Retrospective service tax demands on goods transport services were held unsustainable where High Court precedent defeated post-hoc recovery.

Retrospective validation of service tax on goods transport services for the period 16-11-1997 to 02-06-1998 did not sustain post-2004 demands against service recipients, as the Tribunal followed High Court rulings over an earlier Larger Bench view and held the recovery action not maintainable. In the Nova Iron and Steel matter, a notice issued in 2001 and a later corrigendum were treated as unenforceable for the disputed short levy because the demand was not sustainable under the amended recovery framework and the relevant High Court precedent. The Tribunal accordingly held that the impugned demands could not be enforced against the assessees.

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Issues: (i) Whether demands raised after the retrospective amendments in respect of service tax on goods transport services for the period 16-11-1997 to 02-06-1998 were sustainable against service recipients. (ii) Whether the demand and corrigendum issued in 2001 and 2004 in the Nova Iron and Steel matter were validly enforceable against the assessee.

Issue (i): Whether demands raised after the retrospective amendments in respect of service tax on goods transport services for the period 16-11-1997 to 02-06-1998 were sustainable against service recipients.

Analysis: The liability in question arose from Rule 2(d)(xvii) of the Service Tax Rules, 1994, which was attacked as being beyond the charging scheme of the Finance Act, 1994. The levy was retrospectively validated, and the later insertion of Section 71A of the Finance Act, 1994 and the substitution of Section 73 of the Finance Act, 1994 were examined in the light of prior judicial decisions. The Tribunal gave precedence to the High Court decisions which had held that demands issued in 2004 or later for the disputed period could not be sustained, and applied judicial hierarchy in preference to the earlier Larger Bench view.

Conclusion: The post-2004 demands for the disputed period were not maintainable and the appeals of the assessees were allowed.

Issue (ii): Whether the demand and corrigendum issued in 2001 and 2004 in the Nova Iron and Steel matter were validly enforceable against the assessee.

Analysis: The notice in this matter was issued after the retrospective amendments but before the later amendments relied on by Revenue, and it invoked Sections 66 and 68 of the Finance Act, 1994 rather than Section 73 of the Finance Act, 1994 as the demand provision. The Tribunal held that the earlier notice could not be enforced for the disputed short levy, and treated the corrigendum issued in 2004 as effectively a notice under the later regime, which also could not be sustained in view of the High Court rulings relied upon.

Conclusion: The demand in the Nova Iron and Steel matter was unsustainable and the Revenue appeal was rejected.

Final Conclusion: The Tribunal held that the assessees were not liable to the impugned demands raised for the disputed period, while the Revenue's appeal failed on the same legal principle.

Ratio Decidendi: Where later judicial precedent of the High Courts has held that retrospective validation and the amended recovery provisions do not sustain post hoc demands for the disputed period, those decisions are to be followed in preference to an earlier Tribunal view, and such demands cannot be enforced against the service recipient.

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