Analysis: The definition of clearing and forwarding agent was noticed in Clause 25 of Section 65 of the Finance Act, 1994. The demand had been confirmed on the user of the service rather than the service provider. Relying on the settled position that recovery under Section 73 of the Finance Act, 1994 was not maintainable against users in the absence of an enabling machinery provision, the Tribunal held that the recoveries proposed could not be sustained. At the same time, the Tribunal considered it appropriate to set aside the determination and send the matter back so that the issue could be redetermined after the machinery clause was introduced.

Conclusion: The service tax recovery as made could not be upheld, and the matter was remanded to the original authority for fresh determination.

Ratio Decidendi: A service tax demand cannot be enforced against a user of taxable services unless the statute provides a clear machinery for recovery from that person.

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