Service tax notices to the recipient were unsustainable where no corresponding statutory liability supported action under the rules.

Service tax liability could not be fastened on the recipient through show-cause notices issued under the Finance Act, 1994 and the Service Tax Rules, 1994 for the period in question, because the obligation arose only from the amended definition in Rule 2(1)(d) and there was no corresponding statutory liability under Sections 69 and 70. The Tribunal noted that, in the absence of such statutory backing, the department could not proceed against the recipient under Section 73 in the manner adopted. The notices were therefore treated as not maintainable against the service recipient, and the resulting demands were set aside.

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Issues: Whether, for the impugned period, service tax could be demanded from the service recipient by show-cause notices issued under the Finance Act, 1994 and the Service Tax Rules, 1994.

Analysis: The liability sought to be fastened on the service recipient arose from the amended definition in Rule 2(1)(d) of the Service Tax Rules, 1994. The Tribunal relied on the settled position that, in the absence of a corresponding statutory obligation under Sections 69 and 70 of the Finance Act, 1994, the class of persons placed under the relevant rule could not be proceeded against under Section 73 in the manner adopted by the department. The notices were therefore treated as not maintainable against the recipient of the service for the periods in question.

Conclusion: The show-cause notices were held unsustainable and the resulting demands were set aside in favour of the assessee.

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