Service tax limitation under Section 71A must follow the return obligation, not Section 71, for notice validity.

A service recipient liable to file returns under Section 71A was treated as outside the scope of Section 73, as then framed, for purposes of the show cause notice. The Court applied earlier rulings that the relevant date for limitation had to be linked to the return obligation under Section 71A, not Section 71. It noted that the retrospective validation of the levy did not change the statutory basis on which the notice had to be tested. On that footing, the notice was held unsustainable on the Tribunal's approach and the appeal succeeded for the assessee.

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Issues: Whether, in respect of a service recipient liable to file returns under Section 71A, the show cause notice under Section 73 of the Finance Act, 1994 was maintainable and the limitation period had to be computed with reference to Section 71A and not Section 71.

Analysis: The appeal concerned a service recipient who was liable to pay service tax for the relevant period and to file returns under Section 71A. The Court applied the earlier decisions holding that the class of persons covered by Section 71A was not brought within the net of Section 73 as it then stood, and that the relevant date for initiating proceedings had to be linked to the return obligation under Section 71A. The Court also noted that the retrospective amendment validating the levy had been upheld, but that did not alter the position that the notice had to be tested on the basis of the statutory return provision applicable to the appellant.

Conclusion: The show cause notice was not sustainable on the basis adopted by the Tribunal, and the limitation had to be reckoned with reference to Section 71A. The appeal was therefore allowed in favour of the assessee.

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