Service tax recovery under unamended notice failed where section 71A applied, and interest and penalty also could not survive.

A show-cause notice issued under the unamended section 73 of the Finance Act, 1994 could not validly sustain recovery of service tax from a recipient of goods transport agency services for a period covered by section 71A, because the latter provision required self-assessment and filing of a one-time return by such persons. Where the notice was not issued under the amended post-10 September 2004 framework, the tax demand was not maintainable. As the underlying tax demand failed, the consequential levy of interest and penalty also fell. The resulting demand, interest and penalty were held unsustainable, and the enhancement of penalty was rejected.

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Issues: Whether a show-cause notice issued under section 73 of the Finance Act, 1994 for recovery of service tax from a recipient of goods transport agency services for the period prior to the introduction of section 71A, but issued after section 71A came into force, was valid and whether the demand of tax, interest and penalty could be sustained.

Analysis: The appellant had not discharged service tax on GTA services received during 1997-98. Section 71A, inserted by section 158 of the Finance Act, 2003, required such persons to make a self-assessment, pay tax and file a one-time return within the prescribed period. The notice in the present case was issued after that insertion, yet it invoked section 73 as it then stood. The Tribunal relied on the settled position that section 73, prior to its amendment with effect from 10 September 2004, did not cover persons who were required to file returns under section 71A. Since no notice was issued under the amended provision, the demand could not be sustained. Once the tax demand failed, the consequential levy of interest and penalty also could not stand.

Conclusion: The show-cause notice and the resulting demand, interest and penalty were unsustainable; the appellant's appeal was allowed and the Revenue's appeal for enhancement of penalty was dismissed.

Ratio Decidendi: A notice under the unamended section 73 of the Finance Act, 1994 cannot validly sustain recovery against a person covered by section 71A for the relevant period, and consequential interest and penalty also fail when the tax demand itself is not legally maintainable.

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