Statutory authority for Service Tax demand must exist on the date of notice; recipient liability under GTA service was invalidated.

Service Tax demand on the recipient of GTA service for an earlier period was held unsustainable because, on the date of the show-cause notice, the statute had not yet authorised recovery and confirmation of such demand in that manner. Although Section 71A was inserted retrospectively to require return filing in such cases, Section 73 was amended only later with effect from 10-9-2004 to permit demand proceedings against the recipient. As the notice was issued in November 2002, the legal basis for the demand was absent, and the confirmation of demand was set aside in favour of the assessee.

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Issues: Whether Service Tax demand on the recipient of GTA service for the period prior to the insertion of the relevant return-filing and demand provisions was sustainable.

Analysis: The demand was issued under Section 73 of the Finance Act, 1994 for a period when the statutory scheme did not provide for recovery of Service Tax from the recipient of service in the manner later introduced. The obligation to file returns in such cases came in through Section 71A inserted retrospectively by the Finance Act, 2003, and Section 73 was amended only later by the Finance Act, 2004 with effect from 10-9-2004 to enable demand and confirmation in such cases. Since the show-cause notice was issued in November 2002, the legal basis for the demand was absent at the relevant time.

Conclusion: The demand and its confirmation were unsustainable; the appeal was allowed in favour of the assessee.

Ratio Decidendi: A Service Tax demand on a service recipient cannot be sustained unless the statute, as applicable on the date of the notice, authorises such demand and its confirmation.

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