Service tax demand under an inapplicable statutory scheme was unsustainable; later amendments could not retrospectively validate the notice.

A service tax show-cause notice was held unsustainable where, for the relevant period, the statutory scheme did not bring the recipient within section 73 of the Finance Act, 1994. The later amendments to sections 68 and 71A did not cure that defect or retrospectively validate a demand for the disputed period. The notice was therefore not maintainable, and the service tax demand failed in favour of the assessee, with the order setting aside the demand sustained.

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Issues: Whether the show-cause notice demanding service tax for the relevant period was sustainable under the Finance Act, 1994.

Analysis: The demand was founded on provisions dealing with service tax liability and return filing, but the governing legal position, as settled by the Supreme Court, was that the recipients concerned were not brought within the net of section 73 for the period in question. The later amendments to section 68 and section 71A did not cure the defect for the period covered by the notice, and the substituted regime could not validate the demand retrospectively for the disputed period.

Conclusion: The show-cause notice was not maintainable and the demand was unsustainable, in favour of the assessee.

Final Conclusion: The revenue appeal failed and the order setting aside the demand was sustained.

Ratio Decidendi: A demand of service tax cannot be sustained under section 73 for a period when the statutory scheme did not bring the person concerned within its ambit, and later amendments do not retrospectively validate an otherwise non-maintainable show-cause notice for that period.

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